American Airlines Vows "Business as Usual," Except For the Part About Filing for Chapter 11

TomHorton.JPG
From a video dispatched by AMR this morning from its Fort Worth HQ, where there's a new man in charge
Wait -- who's Tom Horton (no, not a Canadian coffee shop), and what has he done with Gerard Arpey? Oh, Arpey's out -- decided to "retire," per the statement from Fort Worth-based AMR that follows in the wake of its Chapter 11 filing in NYC court this morning. (Though some say the board asked him to stay.) Horton's the new HMIC, and he says that filing for bankruptcy was right ... and inevitable:
"As we have made clear with increasing urgency in recent weeks, we must address our cost structure, including labor costs, to enable us to capitalize on these foundational strengths and secure our future. Our very substantial cost disadvantage compared to our larger competitors, all of which restructured their costs and debt through Chapter 11, has become increasingly untenable given the accelerating impact of global economic uncertainty and resulting revenue instability, volatile and rising fuel prices, and intensifying competitive challenges."
But fret not: The airline will use some of the $4.1 billion in unrestricted cash and short-term investments it has on hand to keep the Admirals Clubs open and "fully maintain our AAdvantage frequent-flyer and other customer service programs."

Now's a good time, unless you work for AMR, to dig into this new AP Q&A with former American senior veep David Cush, now in charge of Virgin. For our purposes this morning, begin here:
In Dallas, you're telling fliers to "dump your older airline for a younger, hotter one." American responded by slashing fares to San Francisco and Los Angeles. Can you survive this fare war?

We'll survive. At current fares, it will not be a profitable route but it wouldn't be such a loss-making one where we would consider any type of reduction. You have to be in Dallas-Fort Worth if you're going to be a business airline.
Press Release AMR and American Chapter Filing
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53 comments
zungtoo
zungtoo

I have a feeling their fees, prices and everything else will be going UP in the VERY near future.invisi-post.tk

steve
steve

They should break the company up into little pieces and starve the executives to death

halldecker
halldecker

AA has been a predator since they moved from NYC to DFW in the 70's.

They ran Braniff out of business,  Texas International helped,  and got Frank Lorenzo as payback, AA turned on them,  AA has  jumped back and forth from Love Field,   destroying competition,  infuriating those nearby with their oldest and loudest jets,  leaving as soon as they won.

And got their pocket pols to ensure their protection via the Wright Amendment.  

As all contracts can be broken in Bankruptcy,  the agreement that SW won't compete with non-stops everywhere from Love should also disappear.

AA played hard and dirty.

Payback is a bitch.

Tragedy is,  the management that did this did quite well.    It takes special MBA expertise to slip from the largest airline in the US to ... #5,  #6?   Alaska Airlines (you may not have ever heard of it)  is about their only candidate for merger.  US Air hasn't yet gotten pilot contracts for its merger with America West close to a decade ago,  they won't want AA.

The employees are having to pay for the gross incompetence and evil deeds of AA.

Kergo 1 Spaceship
Kergo 1 Spaceship

I never fly anything other than American, and have never had a problem!  Discount airlines and discounts restaurants usually equal sh%t.  Flying Southwest to save $40.00, and spend the whole day switching flights is dumb....plain dumb folks!  And I drive anywhere in Texas.  See the sights-it's your state.

Hardliner
Hardliner

If you truly want to know about American's customer service, talk to the volunteers with DFW Ambassador group. They get bitched at all the time about the Arrival/Departure TV screens being wrong, the crappy customer service the receive from AA employees behind the ticket counter, and the overall feeling people get while out at DFW. The volunteers can't rely on the Arrival/Depature screens so some of them bring their own WiFi and computers to make sure to provide travelers the correct information. American needs to focus on their airline and not on trying to run DFW the way they want.

ScottsMerkin
ScottsMerkin

While its never a good thing to file bankruptcy, AMR will be better of 18 months from now by doing this.  Debts will be unloaded, pensions dumped on the government, and contracts that are reasonable for bith sides will be enforced by a judge.  All this will lead to a better stronger company in future.  For the sake of my own personal interest in this company and the rest of my wife's fellow operational employees who work for this dallas edit: ft worth based company, we better hope it works

Scruffygeist
Scruffygeist

I hate American on domestic routes. With a passion. But they were great for international. It's damn near two completely different airlines, which I'd imagine is a huge part of the problem.

The more they emulate Virgin, the better off they will be. Guess we're stuck with those MD-80s for another 15 years.

Augie
Augie

The entire airline industry is in the same shoes as American.  They are all operating at major losses (even Southwest) and in the long run, that can't continue.   American just is less equipped to deal with the current market conditions than others because of its higher operating costs and poor strategic planning.  All airlines suffer with the sky high jet fuel cost, but for competitive reasons, they all refuse/are unable to charge enough cover the actual cost of flying per passenger.  

When AA emerges, they will have dumped huge debt, they will have "negotiated" much better contracts with their unionized employees, and they will have big orders coming in of much more fuel efficient planes, which they don't have to pay for, for a few years, because Boeing and Airbus need the orders for new planes and were willing to wait to get paid.  

A major question to be determined is what will happen to American Eagle.  Very good chance that they will spin off and make it on their own, or be snapped up by Southwest or others who want their routes. 

Phelps
Phelps

In all fairness, I think Chapter 11 is business as usual for AAR.

Don Abbott
Don Abbott

Surely any self-respecting bk attorney will ask the trustee for another 32 years of Wright Amendment protection.

Rooster
Rooster

I've never understood how a company so universally hated by both its customers and employees stayed out of bankruptcy to begin with....

JS
JS

I'm no supporter of AA or Arpey, but dumping on the man for the B/R filing is a bit unfair. After all, he resigned because he was against the company filing.  And one of the issues in the airline biz is that all the other big airlines already filed, thereby decreasing their labor costs substantially below AA's labor cost structure (even recognizing the union givebacks over the last several years). 

Chris Danger
Chris Danger

AMR is broken, has been for a long time. Blame the culture over the past 20 years, If they're smart they'll come out the other side as leaner, meaner airline flying better equipment and focusing on taking care of all their customers. Take a lesson from Virgin America: When you treat the customer right, they'll do all your advertising for you...

TheRealDirtyP1
TheRealDirtyP1

You're telling me the baggage fees didn't work?$25 for first bag, $35 for second, $100 for 3,4, and 5.

Wtf. You're telling me with this added income and other fees, they can't keep things afloat?What the fucking fuck?

steve
steve

And of course the retirees and unionized laborers will get the shaft while Arpey will probably get a big golden parachute...  disgusting

Ben Oliver
Ben Oliver

I think the problem is that it was business as usual that got them into this situation.  Just saying

SeriouslyDallas
SeriouslyDallas

How much are they paying for naming rights for two arenas (Dallas, Florida)?

Anon
Anon

As long as they're renegotiating contracts in bankruptcy, they should make sure Arpey doesn't get a cent from the company going forward - regardless of the retirement benefits he is potentially owed. As for where this will leave him, his "retirement" to an investment firm in Houston will leave him much better off than most of his employees and most of his shareholders. 

Scruffygeist
Scruffygeist

Kergs, you're an odd person to be waiving the Texas flag around when you're constantly shoving Boston down our throats.

ScottsMerkin
ScottsMerkin

wierd that the board would be wrong and the internet right.  all the data you see online at DFWairport.com aa.com and on the arrival/departure boards is sourced from the same database so if one is wrong they are all wrong. as for the overall feeling at DFW, DFW is one of the best airports in the nation to fly out of.  Direct connections to each terminal without ever leaving security some of the shortest security lines you'll ever wait in. The one thing that does suck is no free wifi, so Im sure those ambassadors love paying $15 a day or whatever the charge is to log on to their computers for wifi

Chris Danger
Chris Danger

Amen..Thats the primary issue concerning the airport. AA has pretty much used D/FW as their personal fifedom for years and im guessing has balked at spending money on anything outside their terminals, hence why terminal E is the way it is and the arrival/departure system is stuck in 1987. Here's hoping the Ch. 11 restructure of the company cuts them down to size and finally brings in some true change to the airport as well.

Chris Danger
Chris Danger

As long as they become a sleeker, more modern airline whom understands that customer service is #1 and changes their internal/external images, not to mention dumps their MD-80s, i'll support them all the way..

Anon
Anon

isn't it a Ft Worth based company?

ScottsMerkin
ScottsMerkin

hey scruffles, md80s are on the way out regardless of the filing.  they will have 480 new airplanes flying by 2017, all fully financed by the manufacturers.  Ill say this for the md -80, Id rather sit on the 2 seat side of an md-80 than middle seat of 737

Anon
Anon

international routes are generally more profitable to the airline and more desirable from the perspective of the crew (meaning their most senior and best employees are there). so you've got a lot of factors working in your favor to produce a nice flight.

halldecker
halldecker

SW can move into any market it wants to (it has more access to the capacity controlled via Airtrans.)  It definitely doesn't want American Eagle so it can fly to Ft. Smith.

Bet you can't guess the largest US airport NOT served by SW and/or Airtrans.

Guess.

FAT.

Look it up.

Nose2Much
Nose2Much

Augie, go look at the financial reports from Southwest.  They have been profitable almost every quarter, with a few very rare quarters where they weren't.  They treat their employees and customers with respect, don't nickle and dime with fees and still make money.  So it appears that American has issues beyond their cost structure - which probably exacerbate their problems.

primi_timpano
primi_timpano

More than once I was the object of the worst service and employee attitude I have ever encountered in an airline.  So bad that more than once I have told a completely uncaring AMR reps the company deserved bankruptcy.  I only wish it were liquidation.  Or a t least an acquisition by SW.

Chris Danger
Chris Danger

Rooser: Deep pockets from clueless investors looking to turn a profit in their portfolio..

Anon
Anon

But this is exactly what's wrong with the US corporate system. The rise in CEO pay is only justified if you fully believe that the individual's personal labor contribution is driving the performance of the company and that no other person could do the job as well as him. Otherwise he was simply presiding over a company whose value is related to the enterprise itself (along with other macroeconomic trends that influence the industry). In that case, any excess return in good times should go to the shareholders who own the business, rather than management. But that's not how it works. In good times we reward, but in bad times we come up with excuses about how nothing is really their fault. Then we give CEOs even bigger bonuses for their ability to cut costs. Which generally means firing employees.

So the bankruptcy filing is either his fault because as CEO, he is solely responsible for the performance of the ship, or he never justified the multi-million dollar paychecks because he was mostly just a cog the machine called American Airlines, and his past paychecks have essentially been a theft from the business. There's really no in between option.

Chris Danger
Chris Danger

JS, people like Arpey and Bob Crandall are the reason AA is in the current situation. When you fly 30+ year old equipment that have a history of microfractures, upcharge your customers for luggage and downgrade service to save a buck, all the while for getting a golden parachute for, pardon the pun, crashing the plane into the mountain, they deserve the scorn and disrespect from the masses.

If and when AA exits bankruptcy, a change of culture is needed, one where both pilots and crew (air/ground) are respected as well as better equipment and better customer serivce to boot.  Until then, AA will always be the airborne equivelent of a Greyhound Bus to me...

trannyntraining
trannyntraining

Hey! Watch your fucking mouth! I mean fuck, dude, there are kiddies reading these fucking blogs! Shit!

Kevin H
Kevin H

Yes, the baggage fees did wonders for all that unregulated CA$$SH that AMR has in the bank right now...This is just a good old-fashioned way to short the folks that have already retired and the good folks that are still employed by AMR.

J. Erik Jonsson
J. Erik Jonsson

Exactly.  No one who has met an AA flight crew or paid bag fees wants business as usual.

TheRealDirtyP1
TheRealDirtyP1

what does that matter, it's advertising. In the NBA finals, that investment really paid off, they had both of their arenas in the finals, the best exposure they could ever ask for.

Anon
Anon

The question is not how much are they spending, the question is whether they are paying market rates under any ongoing contract and getting an acceptable return on their advertising spend. Though they may seem frivolous, naming rights do have a value to the company that lends its name to an arena (or any other building, for that matter).

anon's brain
anon's brain

"Despite his long tenure as AMR’s chief executive, however, Mr. Arpey is not expected to leave with a big payout. Under the terms of his contract, he will receive not receive any severance, according to the research firm Equilar. And with AMR skirting $0.35 a share right now, his stock holdings are essentially worthless."

Source: http://dealbook.nytimes.com/20...

Damn those pesky facts.

Ed D.
Ed D.

Ha ha, no. Running a multi-billion dollar company into the ground almost always means a big payday for the outgoing CEO while the workers living paycheck to paycheck find themselves with smaller (or no) paychecks so the company can be "competitive".

Kergo 1 Spaceship
Kergo 1 Spaceship

I only do it to irritate the masses....I've traveled every inch of this state-from Dalhart to the Valley, from Linden to Van.  I like to think of myself as a good Texan American Yankee sir. 

Heck, if I liked the East that much, I'd be up yonder. 

ScottsMerkin
ScottsMerkin

alright smartass, sure, but either way they employee folks of many cities around the area, so yeah, they are DFW based i guess

Scruffygeist
Scruffygeist

I know you're right, but I'll believe it when I don't step on to one of those shitboxes with wings. Now what I'd really like American to do is at least offer what Virgin and Delta and others do, a slightly upgraded version of coach with more freaking leg room. I would've gladly shelled out $100-$200 for that on a recent London to Dallas flight, or $50 for SF to Dallas like Virgin offers on Main Cabin Select with more room and free food/drink/movies.

Juan Valdez
Juan Valdez

You mean...those vile Senior Mamas that treat you like crap. Thats what I got last time i flew them to Zurich. The planes are disgustingly dirty and dilapidated, the employees are mean. I hope someone like AirTran takes over.Heck I flew Spirit this weekend and it wasnt that bad.

Cbs2528
Cbs2528

I'd suggest the flight crew needs a change in culture too. I fly at least once a week and play a game of over/under on how many times a flight attendant discusses either the unions or their complaint about pay/benefits with me (of course you have to have one actually acknowledge you exist first, which is another fun game to play).

The flight experience on AA (outside first class, where treatment is usually excellent-showing they have the capability) is indifferent at best and flat out dissappointing in most instances.

The airline needs a top to bottom makeover.  I fly AA 90% of the time because it is what we have here in Dallas. Hopefully, with the new planes, they can move on some of the "senior" flight staff that is bitter and not interested in delivering customer service and inject people that actually want to be on the plane.

Pat Boyack
Pat Boyack

Yeah, and as you can see that really worked out for them. And people die of exposure. 

Pat Boyack
Pat Boyack

.....and lets not forget the little stunt AMR tried to pull on the Unions 10 years ago. 

Montemalone
Montemalone

Right?I wish I had known who to blow at SMU to get one of those CEO jobs, where you get paid a lot when things are good, because obviously it was all your doing, and get even more when things are bad, cause it ain't your fault, and retaining top talent is worth the extra pay and bonuses.

Frequent flier
Frequent flier

Are you serious?! AirTran is seriously ghetto, their planes scare me and I refuse to fly them. My partner and I recently flew spirit and before we were even on the plane swore NEVER AGAIN. Spirit charges for carry-on bags, and we were told that our 45lb bag was overweight and would be $75 to check. I won't even mention the plane or lack of service. WORST AIRLINE EVER!!! AA isn't much better.

Flying on Virgin is actually a treat, clean planes, happy employees, good food, tv's for every passenger. And usually the cheapest!

Pat Boyack
Pat Boyack

Congratulations on being ignorant.   :)>

Pat Boyack
Pat Boyack

While agree with most of your assessment I think the "flying truckstop waitreses" tag is very ignorant. 

Chris Danger
Chris Danger

Pat, many of the "flying truckstop waitreses" at AA also were pulled in from the ranks of the old TWA, which puts quite a few of them at or beyond normal retirement age. Im of the belief that for AA to become a much leaner airline, those folks need to retire and a new generation needs to take over. AA as a whole needs a new public image, one of being a sleek, modern carrier who actually has great customer service on and off the plane. Thats why I fly airlines like JetBlue and Virgin America, as both take care of their passengers both on the ground and in flight.

Pat Boyack
Pat Boyack

Employees at American have seen many changes which have made their jobs more demanding while getting no increase in pay. All the while watching upper management's pay and bonus structure raise to record heights. I have never worked at American but at one point flew on average 150 days a year. I talked to retired pilots and American workers a number of times. To blame them is stupid. 

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