Bankruptcy concerns rise again for AMR

The stock is taking a beating on word that contract talks with a key pilots union have stalled.

By Kim Peterson Nov 17, 2011 4:53PM
It's tough to be an AMR (AMR) shareholder these days.

The company's stock has fallen nearly 80% this year, mostly on concerns that labor costs and other contracts are becoming unmanageable. Shares were down some 6% Thursday on news that bankruptcy could become a very real possibility.

Post continues below.
Talks are going nowhere between AMR-owned American Airlines and a labor union representing the its pilots. American put forth a contract offer aimed at saving money, but the pilots' union said the proposal would fail in a vote by the rank and file. The two sides have decided to take a break until late November.

That leaves the airline with no progress as it heads into its fourth straight yearly loss. The company already has the highest labor expenses in the industry.

Now, AMR's board may need to weigh a bankruptcy filing, Bloomberg reports.

"Liquidity is going to be whittling away over the next six months," one Sterne Agee & Leach analyst told the news service. "That pile is going to get to a level where the company feels they need to make a strategic decision. We are not there today and might not be in six to nine months, but my guess is we are within 12 months."

Here's the bind for the airline: It desperately needs to restructure, but it can't do that until it works out union agreements. It needs to lower its costs, but again, it can't do that unless the unions cooperate.

AMR is the only major airline that has not declared bankruptcy in the last decade -- and that's part of the reason why its costs are so high.


Tags: amr
5Comments
Nov 17, 2011 6:16PM
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Gary,    That was probably the first idea floated!! (Along with a doubling of the bonus package for management) The second was cut the the pilots and mechanics pay.
Nov 17, 2011 5:57PM
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You fools! Give the executives 30% pay increases so they will get off their buttocks and make the right decisions to save the company. If you don't shower them with more money they will have little incentive to to do so. Send me $10,000 for my excellent idea. Do you miss me yet?

 

Respectfully,

 

George Bush

Nov 17, 2011 6:54PM
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First, I'm not in the airline industry.  So, my opinion is my own. As a businessman I know cost must be controlled and labor is one of the largest.  The problem I see is the company leaders automatically go after the union labor.  Ok, fine. But the problem is they push and push with every angle and in the past have got their way.  The leaders now have things in order and vote themselves million dollar bonuses.  How many times can you cry wolf!  To correct the problem in your company, all involved must make concessions and every expense must be reviewed.  Is it necessary to let Mom and Dad of each employee ride for free or the other freebees you all enjoy?  Your company like most have alot of waste and that can be controlled.  But if you are going to restructure look at all salaries, even the bosses.  Roll up your sleeves and make it work and all will be better for it.  I wish you the best.
Nov 18, 2011 7:58AM
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hey Mr. Dave, you have no clue about the airline biz.  I have worked for a AMR  competitor for 27 years, & I am not a pilot.  It is true the airline biz has one of the worst business plans out there.  Pilots get paid for flying a aluminum tube at 500+ miles an hour through all kinds of obstacles. The most important job they have to is to get the plane in the air safely, & more importantly to land it safely. What's your important job Mr. Dave?  filing clerk? 

 

  The airline biz is flawed....period!  Allow people to fly around the country for "peanuts".  Airplanes are not cheap, as well as parts to fix them.   A titanium fan blade that gets damaged from a wayward goose flying into the engine, costs are a mere $12,000 & up a piece.  Lots of labor needed to run airline operations, which maens labor costs are expensive for airlines. But, the most expensive cost now is jet fuel. You can fly from Boston-LA for $500 roundtrip these days. Try driving that, & see what you pay, & also how long it will take you.

 

  Airline managements are way overpaid, just like most greedy corporations in America today. Airlines always go after the rank & file for paycuts, instead of pricing their product to actually make money.  Also the US government taxes on airlines are the highest of any industry in America today.  The bright Harvard airline managers, just suck up most of those taxes in the ticket price, instead of passing it on to the consumer.  Another flaw in airline managements business 101.  They all care about the all important "market share", instead of pricing their product to make money.  Look at what that did for GM!

 

  Until executive pay is brought in line with the rank & file in this country, we will continue to see businesses failing at rapid paces. . AMR has been mismanaged for years, have a faulty biz plan, always go after their employees for givebacks, & fly older gas guzzling planes.There only hope is probably some big megadeal merger, as I don't believe the govt. will step in & rescue them as "too big to fail" this time around.  There goes another 100,000+ jobs lost in this country.  Of course the fat cat managers will take their bonuses, & retire to Aruba. 

  

Nov 17, 2011 6:49PM
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I wonder if the two horrible crashes,  Flight 191 in May, 1979 and another ten yrs ago is a factor in AMRs financial problems with 273 and 265 deaths in the second.   Virgin Airways founder Richard Branson was right when he said that "Becoming a millionaire is easy--start with a billion bucks, startup a major airline and run it...."  Labor costs are the killer. 

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