Update:  For those sending me private emails, no, this will not change a thing with respect to travel on American Airlines today or even next year.  If you have a ticket, it will be usable.  This is not a liquidation but, rather, a reorganization.  AMR (American Airlines) has enough short term cash holdings to exist in its present state for at least 3 years barring a dramatic change in the airline economy.  Even if there was a dramatic change that ate up cash faster, AMR could survive in its present state for at least 2 years.  Its current situation will be fundamentally different in 2 years with respect to costs as a function of labor and fleet. 

Original Post:

It’s not entirely a surprise but it isn’t entirely expected either, is it?

American Airlines has filed for Chapter 11 Bankruptcy protection and Chairman and CEO Gerard Arpey is “resigning”.

Digest that for a minute.

We’ll be seeing some people say “they knew all along it would happen now” and we’ll be seeing others expressing deep shock.  If you followed American Airlines, you knew this was a possibility.  I think few of us expected this to happen this month, this year or in the next 6 months.  Not really. 

But it isn’t the *wrong* thing to do.  By doing this now, American gets its house in order and they do it while there is ample cash holdings to accomplish it.  This isn’t being done because American is out of money or can’t meet some obligation. 

It’s being done, primarily, to break labor contracts and gets its costs aligned with that of the other SuperLegacy airlines.

By doing it now, American gets to be in control of its destiny much more than by waiting to until cash holdings become somewhat critical and creditos get antsy.  Want proof of that?

Look who just got named Chairman and CEO of American Airlines:  Tom Horton.

My first reaction is that Tom Horton is *not* the person to be put in charge of reorganizing American Airlines (and AMR).  My second reaction is that maintaining the executive corps and the status quo is *not* what you want to be doing at this point. 

American isn’t having a tougher and tougher time of things simply because of what pilots earn.   That’s part of it and labor costs in general are a big part of their troubles.

The biggest problem?  American Airlines increasing irrelevancy to the consumer and its exceptionally decreased value to that consumer when compared to both SuperLegacy and LCC carriers. 

Evolution in AA leadership is going to be very unsatisfying.  A little more Revolution is what is called for.  Tom Horton & Company aren’t that, I believe, but they are free to prove me violently wrong.

Filed under: Airline History, Airline News by ajax
1 Comment »

Now we see some rumour developing that United Airlines is in talks to make a 200 aircraft single aisle purchase.  This has credence due to the fact that United has about 200 aircraft that are some of the oldest around (these are 757s and 737s mostly from the original United Airlines) and those aircraft are likely having a real impact on the bottom line as a result of fuel costs and maintenance.

I think we’ll see an order and I suspect that order may well go all to Boeing.  It may be named United but it is run by Continental executives now and those executives have found ways to effectively use the 737 on their routes.  Furthermore, I think Boeing may be able to offer earlier delivery positions than Airbus can.

What might we see?  I would look for a sizeable portion to be 737-900ER aircraft with some 737-800s.  In addition, I think we may well see a follow on order for the 737MAX aircraft again in the -800/-900 configurations. 

The current fleet of Airbus A319s are “good enough” and while some of the A320 aircraft are getting older now, they aren’t quite old enought to start planning retirement of until those older 737-500 and 757-200 aircraft are replaced.   About 1/3 of the A320s were delivered in the mid 1990s with the balance showing up from around 2000 and on.  Almost all of the A319s arrived in the early 2000s.  There is maneuvering room left with those fleets.

Airbus will want to keep United but I think they’ll struggle to offering the delivery positions that United will need.  Those positions are needed now and over the next 7 to 10 years.  Airbus has sold most of those positions.  The only way to offer early positions is to increase production even more.

And both Boeing and Airbus are struggling to figure out how to increase their production beyond their plans for production rates that will already be historic for commercial airliners.  It would require another production line and even more suppliers for airliners that are now fairly obsolete in light of the A320NEO and 737MAX.

Look for an order announcement in the next 1 to 3 months and my bet is on a 200 to 250 aircraft order of 737s with about 100 of those coming from the 737MAX line.

Filed under: Airline Fleets by ajax
No Comments »