FullFare

There is a significant discussion in a thread on the UA board about a WSJ article today, authored by Susan Carey and Mike Esterl, which conjectures on various legacy carriers' poor cash positions. It includes AA as a carrier that is in a "vulnerable" position. While it doesn't single out out AA specifically for BK, there is plenty of inuendo within the article. The UA board talks freely of the near-probability of UA heading to court protection again.

I say, for AA, there will be a cold day in hell before the FT Worth management team will have a bankruptcy judge making the company's decisions. Don't know how much cash AA has to burn through, but in the past they've always had enough.

I'm hoping AA again can stay out of BK. If AA is in worse shape than I'm thinking, somebody let me know.

woojink

OK, I'm sorry, but I can't resist....

"We are experiencing an ATC hold for our approach into Hellfire International Aiport due to some sudden and freak snowstorms which have just moved into the area..."

zman

How many times will UA go bankrupt before it is decided just to fold?

gemac

Past experience has not filled me with confidence about the ability of journalists to fully understand complex financial problems. Even journalists who primarily cover businesses.

PresRDC

I certainly wouldn't rule out an AA BK filing sometime this winter. I personally would be surprised to see all the legacy airlines come through Winter 09/10 in one piece, but, for reasons I cannot go into here, I do not think AA is the most vulnerable.

Paint Horse

No kidding. How about supposed aviation journalist as well who immediately report that the crash was caused by a lightning strike.

3Cforme

Financial analysis is different from technical analysis.

Monkey-see, monkey-do. The NYT piles on.

http://www.nytimes.com/2009/07/14/bu...rlines.html?hp

martin33

UA's most recent financing effort netted them $175 million at an interest rate of 17 percent. AA's most recent financing raised $500 million at an interest rate of 10 percent. They will be far from first to hit the wall, so this thread deserves a quiet death, until such time as circumstances change...

FullFare

Thanks to those who replied. My query was to find out if anybody knew anything that was new. My prior understanding was that airlines die long, agonal deaths. But, inevitably, some have died and some more will. I was also looking for the percentage likelihood of AA filing, hoping not to hear that it was a significant one.

Thanks, PresRDC for the post. My focus remains on whether (and I previously thought it unthinkable) AA would go BK. Despite the depths the industry has gone to, this one seems to be the deepest and the one with the most dire future with respect to the current economic forecast. I have personal vested interests in seeing AA stay out of ch 13. My big hope was because their management would be substantially disinclined and wondered if anyone else shared that belief.

Blumie

You want us to put a number on it? Like 22.7%?


There's no management of any company that is not "substantially disinclined" from going bankrupt. It's generally a last resort action, but on the other hand can be a very important strategic move when faced with pressure from lenders, vendors, unions, etc.

zman

Just a view
Most of the major airlines keep reducing flights/capacity to match demand.
This has a huge negative revenue impact. But most of their fixed costs (plane fees, corperate allocations, airport space fees, ect) remain the same. So there cost per miles go up and they continue to loose money. Lousy business model.. As long as WN,FL,VX and B6 keep expanding and have such low fares the majors can not compete domestically. The international side which use to be a cash cow for the majors due to their premium seating revenues has been deeply depressed which includes depressed cargo, along with huge fare reductions by the NON U.S. carriers that are matched.

Without a major economy turn around and huge demand uptick major capacity reductions are needed by having 1 or 2 airlines go away as Eastern, TWA, PAN AM, Braniff, ect did to keep our current big 5 going.

brp

I think GM is a prime example of this (although let's see how well they do after the recent, and rapid, emergence). BK allowed them to restructure, among other things, unfavorable union deals to make them more competitive. Of course, Fritz Henderson now says that the focus will be on "customer service." We'll see how that works out

Cheers.

thechosenuno

AA needs to file for chp 11 and dump all of its onerous labor contracts, any bad fuel hedges (if any) and any leases it has on old, inefficient planes (if they're not owned outright) along with restructure their debt.

Chp 11 is a big stick, and AA needs to use it to its advantage.

tom911

So you're fine with them jettisoning their pensions to the federal government, as UA did? I suspect you'll see employees make some concessions to keep AA out of bankruptcy before they surrender their pensions and see them capped at $54,000 a year. That would hurt the pilots the most, and I would guess mechanics right behind them.

zman

Yep, that will make them a successful, profitable airline like UA and US
(and maybe TW, Eastern and Pan AM).