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American Airlines has its priorities way out of whack. The struggling airline has refused to negotiate a fair contract for its pilots for more than three years, leaving its pilots – the public face and lifeblood of the airline – with frozen wages and little hope for the future.
But now the Wall Street Journal reports American Airlines is making a big move to buy another financially troubled airline, Japan Airlines. The Journal reported that American raised $450 million in anticipation of an acquisition of Japan Airlines.
American Airlines has plead poverty to its pilots for more than three years. It has continuously stiffed the men and women who fly its planes – the people you and I recognize as the symbol of an airline – by blocking a new contract with fair wages and benefits.
And now they want to spend half a billion dollars on an another airline?
For a minute, let’s forget about American screwing its pilots. American’s interest in Japan Airlines would be a bad financial decision anyway, further weakening the already financially fragile company. WSJ reports:
But American Airlines’ long-term solvency position is arguably even worse than JAL’s. Total debt to total capital at American is 203% and 142% at the parent AMR Corp. level, the highest for the big carriers operating under the Oneworld flag. And American doesn’t have much of a liquidity buffer: it drew down its entire $255 million revolver back in September 2008 and burnt through $2.2 billion worth of cash and short-term investments on its balance sheet in the last 12 months.
Before American tries to save an airline halfway around the globe, it should get its own house in order by finalizing a contract with its pilots that shows the airline understands the critical its pilots play in the success of the company.
19 Comments
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Now, whatever do you mean by that?
No kidding, right? Why on earth would an airline screw its pilots?
Do I smell Goldman Sachs?
I also seem to recall a past CEO of American saying (in the context of screwing over its mechanics)
something to the effect of,
“Do you really need someone with 30 years experience to change a lightbulb?”
Victoria Newhouse in a lecture about 20 years ago, talked about “Wings that Don’t Fly,” meaning adding wings to existing museums that bastardize the whole project. Like hanging a cheap print of the Mona Lisa right next to a real Rembrandt. Her explanation was that art museum directors makes their bones by increasing the size of the collection, and thus need more room to display it.
I’m guessing there’s an analogy with CEOs. Gotta increase the size of the franchise, whether it makes sense of not. Legacy, ya know.
screw the workers,its the American way
OK. OK. The lecture was probably more like 10 years ago. Time flies, but there’s not point being ridiculous.
The United States of Goldman Sachs. How dare Warren Buffet get in the way.
Wow. I need to pick up the VF.
VF?
Vanity Fair
Duh. *smacking forehead*
American AIrlines has no choice other than to buy Japan Airlines to keep it within its Oneworld alliance. If they don’t, Japan Airlines will end up in Delta’s network, making it the most powerful and largest airline in the world. American airlines will simply be unable to compete and will finally die.
US government policy allows foreign airlines to quasi merge with US airlines if there is an open skies agreements with the US. With that policy, Delta Airlines has linked with Air France,, Lufhansa has linked with United and now Continental.. leaving American Airlines alone, unable to link with its partner British Airways in the same way due to politics. Now US officials are negotiating open skies with Japan, opening the possibility to establish a near monopoly in that country. Right now the US-Japan market is dominated by Delta and United. if Japan Airlines is bought by Delta, it would be devastating for American airlines since it has no other asian partner.
At some point in the distant future, assuming we survive to it, there will be an re-evaluation of what is in business schools, which seems to be growth at any price, especially if it comes out of somebody else’s hide.
Do they really need a CEO with years of experience to go bankrupt?
That dynamic is partially in play here; this isn’t a BofA/Merrill situation directly, but AA is still irresponsible to leave its pilots out in the cold while it raises half a billion for JAL
Yeah, the airlines love to screw the people who actually make the dollars flow into the treasury and are the “public” face of the company… the pilots and FA’s who spend every day making sure the pax get safely from point “A” to point “B”. Not to dis the entire team it takes to make the airline fly (res agents, gate agents, mechanics) but let’s face it, the folks in the plane are the ones who seemingly get screwed by management the most.
Where is APA, the American pilots union on this? How are they going to integrate the seniority lists with JAL and AA? This is not going to be pretty…
American Airlines did the same thing to Flight Attendants in 2001..when they bought TWA in April 2001..at the time the F/A’s were flying without a contract and American was threatening to replace F/A’s if they went on strike that summer..and with the Help of GWBUSH who was threatening using a very old law..the White House was threatening to fine us if we went out on stike..therefore AA F/A’s took a contract that I at the time as F/A for AA thought was a terrible contract filled with terrible concessions!
AA paid 500 million for TWA and after taking control of TWA was stuck with debts that made the merger prob close to 2 billion $$$$
They wanted nothing but concessions from the F/A’s, with White House threats to the AA F/A’s. An Agreement was made that summer, and just before 9/11.
The TWA F/A’s really got screwed with the deal..but AA F/A’s refused to allow merging seniority on an equal basis.
fly.. now retired F/A with American.
It should be noted that the people who make these decisions to screw pilots and their crews do not fly commercial, not even first class. They fly private.