American Airlines Bankrupt??

SkyHog

SkyHog

Touchdown! Greaser!
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Everything Offends Me
Got this email today...
American Airlines said:
Dear AAdvantage® Member,

As you may know, on Tuesday, November 29, American Airlines filed for reorganization under Chapter 11. We took this action as part of our efforts to secure our long-term success in delivering the highest standards in air travel. We are committed to meeting your travel needs with outstanding customer service and safety, and it will be business as usual at American throughout our reorganization process. More than 80,000 people at American appreciate your loyalty and look forward to continuing to serve you.

We want to assure you that your AAdvantage® miles are secure. The AAdvantage miles that you've earned are yours and will stay yours, subject to usual policies, until you choose to redeem them for a great award with us. Likewise, your elite qualifying miles and your elite status, including lifetime status granted under the Million MilerSM program is secure and remains intact. You will continue to earn miles through all our existing AAdvantage participating companies and you will be able to redeem those miles for the same great awards — flights, upgrades, car rentals and hotels just to name a few. And, throughout the coming year, we will be adding even more opportunities to earn miles, as well as new ways to redeem those miles.

American is honoring all tickets and reservations as usual, and making normal refunds and exchanges. And, we intend to maintain a strong presence in domestic and international markets. As we and all airlines routinely do, we will continue to evaluate our operations and service, assuring that our network is as efficient and productive as possible. Additionally, relationships with our oneworld Alliance and other codeshare partners are continuing to provide you with opportunities to earn and redeem miles for travel to hundreds of destinations worldwide, and we are honoring all tickets and reservations for travel on our partner airlines as usual. For information about American's reorganization process, please visit AA.com/restructuring.

Even more importantly, we remain committed to providing a superior customer experience with a focus on delivering what our customers value most — the newest fleet with our upcoming aircraft deliveries, network strength in the important cities of the world and world-class products, service and technology.

American Airlines has a proud history, and we will have a successful future. All of us on the American team thank you for your loyalty and we look forward to welcoming you aboard soon.

Sincerely,


Maya Leibman
President — AAdvantage Loyalty Program
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Yup.....and my stock is now absolutely worthless.....

Very sad, but this was inevitable. AMR was the only major to survive the post 9/11 financial mess without going into bankruptcy and it ended up killing them.
 
What is funny is that I was watching some stock market news show last week and the commentator stated that 'we have seen the low for AMR stock'.....yeah right. That was around 1.70 a share. They stopped trading this morning at 37 cents a share.
 
Reuters reports the pension funds are $10 billion under funded. This would be the largest pension fund default ever.

The human toll of this in just horrible. We all know folks that counted on retirement funds after years and years of hard work only to see them get greatly reduced by things like this.

Best,

Dave
 
Is it just me, or does it seem like Arpey is the only one who isn't really going to get screwed by this?

What is interesting is that I am an AA advantage member and a shareholder and I still haven't received the email that Nick posted.
 
Fearless Tower said:
What is interesting is that I am an AA advantage member and a shareholder and I still haven't received the email that Nick posted.
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I received the email and I didn't even know I was a member. I can't ever remember flying on American.
 
Dave Siciliano said:
Reuters reports the pension funds are $10 billion under funded. This would be the largest pension fund default ever.

The human toll of this in just horrible. We all know folks that counted on retirement funds after years and years of hard work only to see them get greatly reduced by things like this.

Best,

Dave
Click to expand...

Maybe stuffing money in the mattress isn't such a bad financial 'strategy' as once thought.
 
Fearless Tower said:
Is it just me, or does it seem like Arpey is the only one who isn't really going to get screwed by this?
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Oh he's not the only one who will come out okay.

I could go on about the forty-odd vice presidents and above who have been paid millions in incentives over the past several years for stock performance versus a selective peer group (as AMR has posted billions in losses), but I am neither an accountant nor a patron of Holiday Inn Express, so I am not qualified to speak on the subject. :mad2:
 
CJones said:
Maybe stuffing money in the mattress isn't such a bad financial 'strategy' as once thought.
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You may or may not have said that "tongue in cheek" but in this day and age, you CANNOT count on a company funded pension plan. You have to take charge of that yourself, either through IRA's or 401Ks.
 
The truth is that AA deserves to go under. Not because of 9/11 and not because the competition went through chap 11. They deserve to go under because they are the worst of the majors with horrible service that has only gotten worse over the past 10 years. The reality is that the people responsible for this (senior management) will be fine and the rest of the workforce (not entirely without blame) will get really screwed.
 
Greg Bockelman said:
You may or may not have said that "tongue in cheek" but in this day and age, you CANNOT count on a company funded pension plan. You have to take charge of that yourself, either through IRA's or 401Ks.
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It was 'tongue in cheek' but maybe less tongue and definitely less cheek than if it had been said 5-10 years ago.
 
JeffDG said:
Yep...they thought they could push it a bit more before...

They were wrong, and their members will get screwed in Ch 11.
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I would have gladly let my airline go under a year ago while we were in negotiations, had they not come to the table.

Asking the pilots for concessions ontop of concessions is not the answer.

Mismanagement is what kills these companies, not over paid laborers.
 
BellyUpFish said:
I would have gladly let my airline go under a year ago while we were in negotiations, had they not come to the table.

Asking the pilots for concessions ontop of concessions is not the answer.

Mismanagement is what kills these companies, not over paid laborers.
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So now a trustee in bankruptcy gets to rewite any contracts they want with no negotiations required.
 
JeffDG said:
So now a trustee in bankruptcy gets to rewite any contracts they want with no negotiations required.
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Gosh, really? Well, then, bring on the profits, I never realized a restructuring was so easy!

(Cheek, tounge. Tounge, cheek). :)
 
catmandu said:
Gosh, really? Well, then, bring on the profits, I never realized a restructuring was so easy!

(Cheek, tounge. Tounge, cheek). :)
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The point I'm making is that on the 15th, the union gave up what bargaining position they had remaining. Now it's entirely out of their hands.

I'll wager that the deal they end up with will make the final offer they didn't bother to let their members decide upon look like paradise.
 
Dave Siciliano said:
Reuters reports the pension funds are $10 billion under funded. This would be the largest pension fund default ever.
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And, somehow, that's not criminal? It's a promise, a contract, and more importantly, a "man's word".

I have a SIL who has been a baggage handler since the Ozark Airlines days; about 30 years. If I remember her story correctly, she is making less money with less benefits today than she was 10 years ago and that's not even accounting for inflation. If she now loses her retirement, that's criminal.

(by the way, she's a few years younger than my lovely bride and yet looks 10 years older. Baggage handling has been rough on her...but it was an honest job).
 
Wingsofglass said:
The truth is that AA deserves to go under. Not because of 9/11 and not because the competition went through chap 11. They deserve to go under because they are the worst of the majors with horrible service that has only gotten worse over the past 10 years. The reality is that the people responsible for this (senior management) will be fine and the rest of the workforce (not entirely without blame) will get really screwed.
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Well, you've obviously had a bad experience with AA, but could you at least be more original in your rant? Your post looks like a cut-and-paste of just about every venting thread regarding service at (insert airline name here).

I've flown just about every domestic airline in this country and have had both wonderfully positive and horribly miserable experiences on every single one. Even customer service at Southwest has gone into the toilet ever since Herb left.

The entire industry is jacked. It is not limited to one carrier.
 
AA should have filed when the others did. Now they are billions behind, having been saddled with higher costs for 9 additional years.
 
timwinters said:
And, somehow, that's not criminal? It's a promise, a contract, and more importantly, a "man's word".
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How is that contract any different than the lease on the RJ they signed with Bombardier?

That ability to negate obligations and contracts is the essence of bankruptcy.
 
Filing for reorg under 11 is a far cry from going under.

Wingsofglass said:
The truth is that AA deserves to go under. Not because of 9/11 and not because the competition went through chap 11. They deserve to go under because they are the worst of the majors with horrible service that has only gotten worse over the past 10 years. The reality is that the people responsible for this (senior management) will be fine and the rest of the workforce (not entirely without blame) will get really screwed.
Click to expand...
 
Dave Siciliano said:
Reuters reports the pension funds are $10 billion under funded. This would be the largest pension fund default ever.

The human toll of this in just horrible. We all know folks that counted on retirement funds after years and years of hard work only to see them get greatly reduced by things like this.

Best,

Dave
Click to expand...
Soon to be eclipsed by Cailfonia's 500 Billion pension disaster. It's a heck of a time for those at or near retirement.
 
wabower said:
Filing for reorg under 11 is a far cry from going under.
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I was going to say that too. AA isn't "behind" they waited until filing Ch 11 would have the greatest effect on their Union negotiations. It's just strategy by management.

They waited to see how M&A talks went. UAL/CAL merged. They were without a dance partner in a shrinking market.

Then they waited for Union talks to reach a tipping point.

They were always just as doomed fiscally as all the rest. They just waited to find an opportunity for the "bad news" to swing "hearts and minds" away from their Unions.

There's nothing even remotely surprising about this "news". It was a done-deal on their books a decade ago. With a long-term recession and labor surplus they just bided their time.

The numbers never held that they were a good investment either. Riskier than betting on sports in Vegas by far.
 
Yes I agree going under and reorg are two very different things. My point is that all the talk of timing, 9/11 and bargaining leverage fails to mention that a big part of the problem is that this is a poorly run business with horrendous customer service that has only gotten worse with time. If the quality of their product is not addressed, no amount of stealing from employees, taxpayers, shareholders and creditors will save them in the long run.

I may be mistaken about the taxpayer comment but I thought under chap 11, some portion of a failed pension gets picked up by the government (PBGC).
 
Dave Siciliano said:
Reuters reports the pension funds are $10 billion under funded. This would be the largest pension fund default ever.

The human toll of this in just horrible. We all know folks that counted on retirement funds after years and years of hard work only to see them get greatly reduced by things like this.

Best,

Dave
Click to expand...

Dave, the handwriting has been on the wall for DB programs since USAirways dumped theirs in 2005. I hope people have been preparing, but given human nature ... :eek:. PBGC had a release out saying they were going to encourage AA to salvage their plans, but I just don't see a DB plan surviving a bankruptcy.
 
Wingsofglass said:
Yes I agree going under and reorg are two very different things. My point is that all the talk of timing, 9/11 and bargaining leverage fails to mention that a big part of the problem is that this is a poorly run business with horrendous customer service that has only gotten worse with time. If the quality of their product is not addressed, no amount of stealing from employees, taxpayers, shareholders and creditors will save them in the long run.
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That's the part you are missing. Their service is really no better or worse than every other airline that has been dealing with poor management. I haven't flown UAL or NWA in a couple years, but their employees were so ****ed at their quality of life that they routinely took it out on pax. AMR is no different.
 
Fearless Tower said:
That's the part you are missing. Their service is really no better or worse than every other airline that has been dealing with poor management. I haven't flown UAL or NWA in a couple years, but their employees were so ****ed at their quality of life that they routinely took it out on pax. AMR is no different.
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:yeahthat:

I'm glad you said it. I was about to.

They're really not any worse or better than their brethren. Airlines have been in a dog-eat-dog race for the bottom quality-wise for a very long time.

Was watching some of the old Continental Airlines "We really move our tail for you" advertisements over the weekend from a copy of a "Farewell to Continental Airlines" DVD that someone kindly copied for me. (I worked for CAL briefly while in college in the early 90s.)

My reaction emotionally was both one of, "I remember when companies advertised that they actually did want to try harder than their competitors..." and some memories of the pride everyone who worked there felt back then. (Avis too... "We try harder.")

Now if you even see ads, they're always about price price price.

Frontier's animals were the most entertaining airline commercials in a long time, until SWA started the "Bags fly free" with (real or pseudo) employees and now their "Airport referees" giving "penalties" to other airlines.

By the way, there's something odd in the storytelling in that ad campaign.

They give penalties, but the customer who is already booked on the competitor is still getting on the competitors' jets at the end... it's not like the other airline responds to the "penalty" or cares...

Which I'm sure is what the feeling they're trying to leave you with, but the commercial should be offering a solution to the customer's problem, not just talking to the person at home. The arc of the plot is broken at the end. No resolution.

Leaves me feeling a bit like I just watched a mini-tragedy with no fix delivered.

If the referees could magically get those actor-customers out of their ticket fares at the other airline, and send them merrily on their way on an SWA jet, the concept would be much more effective. No closure.

Oh well.

Anyway, competition on the sheer basis of customer service seems pretty dead these days. Individuals within the companies certainly may try hard, but the companies aren't exactly buying ad time to say that's their company culture... service? No. We're here for revenue.

Even SWAs campaign at its heart is just saying, "We're cheaper.". They at least also can say they're measurably better.

Internationally, the non-U.S. carriers still compete on service and quality to some extent. You still see ads for that there.

Other great stuff from the CAL commercials... the announcement of the "Pub Flights" on the domestic DC-10s with a forward coach pub complete with "Pub Pong" table video game, and shot after shot of people eating real food from real plates and silverware. Even one commercial that started with the company Chef showing off his latest creations on a tablecloth laden table out on a ramp somewhere with flowers and a bottle of wine selected to go with them.

Compared to those days we all look like a bunch of broke no-class chumps stuffing ourselves into the aeronautical city bus. Kinda sad when I watched it.

I wonder if "We love to fly and it shows" is a bit of a reach for those with trash canned pensions who have realized they were sold up the river by the management MBAs who pocketed the cash they earned believing that motto... "

Maybe the ultra-cynic in me would change it to, "We love to fly so much we let our bosses rip us off for decades just to keep doing it?" ;)

I'd forgotten Casey Kasem had done some of CAL's voiceovers in the 70s. The ads were fun to watch. Hard to believe they were only 40 years ago or so. 30 even. Totally different outlook on life resounded from all of them. Only in the "Chicken Feed" commercials did those CAL ads ever bring up price and it was clear those were highly restrictive tickets and not a lot of them.

What's also interesting is that you could see the underlying struggle with regulation. New routes being added were a much bigger deal and routes were given a lot more airtime than today. New aircraft types were a big deal too. Still are I suppose, but the types moved much faster 30 years ago.
 
Dave Siciliano said:
Reuters reports the pension funds are $10 billion under funded. This would be the largest pension fund default ever.

The human toll of this in just horrible. We all know folks that counted on retirement funds after years and years of hard work only to see them get greatly reduced by things like this.

Best,

Dave
Click to expand...

Pension fund problem will become govt bailout of the airline.
 
JeffDG said:
How is that contract any different than the lease on the RJ they signed with Bombardier?

That ability to negate obligations and contracts is the essence of bankruptcy.
Click to expand...


Because, when corporations are stealing out of the pension funds then they are literally stealing from their employees; this is money that was already paid to their employees and that the company is simply holding in a trust account for the employees (the pension plan payment was a line item on my paycheck when I worked at FedEx). The theft of this money should be criminal.

More importantly, if this practice wasn’t allowed then we wouldn’t need yet another government bureaucracy to pay these pensions. Translation: We, the taxpayers, get to pay for it. Actually, I just recently learned of the PBCG and I’m kinda outraged at learning that it even exists…this means we’re privatizing corporate profits and socializing their losses again. Wouldn’t we be far better off if we simply required corporations to 100% fund their pension plans instead of having yet another bureaucracy to (let us pay to) bail them out?

Sorry, I'm probably getting spinzone-ish this morning but contually asking me to pay to bail out corporations like AA is really starting to p*ss me off.

Edit: One might contend that this really wasn't the employees' money but, actually, I think it’s quite easy to make the case that this money belongs to the employees. Yes, it’s the company’s money that goes in, and yes, they can put restrictions on it, but, once those restrictions are met, it’s the employees’ money.

It was also the company’s money that went into my paychecks when I worked at FedEx but that doesn’t mean it’s not mine once it’s given to me. My paycheck was compensation in exchange for work. So was the pension, it was part of the total compensation package, once earned it’s earned and it’s mine, mine, mine!

Regarding restrictions placed on pensions, similar to pensions, matching funds in 401k plans aren’t immediately vested sometimes. This is also true of stock options. But once that money is “vested” it has changed hands and it belongs to the employee, not the employer even though the employer funded the accounts. Stock options and 401k matching funds were also part of the total compensation package, once earned it’s earned and it’s mine, mine, mine.

To take any of it away after it’s earned and vested is stealing IMO and it should be considered legally so.
 
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Booking the pension obligation is no different than booking any other long-term obligation at the time it occurs, otherwise it wouldn't be booked. I did it hundreds of times while at the CPA firm, and it's just one of many entries at year-end.

The company recognizes the obligation, the auditors verify the basis for the expense, the amount is carefully calculated by the consulting actuaries, and the entry to recognize both the expense and accrued liability are entered. It's the same mentality as when the company borrows money for any other purpose, and they fully intend to pay the obligations when they become due. Sometimes it's not possible to do so, and sometimes a reorg is used to shed the obligations.

Many reforms to pension funding have been made over the years, and more are likely to come. The government agency has softened the blow to the affected employees to some extent, but it's still a sorry state of affairs for them.

timwinters said:
Because, when corporations are stealing out of the pension funds then they are literally stealing from their employees; this is money that was already paid to their employees and that the company is simply holding in a trust account for the employees (the pension plan payment was a line item on my paycheck when I worked at FedEx). The theft of this money should be criminal.

More importantly, if this practice wasn’t allowed then we wouldn’t need yet another government bureaucracy to pay these pensions. Translation: We, the taxpayers, get to pay for it. Actually, I just recently learned of the PBCG and I’m kinda outraged at learning that it even exists…this means we’re privatizing corporate profits and socializing their losses again. Wouldn’t we be far better off if we simply required corporations to 100% fund their pension plans instead of having yet another bureaucracy to (let us pay to) bail them out?

Sorry, I'm probably getting spinzone-ish this morning but contually asking me to pay to bail out corporations like AA is really starting to p*ss me off.
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It's definitely a race to the bottom among the major carriers. Some people promote bringing back regulation so as to make the end product more predictable and have some say in things like amount of legroom and amenities. Others say that if we did that no one would be able to afford to fly. I say the solution is probably somewhere in the middle because what we are doing now is certainly not working.
 
Wayne is right, of course, but it doesn't make Tim's "there out to be a law..." statement false.

Still, it makes for interesting conversation when you read "Speculation about an AMR bankruptcy grew in recent weeks as the company was unable to win union approval for contracts that would reduce labor costs. The company said it was spending $600 million more a year than other airlines because of labor-contract rules."
 
AMR's spin of making the unions out to be the bad guys is just their way of saying "We can't make payroll" , " We cannot meet our contractual obligations to you" . Imagine being a business school grad and having to come to your employees and essentially say "Gee, we've run this business so poorly the only way we can see to fix it is for all of you to take a pay cut and we have no idea when the pay rates will return" and "Oh and by the way, I am of course keeping my golden parachute".
 
I feel heartbroken for the folks affected by this and see there are many sides to the issue. From the pension side, Wayne discussed how it's accounted for, but another reason there has been a flight to 401Ks, is companies have been saddled with taking market risk in DB plans. I don't think anyone would disagree the market has been extremely volatile and unpredictable for the last several years.

The post I made earlier about the 10 Billion in underfunding was reported by Reuters when I posted it. They may or may not have their facts in order. I guess we'll see. Taking money from a pension plan in an unauthorized manner could lead to criminal, but more likely civil charges. But, most of what we're seeing is underfunding as opposed to bankruptcy and market volatility throwing all actuarial assumptions out the window.

One only needs to look at how many other state, corporate and local pension funds are underfunded to see that. I'm not taking AA's side on this because I don't have the facts, but it was foreseeable.

And, I do have many, many airline pilot friends that have had their entire retirement disrupted by actions like this at other airlines. Should they have saved more money themselves--easy to say. But I know a lot of very bright folks that thought their retirement was secure in these plans. When things began to change, it was too late to make up all the lowered benefits.

Best,

Dave
 
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