Boyd: The American Airlines Bankruptcy

Issues Regarding AMR Chapter 11 FilingKey Points - From The Real WorldBackground


The American Airlines bankruptcy filing is an event that injects a great deal of uncertainty into the planning process of airports, financial institutions, suppliers, and other entities in aviation. This document is prepared to provide our clients independent perspectives on the fallout that can be expected in the immediate future.


Time For Some Facts. Not Guesses Postured As Expertise. What has become obvious since the AMR filing is that the financial world is teeming with new analyst “experts” regarding the airline industry in general and American Airlines in particular. Often, without the luxury of a shred of information on the specifics of the AMR filing, we have all sorts of advice and prognostications about AA from analysts who until last Tuesday were covering the technology sector, or the housing sector, or the paper products sector, but who now are qualified to pass on all aspects of American Airlines. Many of the missives put out by these sources indicate people whose knowledge of the airline industry ranks somewhere between zero and completely ill-informed.


This document is intended to provide our clients with hard information on which they can make reasoned decisions regarding the effects – if any – that the AMR filing may have on their respective sectors of the aviation industry. It’s very clear that the information coming out of many parts of the financial world is less than useless.

? There are prognostications that AA can’t emerge from Chapter 11 because of competition, pricing, or other factors, most of which the “analyst” doesn’t understand in the first place.? There are veneer reports that AA is in trouble because it’s not the #1 airline in size anymore. If size alone is the metric for survival, one may wish to contact a brontosaurus for details.2 | © B o y d G r o u p I n t e r n a t i o n a l , 2 0 1 1

? There are articles noting that AA missed the “wave of consolidation” - without one shred of discussion as to what that’s supposed to represent.

? Some claim the filing offers huge market opportunities for competitors, but failing to mention how or where.

? Several “analysts” have declared that the Chapter 11 filing will allow American to shrink its system and drop “unprofitable routes.” Of note, they leave out the reality that AA doesn’t need a bankruptcy filing to do that. They also don’t explain how flying less will reduce either pension costs or debt expense – which are the core reasons for the filing.

? There are statements that American can benefit from a merger with US Airways, leaving out any support other than “it would reduce overhead.” No review of factors such as hub strength, market levels, or little things like labor and fleet integration, are mentioned.Taking counsel in this type of expertise is akin to trusting the guy selling elixirs on a street corner. If this is the quality of “advice” and expertise typical to the financial world, consumers might do better to place their finances inside a Sealy Posturepedic.


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