Air Carriers competiton : American Airlines filed voluntary for Chapter 11 reorganization (+MAJ1)

AMR and American Airlines (AA) file today for Chapter 11 reorganization "in order to achieve a cost and debt structure that is industry competitive and thereby assure its long-term viability".

We must highlight this decision by some facts :
- AA has approximately $4.1 billion in unrestricted cash and short-term investments.
- AA has total debt of $29.6b, assets valued at $24.7b according to FlightGlobal journalist.
- AMR announced a 460 aircraft order with Boeing and Airbus in july 2011. These manufacturers both knew AA was headed into Chapter 11 when the aircraft deals were negotiated. AA will keep the orders and will argue they need an efficient new fleet to survive, reduce costs, and be profitable again.
- AA (with British Airways & Iberia) received the green light from European Commission and the US DoT in 2010 for sharing all together the revenues and costs over trans atlantic flights (the biggest market). The alliance British Airways, American Airlines and Iberia is competing strongly other european airliners like Air France KLM or Lufthansa. The three airlines cooperate commercially on flights between the EU, Switzerland and Norway and the US, Canada and Mexico.The airlines announced new routes.
In the following months, AA will come back into the ticket battle over Europe and North America.

MAJ1 : Tom Horton sent a letter to AA employees on Thursday, December 15, 2011


"A Message from Chairman and CEO Tom Horton

Dear American Team:

It has been a very busy couple of weeks since we embarked on our new and challenging path forward. We've been working very hard to get this complex restructuring off to a good start. It will undoubtedly be a path with many twists and turns - much will be unpredictable and we'll have to confront challenges as they come. Our objective is simple - to make our company more competitive and successful and poised to capitalize on our new aircraft deal to grow and prosper.

In these early days, I've spent a lot of time out and about in the airports, on the ramp, in crew rooms and onboard our planes. What I've seen is the people of American standing tall, working hard and doing a great job for our customers every day. That is what will ultimately determine our success and for that I salute you.

I've made it a priority to hear directly from folks all around the company and this has been enormously helpful. Here are a few of the things I've heard. I heard and felt the deep pride that all of us share in this company bearing the name American and the commitment to its success. I heard that many are saddened that we had to take the path that others did. I heard regrets and a range of sentiments about the many trials our company has faced over the past decade. I heard much uncertainty about the future. I heard many questions about job security, pay, benefits and pensions, questions whose answers require that we work through a process that will take some time.

What I heard louder and clearer than anything else is that it is time for us to turn the page, do what we need to do and then go out and put American back on top.

This is no small task, but I am confident we have what it takes and that it can and will be done. The challenges are many. We will have to change the way we do business to become more competitive and efficient. We will have to make very tough and sometimes unpopular decisions that will impact people's lives. We will restructure our debt and aircraft leases, and as we do we will undoubtedly need to ground some planes and resize our network before we can turn the corner and grow again. And, regrettably, we will most certainly end the process with fewer people than we have today. And as part of the restructuring process, we'll need to finally agree upon next-generation, competitive labor contracts. This will all be difficult, but I assure you our objective will be to create a successful company and the best outcome for the greatest number of people.

We will have some input in the process from several interested parties, and we need to get used to that. The bankruptcy judge plays a very important role, as does the creditors committee. There will be outside parties who may try to knock us off our path. Some will say we should shrink the company dramatically, close hubs and lay off thousands more to create the greatest value for creditors. Some will say the company should be sold or broken up. And as we've seen before in this industry, there may be opportunists who wish to acquire our company while we are in this situation.

As I've said from the outset, I think the best path for American is the one that leads us back to the top. I believe we have the best people, the best assets and the best partners in the industry. We have hubs in the most important markets, we have the finest alliance partners in the world, we're investing to create a world class product, we have the best brand in the business and we have an order book of aircraft which is the envy of the industry. It doesn't take too much imagination to picture what we can do with all that once we have a competitive cost and capital structure in place.
Level the playing field and American will win. I assure you, our competitors are already taking note.

The best way for us to realize that future is to stand together and build it. And the best way for us to control our own destiny is to move quickly and with a sense of mission in the early days of this restructuring. Internal discord will not serve us well.

In the coming weeks, as we said in our initial announcement, we will be working through the debt and lease renegotiations which will form the basis for the near term fleet plan. At the same time we'll be determining the new size and shape of our network. This will impact our business plan and our staffing requirements. It will also help shape the proposals to be put forward for next-generation labor contracts. We have already made some changes to strengthen and streamline the leadership team, and there will be more changes to come.

I wish we had more answers to the questions I know are on all of our minds, but we'll seek to move this process along as quickly as we can and get to those answers. As we do, we'll do our best to provide complete and accurate information just as soon as it is available.

In the meantime, we are in the midst of our busiest season and a time when we are all occupied, too, with our own families and holiday plans. Especially at this time, I thank you again for standing tall and continuing to deliver the safe, comfortable and reliable travel experience our customers expect from us. There is simply no better team in the industry and with the conviction and confidence I have heard on my travels the past two weeks, I know we will return American to its rightful place of leadership.

Sincerely,

Tom Horton"

Ostrower / Oversupplying : What 84 A320s and 737s per month mean

Jon Ostrower provided its point of view concerning oversupplying the narrowboby market and the various announcements done by Airbus and Boeing this year. We should keep it in mind, following the giant orders of Lion Air, Air Asia or AA.

>>>

Airbus is heading to 42 A320s per month by the end of 2012 with Boeing announcing today it will follow suit with 42 737s in the first half of 2014. That means 84 narrowbody aircraft per month will be delivered with more than 1000 new narrowbody aircraft per year by the middle of decade.

Boeing forecasts a need for 21,160 narrowbody aircraft over the next 20 years. Assuming no new competitors, split between Boeing and Airbus equally, that figure should yield 44.5 deliveries per month to meet market demand. Airbus's 20 year (2010-2029) Global Market Forecast sees 17,870 narrowbody aircraft being delivered, corresponding to a 50-50 market split with Boeing at 37 deliveries per month.

The Boeing and Airbus definition of narrowbody is an aircraft 100 to 210-seats with a single aisle, which neither airframer covers this full spread in its current product line. This spans from the Embraer E-190 and E-195 all the way up to the Boeing 737-900ER, 757 and Airbus A321.

These rates assume that Bombardier's CRJ1000, CS100, C300, Comac's C919 and ARJ900, Irkut's MS-21, Mitsubishi's conceptual MRJ100X and Embraer's E-190/195 and clean sheet jet will only deliver - at most - an additional 5 aircraft per month against the 42 aircraft per month from Boeing and Airbus.

The 2011-2030 figures from Boeing will revise this figures upward again, and will be released at the week's end ahead of the Paris air show, but the assurances of sustainability at the beginning of this industry up cycle are far guaranteed. Airframer's lament the commoditization of narrowbody aircraft, creating a crop of amorphous and indistinguishable products, a trend likely reinforced by an oversupply of aircraft.

The sustainability of these rate increases will be a central question in the coming years, and with the certainty of the industry's exogenous events to try and throw it off course, the huge output growth decisions of Boeing and Airbus will guide the fortunes of the industry.

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Gil Roy: A400M, l’Allemagne referait-elle le coup du Transall ?

"Le cas de l’A400M est emblématique, parce qu’il n’est pas nouveau. Il y a 50 ans, l’Allemagne avait eu un comportement similaire pendant le programme Transall mené en collaboration avec la France. Berlin avait dans un premier temps affiché un besoin pour 110 avions : il s’agissait officiellement de disposer d’une flotte importante pour transporter rapidement des troupes vers la frontière orientale du pays, en cas d’agression communiste. Le partenaire français comprit rapidement qu’il s’agissait avant tout d’accaparer une part proportionnelle du plan de charge industriel. Dès 1967, le partage industriel étant fait, l’Allemagne essaya de réduire sa commande de 110 à 60 avions seulement. Le gouvernement français ne cédant pas, Berlin trouvera finalement une porte de sortie en revendant vingt avions neufs à la Turquie… La Turquie ayant déjà commandé dix A400M et affichant une plus grande autonomie de décision qu’au temps du Transall, il sera cette fois plus difficile de lui refiler des queues de programme. Sauf à brader les avions…"
Sur Aerobuzz