Sky Talk

Hurricane Sandy cost AMR $40 million in revenues

In a Securities and Exchange Commission filing made on Friday afternoon, AMR Corp. said that Hurricane Sandy cost the Fort Worth-based carrier about $40 million in revenues.

The storm, which hit the East Coast in late October, caused American Airlines and its regional carrier, American Eagle to cancel more than 2,000 flights.

The carrier, also took a $45 million hit on its revenues due to operational problems at American. The airline had thousands of flights delayed in early October partly due to pilots filing more last-minute maintenance requests, American said. The pilots union said it was not engaging in a work slow down.

-Andrea Ahles

AMR posts $164 million loss in October

AMR Corp. posted a net loss of $164 million in October, according to a court filing made Friday afternoon.

Excluding $72 million in reorganization fees, the Fort Worth-based carrier would have posted a monthly loss of $92 million. During the bankruptcy process, AMR is required to file monthly financial reports with the court.

The company said it spent $22 million on aircraft financing renegotiations and rejections and $23 million on professional fees during the month. It also spent $27 million on "other" reorganization items which are not detailed in the report.

In early October, American had substantial delays and flight cancellations, partly due to pilots filing more last-minute maintenance reports, the carrier said. The pilots union, which is currently voting on American's latest contract offer, said it did not engage in a work slowdown.

AMR also said that its mainline carrier, American Airlines, had passenger revenues of $1.4 billion with its regional affiliates, including American Eagle, bringing in $249 million in revenues. Total revenues for the month were $1.95 billion.

The company ended the month with $494 million in cash and $3.7 billion in short-term investments for a total of about $4.2 billion on hand. That number is about the same as AMR reported in September and does not include $848 million in restricted cash.

-Andrea Ahles

American asks for more time to file restructuring plan with bankruptcy court

In a filing made on Friday, American Airlines' parent company, AMR Corp., asked for more time to submit a restructuring plan.

The request was made jointly with the unsecured creditors committee and if granted, would give American the exclusive right to submit a restructuring plan to the court until March 11. Currently, American's exclusivity period ends on January 28.

"The relief requested will allow American to continue focusing on preserving and enhancing going concern values and restructuring American’s financial condition and operations to achieve a competitive and sustainable cost structure and, thus, achieve the objectives of chapter 11 – a successful rehabilitation.

"Extensions of the Exclusive Periods will enable American to further the cooperative relationship with the UCC, permit the satisfactory resolution of labor issues, including pension obligations, refresh American’s fleet, take other actions to enable the attainment of a competitive cost structure, analyze potential recoveries after thorough review and analysis of claims filed in accordance with the bar date order, and thoroughly review with the UCC all strategic alternatives," the filing said.

A court hearing on the motion has been tentatively scheduled for December 19.

American spokesman Sean Collins said the carrier has made significant progress in its restructuring.

"This work, while progressing well, takes time, and American and the unsecured creditors' committee believe that the proposed extension to March 11, 2013 is appropriate for this process to continue in an orderly and efficient manner," Collins said.

-Andrea Ahles

Bondholders will finance standalone AMR plan only if a new board is put in place

Last night, Bloomberg News reported that a group of bondholders told the pilots union that it will support a stand-alone AMR Corp. restructuring plan only if a new board of directors is appointed.

The ad hoc bondholders group holds about $885 million in debt and includes JPMorgan Chase and Pentwater Capital Management and has previously said it was interested in providing financing for American Airlines' parent company's restructuring plan.

"The bondholder group intends "to be one of the primary negotiators of any plan of reorganization" because of its position as a material stakeholder in AMR, Gerard Uzzi of law firm Milbank, Tweed, Hadley & McCloy LLP, wrote in the letter dated Nov. 15.

"AMR said in August that the ad hoc group was interested in providing financing for a restructuring, and the company won bankruptcy court approval in September to move forward on talks with the ad hoc bondholders. American will pay for the 12-member group's advisers.

" 'Our support for a stand-alone plan of reorganization for AMR will be conditioned, among other things, on that plan providing for the naming of a new board of directors,' Uzzi wrote in the letter," the Bloomberg article said.

On Wednesday, Gimme Credit senior bond analyst Vicki Bryan weighed in on the new development, saying the bondholder group could be planning to replace the board with members that are more favorable to a merger with US Airways.

"We suspect this ad hoc bondholder group with its "exit financing with a catch plan" might be reading the tea leaves the same way we are, and if it can convince all of AMR's stakeholders that a merger with US Airways is their goal it might help to fast track an efficient path for the carrier to exit bankruptcy with a more promising future of growth with sustainable profitability and full support of its employees," Bryan said in a research note sent to investors.

The Allied Pilots Association is currently holding a ratification vote on the latest contract offer from American Airlines. Voting ends on December 7.

-Andrea Ahles

 

New York Times portrays F-35 as "out-of-control" military program

The New York Times published a long, unflattering article about Lockheed Martin's F-35 fighter jet program on its front page today, calling it an example of "how the Pentagon can let huge and complex programs veer out of control and then have a hard time reining them in."

Little of the information is new. Rather, the Times takes a view of the program from 20,000 feet, recounting years of delays, cost overruns and technical problems, laid against the new and pending budget constraints in Congress.

Held up as a poster child for an out-of-control military program likely to get chopped in future budget negotiations, the Times reports that some analysts believe the Pentagon will eventually order only 1,200 to 1,800 planes, well short of the 2,443 planned when the program began.

“It is simultaneously too big to fail and too big to succeed,” says Todd Harrison, an analyst at the Center for Strategic and Budgetary Assessments, a research group in Washington. “The bottom line here is that they’ve crammed too much into the program. They were asking one fighter to do three different jobs, and they basically ended up with three different fighters.”

According to the article:

With all the delays — full production is not expected until 2019 — the military has spent billions to extend the lives of older fighters and buy more of them to fill the gap. At the same time, the cost to build each F-35 has risen to an average of $137 million from $69 million in 2001.

The jets would cost taxpayers $396 billion, including research and development, if the Pentagon sticks to its plan to build 2,443 by the late 2030s. That would be nearly four times as much as any other weapons system and two-thirds of the $589 billion the United States has spent on the war in Afghanistan. The military is also trying to figure out how to reduce the long-term costs of operating the planes, now projected at $1.1 trillion.

Lockheed's outgoing CEO, Robert J. Stevens, is quoted as saying that company officials were “working as aggressively as we can” to fix the problems and cut costs.

Not good publicity.

-- Steve Kaskovich

A look back at AMR's first year in bankruptcy

It's been 365 days since AMR Corp. filed for bankruptcy.

In the past year, the Fort Worth-based carrier has announced layoffs, cut labor costs, froze pensions and terminated leases on old planes parked in the desert. 

At the Star-Telegram, we hired a new web guy, Taylor Cammack, and he put together this cool interactive feature that looks at the milestones in AMR's first year in bankruptcy.

-Andrea Ahles

 

 

AMR likely to complete bankruptcy restructuring by next spring, analysts say

One year later, with eight new labor contracts in place and after 5,500 court filings, AMR Corp. is getting closer to emerging from bankruptcy.

Industry analysts say the carrier will likely complete its restructuring by next spring, although it's still unknown whether American Airlines will remain a stand-alone airline or merge with suitor US Airways.

American has agreed to new labor deals that will save it hundreds of millions of dollars annually and has terminated expensive leases on gas-guzzling planes that were too costly to fly. The carrier has increased its average fares and maintained its cash balance at $4 billion throughout the restructuring.

But as the airline hits the one-year anniversary of its bankruptcy filing, analysts say management missed opportunities to dramatically change the Fort Worth company and its cost structure.

While pensions are frozen and employees and retirees are paying more for healthcare benefits, the labor contracts still don't give American enough flexibility to compete with bigger rivals United and Delta, analysts say.

"American, in my view, didn't differentiate themselves enough from the industry," said Bill Swelbar, an airline researcher at the Massachusetts Institute of Technology.

"There was a chance for radical surgery and instead they did selective surgery."

Click here to read the full article that appeared in Thursday's Star-Telegram.

-Andrea Ahles

Read more here: http://www.star-telegram.com/2012/11/28/4446255/american-has-made-improvements.html#storylink=cpy

 

Justice Scalia denies American's request to halt passenger service election

Supreme Court Justice Antonin Scalia denied American Airlines' request to delay the passenger service union representation election, union organizers said on Tuesday.

American had asked the court to halt the election while the Fort Worth-based carrier appealed its case.

The airline has argued that the Communications Workers of America did not collect authorization cards from 50 percent of workers, as required by a new law enacted in February. The National Mediation Board, which oversees union representation elections, argued that the previous 35 percent standard should be used since the application for an election had been filed in December 2011.

"Attorneys for American Airlines are expected to appeal to the full Supreme Court, but they will need to get four of the nine justices to agree to hear the case, which is unlikely. Scalia is regarded as one of the most business-friendly justices. Even if the court decides to hear the case, it wouldn’t occur until some time in January, probably after our election has been held," the CWA organizers told passenger service agents on its website.

The CWA is attempting to organize 9,700 passenger service agents at American.

"It's been just about one year since agents filed for this election, and many agents have seen their jobs outsourced, wages and benefits cut over that period. Agents want their union and today's decision brings that union another step closer," CWA spokeswoman Candice Johnson said.

UPDATE:  Here is the statement from American Airlines spokesman Bruce Hicks. "We believe pursuing this case on behalf of the majority of American’s agents and representatives who did not seek or authorize a union election was the right approach. With the election now going forward, we urge all of our agents and representatives to vote."

-Andrea Ahles

Read more here: http://blogs.star-telegram.com/sky_talk/2012/11/cwa-launches-ad-campaign-to-allow-american-passenger-service-agents-to-vote.html#storylink=cpy

American passenger service agents get voting instructions

Passenger service agents at American Airlines will receive voting instructions in the mail this week for its upcoming union representation vote.

The Communication Workers of America said instructions were mailed out Tuesday to 9,700 employees and voting will begin on December 4. The votes will be tallied on January 15 by the National Mediation Board.

American has fought against holding a union representation vote of its agents. The Fort Worth-based carrier has filed several legal challenges to stop the vote, claiming the union did not collect authorization cards from 50 percent of workers, as required by a new law enacted in February. The NMB argues that the previous 35 percent standard should be used since the application for an election was filed in December 2011.

The union alleges that American is now trying to pad the voting list with an additional 900 workers on the even of the election. For the agents to be represented by the CWA, a majority of the votes must be cast in the union's favor.

"American just wants to throw another monkey wrench into the process," said Sandy Rusher, organizing director with the CWA.

-Andrea Ahles

Monday Midday Must-Reads

-American's loose seat problem was partly due to cost-cutting measures taken by the bankrupt carrier, says  this New York Times piece that appeared over the weekend. "The airline, in trying to cut costs during bankruptcy, hired outside maintenance companies this summer for the first time to modify its cabins. And airline documents show that those workers did not understand how to properly install the seats," the article says.

-Airline food is healthier than it used to be, according to a professor nutrition at the City University of New York. Charles Platkin gave the top rating to Virgin America as the airline offers low-calorie options including an arugula salad and a "protein plate" with hummus, the Los Angeles Times reported.

-And since it's Cyber Monday, travel companies and airlines are getting in on the action, offering vacation deals on their websites. The most unusual offer comes from Virgin America. For $49,000, one customer can charter their own Virgin America Airbus A320 to fly from San Francisco to Las Vegas for the 2013 Consumer Electronics Show in January. As part of the deal, the customer will be able to fly 136 guests to the show and get passes for the keynotes at CES. The plane will also be decorated with "a unique decal of your design for one month," according to USA Today.

-Andrea Ahles