Sky Talk

With AMR's stock up, executives sell some shares

Since AMR's merger with US Airways was announced, the Fort Worth-based carrier's shares have soared over 400 percent to $6.85.

Now, a few executives are selling shares, that were likely worthless when the company entered bankruptcy, and generating some cash.

According to documents filed with the Securities and Exchange Commission, three AMR executives acquired stock options and then sold some of their existing shares over the past week.

-chief financial officer Bella Goren acquired 13,007 shares of common stock at $6.13 on May 15 and then sold 33,979 shares on May 15 and 16 at prices ranging between $6.33 and $6.88, for a total sale price of $222,028.22. It is unclear how much Goren profited from the transactions since the filing did not say how much she might have paid for some of the shares she had previously acquired.

-executive vice president Dan Garton, who also runs American Eagle, acquired 19,514 shares of common stock at $5.83 on May 14 and then on the next two days sold those shares for $120,168.03 at prices ranging from $5.91 to $6.82. His profit from the transactions was $6,401.41.

-AMR's general counsel Gary Kennedy acquired 11,112 shares on May 14 at $5.83 and then sold those shares for $68,419.39 over the next two days at prices ranging from $5.91 to $6.82. His profit from the transactions was $3,636.43.

AMR plans to complete its merger with US Airways some time in the fall, pending government regulators and US Airways shareholder approval.

-Andrea Ahles

American/US Airways integration team says it could take more than 18 months after merger close to get single-operating certificate

It's going to take a long time to integrate American Airlines and US Airways, executives at the two airlines told employees in a merger update.

In a letter sent to workers on Friday, US Airways chief operating officer Robert Isom and American treasurer Bev Goulet said it will likely take at least 18 months after the merger closes for the new company to receive its single-operating certificate from government regulators. 

They reiterated the merger is expected to close in the third quarter and that a new executive team will be named in late May, early June.

"Consider the numbers: Our integration will include more than 110,000 people serving 187 million customers a year flying to and from 336 destinations on more than 1,500 planes. Boil that down, and we will need to align thousands of systems, applications, procedures and policies as we implement the merger. And we want to get every one of them right," the pair wrote.

Keep reading for the full letter from Goulet and Isom.

-Andrea Ahles

 

May 10, 2013  

Fellow Employees:

We’re pleased to report the latest on our progress in planning the integration of American Airlines and US Airways. Ours is a big, complex task guided by a team of committed professionals from both airlines who have joined forces to create not just the biggest, but the best airline in the world.

Consider the numbers: Our integration will include more than 110,000 people serving 187 million customers a year flying to and from 336 destinations on more than 1,500 planes. Boil that down, and we will need to align thousands of systems, applications, procedures and policies as we implement the merger. And we want to get every one of them right.

The Integration Management Office (IMO) – the “nerve center” of our integration effort – has been firing on all cylinders since we last provided an update. As we have previously shared, there are 29 teams planning the integration of our commercial, customer-facing, operations, and corporate and staff functions for our two airlines. We’ve also created several cross-functional taskforces that will work on specific objectives. One, for example, is preparing a joint crisis response plan, while another is already focusing on obtaining a single operating certificate for the combined carrier.

This week several teams – those who have tasks that must be accomplished leading up to legal close or that otherwise will enable us to capture and deliver value to customers and employees – gathered in Dallas/Fort Worth to discuss and align objectives, set milestones, and properly sequence activities. Ultimately, we are working to create an airline that keeps our current customers happy, brings in new customers, provides a great place to work, and achieves the financial value that will make it all possible.

We know this planning process raises many more questions than answers at this time. How long will this take? What changes might affect you and when? As a guideline, we are planning toward a third-quarter transaction close. Between now and then, the leadership team for the new company will be named; this week Tom Horton and Doug Parker shared that they expect to name the senior team around the end of May or early June. And, once the merger closes, you will start to see things change as we begin to implement our integration plans. 

Following close, we anticipate it could take at least 18 months before we operate as a single carrier. In the interim, we’ll begin to extend to customers some of the benefits they’ll see from the merger, including the ability to combine flights on a single itinerary and earn and redeem frequent flyer miles across airlines. We are committed to educating our employees on those changes so that you can provide the best service to our customers. Only later in the process will we combine, for example, reservations systems and combine our operations control centers.

Our goal is to make these transitions as smooth as possible at every phase. Please watch for regular updates from us as the work of the IMO continues, and we encourage you to read each weekly edition of our joint merger newsletter Arrivals, which you can find on Jetnet or Wings, to learn more about what’s happening across both airlines.

While our integration planning teams continue their work, the biggest priority for all of our employees is to stay focused on running both airlines safely while maintaining a reliable and convenient experience for our customers.

We have a great deal of work ahead as we plan to put the new American back on top. With the best people in the industry alongside us, we know we will succeed. A big thanks to all of you for your hard work and commitment to our customers as our busy summer travel season approaches.

Sincerely, 

  Robert Isom                                  Bev Goulet

 

American agrees to pay $24.9 million to settle FAA safety claims

American Airlines has agreed to pay the Federal Aviation Administration $24.9 million to settle $162 million in safety claims made by the agency.

According to bankruptcy documents filed on Thursday, American agrees to also perform additional training of its maintenance personnel and increase its oversight of third-party maintenance providers.

"This settlement recognizes the many changes, including enhancements to our maintenance and engineering processes, increased training, inspections, and audits that have taken place at American over the past several years that address past FAA concerns," said American spokeswoman Andrea Huguely. "The safety of our people and our customers always has been – and always will be – our top priority."

After American's parent company, AMR Corp., entered bankruptcy, the FAA filed several claims with the bankruptcy court to potentially fine AMR up to $162 million as part of ongoing safety investigations.

One of the claims relates to American's MD-80 fleet which the FAA grounded in 2008 after finding improper wiring around the landing gear of the aircraft. About 3,000 flights were canceled as a result during one week in April 2008. In 2010, the FAA proposed a $24.2 million fine against American.

An FAA spokesman said the agency agreed to reduce the claim amount in the settlement because American had made several safety and compliance improvements that have an estimated value over $50 million.

American did not admit to any wrongdoing as part of the settlement, court documents said.

The settlement with the FAA requires bankruptcy court approval. A hearing is tentatively set for May 30 with objections to the settlement due to the court on May 23.

-Andrea Ahles

 

 

AMR says passenger traffic dropped 1.1 percent in April

AMR Corp. said its consolidated passenger traffic declined 1.1 percent in April as the Fort Worth-based carrier increased capacity by 0.4 percent.

Its load factor dropped 1.3 percentage points to 81.6 percent. AMR said its unit revenues also decreased 2.9 percent when compared to April 2012.

Domestic traffic was 1.4 percent lower as capacity declined 1.5 percent, the parent company of American Airlines said. International traffic decreased 0.6 percent as capacity on international routes rose 3.4 percent.

-Andrea Ahles

 

American reports $193 million loss for March

In its monthly operating report filed with the bankruptcy court, American Airlines said it had a $193 million loss in March.

The report was filed on Tuesday.

Excluding $314 million in reorganization fees and other accounting items, the Fort Worth-based carrier would have posted a monthly net profit of $121 million. During the bankruptcy process, AMR is required to file monthly financial reports with the court.

The company said it spent $129 million on aircraft financing renegotiations and rejections and $13 million on professional fees during the month. It also spent $3 million on "other" reorganization items which are not detailed in the report.

AMR also said that its mainline carrier, American Airlines, had passenger revenues of $1.7 billion with its regional affiliates, including American Eagle, bringing in $253 million in revenues. Total revenues for the month were $2.19 billion.

The company ended the month with $602 million in cash and $3.6 billion in short-term investments for a total of about $4.2 billion on hand. That number does not include $853 million in restricted cash.

-Andrea Ahles

Read more here: http://blogs.star-telegram.com/sky_talk/2013/01/amr-reports-773-million-profit-in-december.html#storylink=cpy

American warns travelers of possible delays because of FAA budget cuts

On Saturday, American Airlines warned its passengers that flights may be delayed, starting this week as the Federal Aviation Administration begins furloughing air traffic controllers.

American specifically mentions New York's JFK, Newark, Chicago O'Hare, Fort Lauderdale and San Francisco airports where budget cuts and ground delay programs could hurt the carrier's operations.

Dallas/Fort Worth Airport, American's headquarter hub, is not mentioned as one of the airports that could be hurt by federal government budget sequestration cuts.

Here's the carrier's statement:

As a result of the Federal Aviation Administration (FAA) sequestration budget cuts that took effect on March 1, American Airlines and American Eagle are urging customers to check their flight status on AA.com before departing for the airport tomorrow, Sunday, April 21. Unfortunately, the FAA has not yet provided specific details to the airlines, making it difficult to communicate exactly how customers will be affected. However, we will make every effort to communicate with our customers as information becomes available.

Airports in the American network that will most likely be affected tomorrow by the sequestration cuts and ground delay programs implemented by the FAA are New York Kennedy (JFK), Newark (EWR), Chicago O’Hare (ORD), Fort Lauderdale (FLL) and San Francisco (SFO). Additionally, other airports in the American network that could be potentially affected by FAA's actions are New York La Guardia (LGA), Philadelphia (PHL), Los Angeles (LAX) and San Diego (SAN). In addition to ground delay programs, the FAA could also implement airspace flow programs that could affect any flight.

-Andrea Ahles

AMR CEO Horton highlights earnings results in note to employees

AMR chief executive Tom Horton told employees they have created a "strong and vibrant" American Airlines as the company reported its first quarter earnings.

Here is the letter he sent to employees on Thursday.

-Andrea Ahles

Dear American Team:

Thanks to all of you, the first quarter of 2013 was a pivotal start to the year for American. Putting customers first, you delivered results over the past year that positioned us well for one of the most significant events in our history – a transformational merger with our partners at US Airways that will create the world’s leading airline.

The events of the quarter underscore both the success of our restructuring to date and the promise and potential of the new American. Here are some of the highlights:
  •   We reported record revenues and a net first quarter profit of $8 million (excluding special items), the first since 2007 and a $256 million improvement over last year. Operating profit was $125 million and our earnings momentum is building.
  •   With our financial restructuring nearly complete, we have built a competitive cost structure and a financial foundation for a successful future. Our non-fuel unit costs were down 3.2 percent.
  •   We are rapidly transforming our fleet with the introduction of 59 new aircraft into our fleet this year, 12 in the first quarter, including our new flagship Boeing 777-300ER, a first for a U.S. airline.
  •   We are strengthening our network with the announcement of a major expansion of our hub at LAX. We are expanding internationally with new flying to Lima, Dublin, Düsseldorf and our first ever service to Seoul.
  •   We announced a very big win in our alliance strategy with LATAM’s decision to join oneworld and to strengthen its ties with American throughout growing Latin American markets.
  •   We launched a modernization of our iconic American brand for the first time in over 40 years.

None of this would have been possible without the hard work of everyone on the American team staying focused on our customers. I am proud of our people companywide who worked diligently this week to get our operations back on track after a network outage, doing their best to minimize the effect on our customers.

As we look back on the past months, the results of our restructuring have been extraordinary, particularly for American’s owners. Typically in a court restructuring, the bondholders, to whom the company owes money, recover only a fraction of their investment, if anything, and the shareholders lose everything. That will not be the case at American. It now appears that our bondholders may fully recover their investment and our shareholders will receive substantial value. In fact, since the day we entered restructuring, the value of our bonds has risen (fivefold) and our stock price has risen (fifteenfold). This is unprecedented and serves as a yardstick of the turnaround of American and all we’ve accomplished together.

We all know that the restructuring of American hasn’t been easy, and that we have much hard work ahead with our partners at US Airways to prepare for a successful integration of our two great airlines. But together, we have created a strong and vibrant American, which will again lead the industry with great promise for our people, our customers and our investors.

I look forward to sharing updates on our progress in the months ahead. Thanks for all you do!

Sincerely,

Tom

AMR CEO Horton talks about earnings and the computer outage

AMR chief executive Tom Horton took a few minutes to talk to the Star-Telegram on Thursday morning after the Fort Worth-based firm posted a $341 million loss for the first quarter.

Here is the Q&A.

ST: Labor costs dropped 16.7 percent for AMR in the quarter. Is this the first sign of the cost savings that AMR was able to achieve through the bankruptcy process?

Horton: It’s part of it. It’s an important part of it. In general, I think we’re off to a running start for the year. As you know the first quarter is easily the weakest of the year...We don’t yet have all of the savings ground into our numbers from the restructuring, you’ll see more coming online throughout the year. But I think we’re very much on track and I think it’s, in our view, a very quick and an effective restructuring of the company.

ST: Revenues improved 1 percent year over year for the quarter. What do you attribute the increase to?

Horton: That is a result of a lot of things, not least of all of the upgrades we’ve been making to the fleet, the product, the services and our customers are taking notice. The [Boeing] 777-300 in particular has been a big improvement.

ST: Can you give more details on what caused the computer outage that occurred on Tuesday?

Horton: I’m not going into a lot of detail because I’m probably not qualified to do that. We do understand the cause of the failure. We have ruled out external threats as some folks had asked about that given the events of the week. We’ve continued our evaluation and testing and believe the situation was an isolated event.

ST: So you're confident that this was an isolated issue?

Horton: It is and as you probably know we were very aggressive to reach out to our customers to help in any way we can. We were very quick in our response.

ST: What is the financial impact of Tuesday's computer outage?

Horton: We haven’t estimated it yet so stay tuned on that, but the operations are now back up and running normal as of yesterday. [Wednesday]

ST: Without $349 million reorganization fees and one-time charges, AMR would have posted a profit of $8 million. Is this the last quarter where AMR will have significant charges related to the bankruptcy process?

Horton: I really can’t pay lawyers enough. (laugh) But seriously, it will begin to wind down. You’ll see some more in the second quarter before we’re completely through the bankruptcy process.

ST: What kind of travel demand is American seeing as several carriers reported weak demand in March partly due to the federal budget cuts?

Horton: We saw a little bit of softness at the tail end of the quarter. We’ve seen a little bit for April. However, May and June bookings are slightly ahead of last year. We’re going to have to wait and see. The industry dynamics are reasonably healthy and we’ve got GDP growth in a couple percent, which is not as fast as we think it should be but industry capacity is relatively constrained.

ST: Is the merger with US Airways still scheduled to close later this year?

Horton: I think it’s on track. We’ve said we expect to close the deal in the third quarter. We still believe that will be the case. The plan confirmation hearing is now set for August 15. We’re very busy working together on the integration planning and [US Airways CEO] Doug Parker and I chair a transition committee and we’re meeting weekly and we're making good progress but there’s a lot of work ahead.

-Andrea Ahles

AMR reports first quarter $341 million loss

American Airlines' parent company, AMR Corp., posted a $341 million loss for the first quarter as it continued to reduce its costs through the bankruptcy process.

The quarterly loss is an improvement over the $1.7 billion loss reported in the first quarter of 2012. Revenues grew 1 percent to $6.1 billion for the quarter while unit revenues grew 2.6 percent over last year.

"We have raised revenues and built a competitive cost structure and sound foundation for the future," said AMR chief executive Tom Horton. "Looking forward, our pending merger with our partners at US Airways positions American to be the world's leading airline."

Excluding $349 million in one-time accounting items and reorganization costs, AMR said it would have reported a profit of $8 million for the quarter. The items and reorganization fees include a $45 million charge related to an increase in workers' compensation claims and a $160 million loss for professional fees and an adjustment in claim amounts for special facility revenue bonds.

The first quarter was also the first full quarter where American realized its cost savings from newly negotiated labor contracts. Its wages, salaries and benefits declined 16.7 percent to $1.4 billion.

Jet fuel costs increased slightly as AMR paid $3.26 per gallon, up from $3.24 per gallon in the first quarter of 2012, an increase of $14 million to its quarterly fuel bill.

The carrier ended the quarter with $4.2 billion in cash and short-term investments, which does not include $853 million in restricted cash.

AMR plans to merge with US Airways as part of its restructuring in bankruptcy. The merger deal still needs the approval of government regulators, US Airways shareholders and AMR creditors.

-Andrea Ahles

 

Flight attendants' union lays out timeline for American's reorganization plan approval

In a message sent to flight attendants on Tuesday evening, the Association of Professional Flight Attendants laid out the timeline for what happens next in American Airlines' bankruptcy.

The Disclosure Statement must first be approved by the court as containing adequate information. The Disclosure Statement describes the Plan of Reorganization, the history of the bankruptcy case, the kind of compensation creditors will receive for their claims, and the company's finances and operations once it emerges from bankruptcy protection. As shown in the time line below the hearing to approve the Disclosure Statement is set for May 30. Then, AMR will send the disclosure statement, the POR, and a ballot to all creditors so that they can vote. The Court then holds a hearing to confirm the plan. Since the merger plan already has the support of the UCC, our team does not expect any significant objections to the disclosure statement or the POR.

Yesterday’s motion requested the following timeline for the significant milestones remaining in this bankruptcy:

May 23 at 4:00pm – Disclosure Statement Objection Deadline

May 30 at 11:00am – Disclosure Statement Hearing

June 20 – Solicitation Deadline (ballots must be distributed to each creditor by this date)

June 29 – Voting Deadline

August 1 at 4:00pm – Plan Confirmation Objection Deadline

August 8 – Voting Certification Deadline

August 12 at 4:00pm – Deadline to Reply to Plan Objections

August 15 – Plan Confirmation Hearing

-Andrea Ahles