The Fort Worth Star Telegram SkyTalk blog has a story about a bond analyst blasting the American Airlines management for their latest request to extend their deadline for presenting a plan for bankruptcy exit.  In her note to investors, Gimme Credit Vicki Bryan said:

“AMR management has been coming off as more arrogant than confident, in our view, with destructive diversions and posturing that almost has boarded on the ridiculous. From CEO Tom Horton’s “revelation” back in July that the merger with US Airways actually was his idea in the first place (oh really? If so, he apparently couldn’t pull it off. See our note on 7/25/12) to the unveiling last week of expensive (and unappealing) corporate rebranding and garish new livery on planes that most likely will be owned by somebody else soon,”

This is what I mean about putting the cart before the horse in this process.  There are way too many attempts to pre-emptively announce developments and changes to control the outcome.  At what point does a board of directors or an unsecured creditor’s committee direct that their inclinations and desires are what controls an outcome rather than the CEO’s desires.  Even if that desire is a multi-million dollar payout if they exit as a stand-alone organization.

And let me ask you this:  Why should multi-million dollar payouts to an executive team take precedence over what is the right outcome for those holding AMR debt?

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Short version:  Non-disclosure agreements keep getting extended for more talks.  Conventional wisdom has it that most issues have a solution framework and that there are perhaps one or two sticking points.

First, who owns how much of the new entity.   The word on the street has the offer amounting to 70% of the entity being owned by AA creditors and 30% being held by US Airways shareholders.   Part of me says this is a touch inequitable but it might be palatable enough for US Airways shareholders to do the deal.

Second:  Who runs the show.  Doug Parker would seem to have the inside track based on his performance at US Airways but apparently Tom Horton (and possibly others) are making an argument for Tom Horton to be Chairman and CEO or, at the least, Chairman, of the new company.  This argument is based on the fact that Horton & Company have run a large international airline before and . . . Parker & Company has not.

Financial analysts see the consensus that this is not what should happen.   The key risks there are that Tom Horton has no employee support and particularly none from unions and lacks a certain credibility with this plan to grow capacity as much as 20% in saturated markets.  I’ll go one further:  Horton and his team have never focused on the revenue side of the business.   It’s always been about managing money and assets as opposed to growing the business.

Parker & Company have a strong reputation for returning value to shareholders, managing their operations closely and responding to problems with solutions that work.  Moreover, Parker & Company haven’t exactly been managing some 20 airplane LCC carrier either.  US Airways may not be quite the size of AA but it’s no small entity.   It’s the 10th largest airline in the world by fleet size (AA is 6th).  In Revenue passenger miles, US Airways is 11th and AA is 2nd.

US Airways does fly a number of international routes.  They just don’t fly to quite as many destinations or with as much frequency.  It’s not like Doug Parker doesn’t know how to establish a route to a South American city.   His team established a route from Charlotte, NC to Rio de Janeiro, Brazil and made it work.  That’s saying something and I want to see what they can do with AA resources.

I also think that the Horton Team just might have overplayed their hand recently with these rapid fire introductions of branding, uniforms, aircraft liveries, etc.  These acts were, in my opinion, designed to help bolster their argument that they should be in charge.  Now I think they are starting to sound shrill and I think many who care (such as the unsecured creditors) aren’t impressed with this team putting the cart before the horse several times over the past 2 months.

At this point, I rate a merger probability as nearly certain.  I think that the most that will be given to Tom Horton is a non-executive Chairman role (such as Glenn Tilton) set to expire after a few years.  Maybe.  If he stops futzing around.  I think many very capable AA executives will be retained.  I think some won’t be.  The truth is that there is a rich garden of talent at AA that can be mined.  There is a reason why Virgin Atlantic hired their next CEO from AA and why Virgin America got theirs from AA too.

I think we’ll hear the merger announcement sometime between now and February 15th.  That’s a pure guess on my part based only my sense of timing and mood in this affair.

The only thing that could make me happier in that announcement would be the news that that awful livery will be stopped and redesigned immediately.

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American Airlines announced yesterday that they will be developing new uniforms for its service staff.  Pilots, flight attendants, customer service agents and others will be given a new look and AA has engaged the designers Ken Kaufman and Isaac Franco to do the work.

This isn’t about the need to urgently rebrand the airline.  This is about AA attempting to create a story to send their message to the  unsecured creditors that everything will be OK if they permit a stand alone bankruptcy exit.  AA and its executive team has been working frantically from a PR point of view to send this message and particularly so this month.

The problem is that it is becoming rather shrill.  Yet, they manage to do this while choking off US Airways with a non-disclosure agreement.  That NDA doesn’t prevent US Airways speaking privately though.

What bothers me is how they’re working so hard to stay on script and timing without paying attention to feedback.  For instance, the overwhelming poor feedback on their livery would, in my opinion, ordinarily ask for a pause in the efforts.

But that’s the problem with the current team:  They are extremely deaf to critical feedback and particularly so when it comes to external sources and even external stakeholders.  If I’m a member of the UCC, I’m going to be annoyed with the persistence being shown here without regard to putting first things first.

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American Airlines has inked a deal with Republic Airways to flying under the American Eagle brand.  Republic will operate 53 Embraer E-175 jets with 12 first class seats and 64 coach seats.  The contract will last 12 years from the time the aircraft are put into service and the full complement won’t be in service until 2015.

If I were American Eagle or an employee of American Eagle, this would worry me.

It’s clear that no matter who runs AA in the future, contracting out American Eagle services will only increase, not decrease.  In addition, it will likely go to regional airlines that either have the equipment today or the orders for the equipment already in place.

American Eagle has neither.  It’s fleet is primarily comprised of the ERJ-135/140/145 aircraft although they do have 47 Bombardier CRJ-700 aircraft.  If the team at American Eagle wasn’t getting ready for a new world order, they should be doing so as of this morning.

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Terry Maxon at the Dallas Morning News made a post about Mike Boyd responding to American Airlines’ rebranding and livery change. The short version is that Boyd was scathing in his criticism of American Airlines management for doing this now.

And it mirrors some of my own feelings posted earlier today.

If one considers the priorities just prior to and during bankruptcy, rebranding efforts should have been suspended upon entering into bankruptcy.  I assure you millions of dollars were spent on it leading up to the unveiling of the new livery.

I do think AA needed rebranding ultimately but whether it got done today or a year from now wasn’t really important.  Delivering a great customer service product is the priority right now.

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Update 04:  Best funny comment I’ve seen so far is:  “So, I see AirFrance and Pepsi had a Cubana love child??”  Seen on Airliners.net.

Update 03:  I am amused.  I’ve seen it suggested on Terry Maxon’s blog that the livery is inspired by Greyhound (which gave me a good laugh but no doubt really isn’t true.)  On a third pass over the livery, now I’m feeling like it was designed for the United States Postal Service.   What I’m not getting is any strong connection to the history of American Airlines.  It didn’t inspire me forward and it didn’t connect me to all that is positive about AA’s history.

Update 02:  So far, I am not seeing much in the way of positive response to this livery.  I expected quite a few people to immediately dismiss it but I also thought I’d see some people speak out for it.  Not yet.

Update 01:   It would be very easy to see the US Airways logo embodied in that tail design, I think.  What I’m referencing is the bar representation.  I suspect Doug Parker would be OK with it mostly.

I also think that the billboard title is less obvious than it could be against that fuselage.

I’m still digesting it, however.

Here it is.  A screenshot of their new livery captured from American Airlines’ website.

I think this new livery is going to spark a lot of controversy.  My own thoughts:  My first reaction to the tail wasn’t good but it’s already growing on me.  I don’t like the highly stylized “aircraft tail” symbol in front of the billboard titles for American.  For some reason, it reminds me of Lan Chile.  I also don’t like how they’ve extended the red bars of the tail down below the horizontal stabilizer.

My first reaction is to give this a B or B+.  I feel like I’ve seen better created by amateurs online.  But let’s digest this one first before going all Pulp Fiction on it.  I actually liked THIS and THIS one more.

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American Airlines’ board of directors met on Wednesday but don’t expect a merger announcement quite yet.  I think there will be a merger.  Frankly, I think there is a very high chance of a merger.  But I also think that the details of the deal still have to be worked out to everyone’s satisfaction.  Tom Horton will be arguing that shareholders will get more value with a standalone exit (I’m not sure I agree here if one considers what is likely to happen with a mediocre operation over the 3 years following bankruptcy exit).  I think a better guess for an announcement will be around late January.

Delta Airlines is set to acquire regional airline Pinnacle as it is already providing its Debtor In Possession financing.  Pinnacle entered bankruptcy and Delta needed that airline to stay afloat and operating.  Whether the airline is integrated into Delta and Delta managed, I can’t say for now.  I suspect that Delta will become the majority owner and seek to install an executive to finish making Pinnacle a viable entity.  At that point, I would expect Delta to spin off Pinnacle again.

US Airways is setting new records (again) for revenue and passengers.  While they expect a $35 million hit against 4Q earnings because of Hurricane Sandy, I would expect that their earnings report for December to, once again, shock and delight investment analysts.  This is where US Airways is making its best argument for a merger with American Airlines:  Investment analysts, shareholders, etc all want this management team in charge of American Airlines because it performs and does so under the worst of network circumstances.

Delta Airlines opened up 300 flight attendant positions and got 22,000 applications for the positions.  That’s about 73.5 people per job applying.  (Take note flight attendant unions:  People want those jobs and readily accept the entry level conditions.)

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I’m often struck by how many successful investors have often described their choices in who to invest in being based upon their own personal experiences with a product.  Time and again, one of these people tries a product and realizes that someone has something worth betting on.

For those who may invest in American Airlines and particularly at this time, I would ask that you try the product out.  Read my trip reviews found HERE and HERE.

Don’t fly in First Class.  Don’t schedule a trip known to AA management.  Buy an economy class ticket for a flight of a duration of 2 hours or more and make a decision based upon your experiences and contrast those experiences with those on other airlines.

American Airlines may have largely fixed its cost problems but it hasn’t addressed its service problems at all.  Service will be what determines the airline’s ultimate success.  Service is what attracts revenue, not cost cutting.

Consider the value proposition AA is offering in comparison to other airlines and particularly those it is competing against.

US Airways may have its problems but it doesn’t have AA’s problems.  It attracts customers on price and it keeps them by doing what it contracts to do.  It competes against the likes of Southwest and Delta all the time and it makes money.  It makes money because it does deliver on the service and value propositions.

Ask yourself if the status quo that exists today at American is the status quo that wins in the marketplace here in the United States.  Consider that despite having a very senior and very well paid service staff and crew, Southwest accomplishes what AA can’t every day.  It does it day after day and has expanded its revenue growth and still has managed to earn a profit.

Contrast the experiences with Delta who is arguably kicking everyone’s butt in the business currently.  It is these intangibles that have always determined the success of an airline.

Yes, it’s important to be competitive on costs but you can’t win if you can’t compete on the service and value side.

Now, ask yourself if the status quo is who should be running American Airlines going forward out of bankruptcy.  Some say that the executive team has changed and that it is leaner and more responsive.  I would argue that we simply have Version 3.0 of the same leadership the airline has enjoyed for 15 years and that this version shows no evidence of being anymore sensitive to the service and value side of the business than the previous regimes.

AA needs new leadership and it needs leadership that can change those service and value propositions.  Even if that leadership is not US Airways management, those in charge today need to go and new people need to come in and change the airline to a model that wins.

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As the clock ticks towards the end of the year, more and more people are weighing in on the potential American Airlines / US Airways merger that’s been cooking for a few months now.  I have a few thoughts on this:

1)  It is curious to me that Tom Horton continues to describe himself as neutral on the merger idea on the one hand but also argues for a post bankruptcy merger any time the door is theoretically closed at a meeting.

2)  The fact that the pilots have been engaged on this leads me to believe that an offer is imminent.

3)  If an offer is imminent, someone has found a way to let Tom Horton exit gracefully.  I’m guessing the plan here is something similar to what Glenn Tilton got in the ContiUnited merger.  I’m also guessing that Tom reckons that if Doug Parker blows things, he may yet be able to step into the CEO role again.

4)  Not all pilots are eager for this.  There is a new blog started by about 35 AA pilots, mostly captains and mostly from the DFW base.  The fact that most are captains from the DFW base leads me to believe that these are fairly senior captains who may feel a touch threatened with respect to retaining their seniority against similar US Air (EAST) pilots.

Seniority is going to be a touchy issue for pilots and other crew.  It won’t be Delta like in the integration largely because rational thought isn’t in place for either union involved (APA or USAPA).  If this were an ALPA/ALPA integration, the odds for a smoother integration would go up.

You know what?  Smooth or unsmooth, it doesn’t really matter.  US Airways has already proved it knows how to run a split operation.  Furthermore, there is now federal law that will govern a seniority integration in this case and that should prevent a USAPA-like embroglio.

Some pilots from both unions point to Doug Parker and US Airways not being able to integrate their employees in the previous merger and that’s not quite true.  There was an arbitrated decision that very senior US Air (EAST) pilots threw a temper tantrum over and tossed out by electing a new union organization.  Parker & company couldn’t even be sure who to negotiate with for the last several years much less solve a problem.

Parker & company keep making offers to US Airways flight attendants and they keep voting them down asking for more.  And who wins in those situations?  Parker & company.  Because the NLRB won’t let the crews strike and does keep the new agreements coming which proves that progress can be made and that therefore justifies not letting the unions strike.  Meanwhile, US Airways keeps paying the old rates.

At some point, you need to make the deal you can get, not the deal you want.  US Airways crews haven’t been able to get their act together to realize that much less make it happen.

I rate a merger announcement as 80% probable at this point but I’m not sure that I agree that it will happen before the end of the year.  I can see this deal getting announced in the 2nd week of January, however.

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It’s occurred to me that American Airlines may want an accelerated pilot contract hearing in bankruptcy court for multiple reasons.  First, it enables them to woo the Unsecured Creditor’s Committee towards their stand-alone plan.

Second, they have 777-300ER aircraft arriving shortly and that pilot contract allows them to train pilots and presumably stay on schedule for entry into service for that aircraft.  I rather believe that this is  the prime driver.

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With the AA Pilot Contract ratified by the Allied Pilots Association, speculation as to what’s next has gone into full overdrive.  Some think American Airlines will make a case for its stand-alone bankruptcy exit plan and some think this clears the last hurdle for a merger with US Airways.

American Airlines has asked that the court set a hearing to approve the contract more quickly than the customary 21 days.  I suspect that request is more about checking the box quickly than anything.  With this contract settled, American Airlines is done with the big challenges of reorganization in its mind.

Is it done?  Frankly, we’ve seen them address costs in a very aggressive manner and not just in the area of labor.  AA’s fleet has been slashed of aircraft and leases on other aircraft have been renegotiated.  Costs have been addressed more than adequately.

But where is the revenue plan?  It remains the cornerstone market strategy of old.  Routes haven’t been radically altered and hubs haven’t been re-tooled and new markets haven’t been explored.  Bankruptcy reorganization gives AA time to work on this area too and it appears there has been no real interest in putting in the same effort here as what has been done to costs.

My concern is that American Airlines has achieved another 10 year holding action.  Time will tell but this reorganization feels like the company has puts its hopes into the cost cutting basket without truly addressing the need to grow revenue and, frankly, repair relations with employees.

I sit amazed that the company hasn’t acknowledged its challenges going forward with respect to employee morale.  Were I an analyst, I would be worried about this companies exit from bankruptcy not because the employees would intentionally sink the ship but because a service company such as an airline is extremely dependent upon its employees providing a positive experience.

American Airlines seems to think it’s still the dominant player in all its markets and that people don’t have choice.  That’s just not true.  Los Angeles and New York City are extremely competitive marketplaces and areas where other airlines have been much more aggressive than AA to date.  Chicago is a very, very competitive market with United Airlines and Southwest Airlines eating at American’s constituency every day.  Miami / Fort Lauderdale has a tremendous amount of LCC competition and airlines are flying to South America from other gateway cities and competing just fine with AA.  Dallas / Fort Worth has increasing competition at DFW airport and the prospect of a fairly unlimited Southwest Airlines in 2014.

The differentiating difference for an airline over the next 3 ot 5 years in the SuperLegacy category is going to be service and its those employees who have been roughed up badly who will be delivering it.  What’s being done to sooth those wounds and what’s being done to incentivize a positive experience for passenger?  A plan for this would be a good thing.

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American Airlines says it has lost $164 million in October with $72 million of that related to bankruptcy expenses leaving $92 million related to its operations.  The company says that about $40 million of that is related to Superstorm Sandy and another $45 million was due to the recent operational troubles it experienced in October.

Every airline is reporting losses from Superstorm Sandy and $40 million does kind of pass the gut check.  However, I think attributing $45 million in losses to recent troubles in October is a bit . . . convenient.  And it certainly doesn’t take responsibility for those problems.  Let’s be mindful of the fact that the airline and union went back to the negotiating table in early October and operations regained sanity.

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The Allied Pilots Association and American Airlines have reached a tentative agreement for a new contract.  APA President Keith Wilson seems optimistic about it and describes it as an industry standard contract.  American Airlines seems to think it’s got a deal as well.

I’m pleased to hear a deal has been reached but . . .

There was a deal a few months ago that the pilots voted down.  We’ll see just how much the deal has changed once some details leak.  It’s possible that the pilots are ready for a deal and, if so, they’ll be likely to vote on it.

Maybe I’m cynical but I remain a little skeptical that this deal is truly done.

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Terry Maxon, who I respect immensely in the business of airline reporting, has a story in the Dallas Morning News saying that sources close to the potential merger between American Airlines and US Airways say an official offer is imminent.

All parties involved were supposed to meet last week in New York City but that meeting was delayed after Hurricane Sandy.

The radio silence since October 31st, the date the non-disclosure agreement between the two airlines was to expire, has made me curious.  The NDA was extended for more time between the two parties.

It’s hard to read the tea leaves on this one and at this point.  American Airlines and its executive team isn’t in the worst position possible although their position hasn’t improved measurably either.  My expectation was that the AA team would stall for more time.

To make this deal attractive, US Airways will have to make an offer that creditors find hard to refuse.  The expected valuation of the company upon bankruptcy exit is likely to be $6 Billion or more.

The combined revenues of each company would be approximately $36 Billion and that exceeds that of Delta and United Airlines.  The synergies that would result have the potential to offer profitability that might approach that of Delta and that isn’t trivial.

The creditors have to balance what their holdings would be worth with a stand-alone exit and what the prospects of AA are as a stand-alone company against what value might be created over the same time combined with US Airways.  Creditors aren’t going to sell their holdings as soon as the markets open upon bankruptcy exit.   My guess is that the time frame they’ll consider is somewhere between 3 and 5 years.

If I’m a creditor, I’m interested in the executive team that can create the most value over that time period.  Based on that, US Airways as a merger partner looks very attractive based on their performance with a sub-par network.  I would not be concerned about the ability of the US Airways team to integrate or operate the new airline as this team has proven that it can run an airline and that it knows American Airlines.  And it really does know American Airlines.

This is the part where pilots would have been very wise to have taken the deal they were offered this past summer.  With a 13.5% equity stake in the new airline, they would have been in a stronger position to profit.  I wonder if the creditors would be as excited about such a large stake in the airline given to the pilots with a US Airways merger involved.

We may hear something soon but we won’t hear it today, in my opinion.  I would look for an announcement next Monday or Tuesday at the earliest as I suspect all voices will need to be heard for the next few days.

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AMR has reported a net loss of $291 million for September which includes $160 million in special bankruptcy charges.  This means that American Airlines had a significant loss for September regardless.  And I would remind readers of the artificially low costs AA is experiencing right now as well.

Yes, this absolutely had to do with the pilots conniption with the company but I assure you that the pilots didn’t do $131 million in damages with their behavior either.  That would be so spectacular as to cause the airline to head immediately to court for relief.   Furthermore, the pilot problem is at the least 50% of AA’s fault in the first place.

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American Airlines pilots are now reporting what they’re after in negotiations with American Airlines management and I find it . . . ambitious.  The highlights of their “asks” are:

• Eliminate Group II pay band and move the A-319 into Group III, with a weighted industry average before year three

• Pay rates that align us with our network-carrier peers at Delta and United

• Codeshare restrictions in line with those in the US Airways conditional labor agreement

• Contract duration that is shorter than the six-year duration in management’s “last, best, final offer”

• An industry-standard pension

• An equity claim that can be monetized and has an established “hard floor” protection

• Scope limits that include a hard cap or percentage limits on the 50- to 76-seat jets

To a degree, when you enter into negotiations at airlines, you ask for the world, promise the world to your membership and ultimately settle for something less than the world.

These goals are too much for the present situation.  They don’t set appropriate expectations for either side.

Changing airliners around into different pay groups will materially affect American Airlines’ cost plans.  AA has a solution for that problem:  Impose terms and live with the pilots bad behavior.

Negotiating for pay rates that are equivalent to those of both Delta and United pilots is too aggressive.  Let’s not forget that pilots at both those airlines paid their dues with lower rates and got their airlines to a high performing level before they earned those industry leading rates.  AA pilots haven’t paid their dues and I’m beginning to wonder if anyone bothered to tell them that the AIRLINE IS IN BANKRUPTCY.

Codeshare restrictions are about preserving jobs.  I get that and even approve.  I think that airlines should fly their flights and compete rather than buddy up in every possible way out there.  But I would also point out that while the bankruptcy judge didn’t let AA have carte blanche on codeshares, he pretty much let them get as much they needed and wanted.  This shouldn’t be the hot button issues that the union keeps making into.  American Airlines isn’t going to be a Virtual Airline.

Contract duration seems silly at this point too.  The pilots are already into their 6th year of negotiating a contract now.  Get something in place that allows both parties to go to work on their jobs.  Quit making a fuss and causing a distraction every 3 years when it comes to pay.  Take the 6 year duration and the stability and the benefit it will provide the company as well as you.  Going for a 3 year duration in the hopes that you’ll get an even better rate is just . . . silly.  There isn’t room in the airline industry to see those pay rates grow substantially and there won’t be for years to come.  Sorry guys, you’re fighting for a right that potentially leaves you at a greater disadvantage.

Industry standard pension:  How about you guys take an Industry Standard 401K like the rest of us.

Equity claim:  I’m fine with this but if the pilots want this, they *have* to give something up to get it.  You don’t get industry standard/industry leading benefits and wages plus a substantial equity claim that can be converted to cash and distributed to pilots as well.  That is called having your cake and eating it.  I really do wonder if anyone has mentioned that AMERICAN AIRLINES IS IN BANKRUPTCY.

Scope limits:  I’m in violent disagreement here.  I actually think that AA has limited itself too much with scope limits even now.  There will be growth on routes and routes that are 60 seat commuter routes today may well be 90 seat routes 10 years from now.  But a 90 seat route isn’t a mainline route.  Not in this decade.  There is a solution here:  Offer low, low pay rates to American Airlines to take on this flying internally.  Ask for an apprentice program that hires and trains new pilots and puts them into this commuter flying at “industry standard” regional airline rates with a growth path to mainline flying internal to the company.  But make it *cheap* for AA.  The upside?  The union gets these pilots earlier and has them “feeding” the union earlier in the process and they get to control one hell of a lot of more pilots than they otherwise would.

I don’t think we’ll see a successful agreement out of these latest talks.  I think reality hasn’t hit either party in a substantive way and I think that pilots will decry management and start impacting operations again after these negotiations break down.  I think the prospect of a real contract is slim and I begin to wonder if AA shouldn’t impose terms and take the operational hit for another month or two and let pilots get tired of their behavior.  Or, better yet, impose terms and hire yet another law firm to be prepared to seek an injunction against pilots when they start their slow down again.

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In a bold understatement, American Airlines CEO Tom Horton has acknowledged in new stories that AA has had a rough few weeks.  Horton was admitting to AA’s operational problems primarily with respect to cancelled flights and reduced schedules due to pilot driven maintenance issues.

It’s notable that Horton would not speak about a merger with US Airways but did mention IAG (International Airlines Group: British Airways / Iberia) CEO Willie Horton was willing to take a minority stake in the airline to emerge from bankruptcy.

I strongly suspect that Horton and his team are continuing to look for every option to emerge independently from bankruptcy.  In short, he seems determined to benefit from the rewards previous airline CEOs have enjoyed upon emerging from bankruptcy rather than necessarily being oriented towards the best interests of AA’s stakeholders.

The problems going on at AA are many and not just limited to the pilots.  We now see an airline unable to cope with its unions with respect to coming to an agreement with pilots to settle the pilot induced operational problems as well as it seems to be having trouble figuring out how to deal with reduced staff as a result of “early out” options negotiated with unions representing flight attendants and mechanics.

Furthermore, it has enjoyed a PR disaster over the operational problems as well as the seat problems on 757 aircraft.

Here is the point:  None of these problems as a single event is that big of an issue.  Airlines go through these from time to time.  However, the ensuing perfect storm belies a company lacking leadership.   To further my point, this is really the first we’ve seen Tom Horton answering media questions in weeks and the answers aren’t entirely forthcoming.

Instead, we’ve seen subordinates and spokespersons responding to each problem as if to say “there really isn’t anything wrong here, look away.”

Denial starts to make you look stupid in these situations.  The growing consensus among industry observers is that it is time for this executive team to go.  I agree.

Whether it be a takeover by US Airways or another executive team, we see a leadership crisis that needs to be solved.  No one is out front and leading the airline through these crisis.  We continue to see “committee” responses to these problems that seem couched to avoid public mea culpas.  Airlines in denial fail more.

I expect that we will see financial results over the next few months that point to this denial and we’ll see a return to the “Wait, wait!  It will get better!  We promise” approach to advocating to the airline.

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Curiously, American Eagle has managed to get deals with all its unions on terms that seem to work very well for its labor and without nearly the muss and fuss that AA has experienced.

I think this has to do with a combination of factors:

1) Dan Garton, President & CEO of American Eagle, sees his destiny with American Eagle and sees the destiny of American Eagle going far past what business it can capture from American Airlines.  In short, he knows deals have got to be done.

2) Labor at American Eagle knows it has to have agreements in order to survive.  Regional airlines can be liquidated as they are not too big to fail.

3) American Eagle as a company knows that to survive, it must have in place agreements that permit it to compete with other regional airlines for business.

4)  American Airlines threw a warning out when it signed a deal with Skywest for flying in Los Angeles.

It is both surprising and pleasing to see just how non-contentious the negotiations have been in the American Eagle camp and makes me wonder if Dan Garton isn’t the person to be leading American Airlines.

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Terry Maxon who is the regular reporter for all things airline related at the Dallas Morning News and the primary contributor for the Dallas Morning News Aviation Blog has created an uproar among American Airlines pilots by suggesting that AA either suddenly has a vast number of its fleet experiencing serious maintenance problems all at once or something is up among the pilots and/or mechanics.

As a result, he’s gotten many emails from AA pilots contending that maintenance is the real issue  and that pilots are simply going by AA’s own book when it comes to dealing with those issues.

AA’s fleet is old by any standard and, yes, maintenance issues should be pretty common particularly among the MD-80 fleet.   Let me point out that the MD-80 fleet is only 191 strong now and is getting replaced rapidly by new build 737-800s.

AA has the following fleet count:

• MD-80:  191
• 737-800:  186
• 757-200:  105
• 767-200:  14 (and to be replaced by A321NEO aircraft)
• 767-300:  58
• 777-200:  47

205 aircraft in AA’s fleet could be categorized as “very old”.  These are the MD-80s and 767-200s.   Most of the 767-300 aircraft are actually not that old as aircraft go and should be categorized as “appropriate” and that accounts for 58.  The same is true for the 757 fleet and that gives us another 105 aircraft in the “appropriate” category with an average age of just 17 years.  For the relatively low cycles the 757 fleet has, that’s perfectly acceptable.  The 767-300 aircraft tell a story similar to that of the 757 fleet and total 58 aircraft.   The remaining aircraft (737/777) total 233 aircraft.

Now, please remember that fleets change and my counts may be off by a few aircraft but how I’m categorizing them isn’t.  So, let’s look at what is old vs new in the AA fleet:

• Very Old Aircraft (MD-80 and 767):  205  (34% of the fleet)
• Old But Appropriate (757 & 767-300):  163 (27% of the fleet)
• Young Aircraft:  233 (39% of the fleet)

I think the pilots are overplaying their story of age and poor maintenance.  Furthermore, I’ll point out that other airlines run similarly old or even older sub-fleets with nary a problem.  Airlines such as Delta, for instance.

And despite how old those MD-80s are, they are also by all accounts some of the most durable aircraft around and very capable of flying with deferred issues.

Sorry AA pilots, I think you’re right in that some stuff has been deferred, some maintenance not done as regularly but I also think you are still playing “the game” with the company too.  If you think I’m wrong, contact me and give me real evidence that you aren’t.

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These days, it seems as though American Airlines and the Allied Pilots Association are in a contest to see who can be more dysfunctional.   After asking for a return to negotiations, American Airlines has made threats to seek a court injunction against the pilots for the work slow downs occurring among some pilots.

The Allied Pilots Association is doing its union thing saying “What, us?  No way!” and then refusing to return to negotiations because its feelings are hurt.  But then also publicly cautioning its pilots that if they are engaging in a work slow down, they really should cut it out.

A curse on both their houses.

AA should have kept its silence and gotten to the table to get a deal in place.  Instead, they lost confidence and sent their new HR VP to threaten and already furious labor group.  That isn’t leadership.  That’s accounting people doing the accounting thing.  Do readers think that someone such as Gordon Bethune would have made such a move?

The APA should have shown it was in control of its pilots and gotten the word out quietly to cut it out as this is a chance to get a deal in place.  Instead, they did their usual song and dance.  The APA board is particularly dysfunctional since its run really by pilots who act in self interest instead of the better interest of the entire group.  The union’s president, Keith Wilson, is doing his best imitation of Laura Glading at this point which may get him re-elected but won’t get his group a deal.  Do you think David Bates would have advocated for these silly moves?

Like I said:   A curse on both their houses.

Filed under: Airline News by ajax
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