Food for thought ...
source
The AMR Bankruptcy -
So Many Things We Didn't Know About The Airline Business
It's been a bonanza for creative writers and Walter-Mitty-esque "financial analysts" working on the fringes of reality. The AMR C-11 filing, that is.
The past week has been a hoot, reading all the "expert" prognostications on the causes, outcomes, and fallout from the AMR bankruptcy... Some of the great insights we've found at various media outlets:
"... Now that the airline is in bankruptcy, it is likely to cut back on schedules and the number of seats on various flights, to save money. That will make even fewer seats available for purchase – either with dollars or with points....
Really? Where are the data to support the projection that the airline will cut back on "various flights" to "save money" as a direct result of the Chapter 11 filing? The direct cause of the decision to file was high debt load and the challenges of a costly pension program. How will cutting back on flying fix that?
No matter, it was in the press, so it must be accurate.
Or, from the LA Times...
...The 777 jets will include lie-flat seats in first- and business-class sections, mood lighting and a walk-up bar stocked with snacks and drinks, the airline said. Throughout the plane, passengers will have access to an entertainment system with 120 movies, more than 150 TV programs and 350 audio channels.... American ordered the narrow-body planes in July to replace the airline's MD-80s, most of which had been built from 1979 to 1999. The new planes are expected to be up to 35% more fuel efficient than the MD-80s.
You bet... Somebody please let airports know so they can order new Jetways when the 777s replace those MD-80s. Great research, reporter.
"... AMR filed for Chapter 11 protection today after failing to secure cost-cutting labor agreements and sitting out a round of mergers that dropped it from the world’s largest airline to No. 3 in the U.S...."
This according to a noted expert on the airline industry, one who nobody's seemed to have heard from before. Here's a hint to rain on this guy's parade: The labor agreements were not the driver in the chase to the bankruptcy court, by the way. Another tid-bit: those allegedly fat cats in the AA rank-and-file have not seen any significant changes in their paychecks in eight years... and that was after major reductions in things like vacations, holidays, and holiday pay. Point: AA employees are not exactly living the life of Riley. (If you're under 40, Google it.)
Finally, where's the support for the contention that "missing out on mergers" had anything to do with the carrier's financial issues?
Don't need none of them facts, see. It's from a financial wizard, don't ya know.
"...However, AMR, which filed for Chapter 11 on Monday, is expected to shed some of its more unprofitable jets and routes through its court-supervised reorganization,..."
"Shedding routes?" The airline didn't need to go to a bankruptcy judge to cut out flying. The best part is to come when some of these junior Woodward & Bernstein wannabes find out that AMR has already petitioned to court to renounce leases on 24 jets. They'll probably report this as a part of the "route shedding" - and won't bother to find out that the airplanes involved are all already retired - some for years - and are sitting out in Roswell, waiting for the smelter. Or another space alien visitor.
Then, we have the
piece de resistance of inconsequential babble. A news network asked a consumer gadfly about the effects of the merger on airport finances. Now, keep in mind that this twit has zero experience in airport financing, not to mention just about anything else in aviation. But she's a darling of the shout-you-down-if-you-disagree talk show types. But she gave it to us straight:
““It will be noticeable because of the size of AMR,... and it will create a ripple effect throughout the system....any reduction in slotting fees at their hubs would have a huge impact on the airports, and that will trickle down to the passengers,”
Slotting fees?
Golly gee! Darn! We've been totally ignoring slotting fees when doing forecasts and revenue projections for airports all these years. And, apparently so have airports coast to coast all these years, too. There needs to be a nationwide investigation of where airports are stashing this dough from slotting fees. Not to mention discovering what they are in the first place.
Stand by. The fun is just starting.
