AA parent company filing Chapter 11. Will this bring airfare back down at all?

[beachbum53]

Southwest hasn't.

 

For our upcoming cruise (out of Miami), I was debating between flying on Southwest (and not pay a baggage fee) to Ft. Lauderdale and take a shuttle to Miami, or fly on AA to Miami (but have to pay a baggage fee). This could be the deciding factor. Someday, we'll likely see coin operated planes (like the ones in front of department stores). "Please deposit $5.00 for the next three minutes, and do it quickly!!" :D:D

[StillPooh]

For our upcoming cruise (out of Miami), I was debating between flying on Southwest (and not pay a baggage fee) to Ft. Lauderdale and take a shuttle to Miami, or fly on AA to Miami (but have to pay a baggage fee).

We're flying Air Tran to San Juan for our upcoming cruise. I am hoping their merger with Southwest may lead to free luggage eventually, but it probably won't happen that fast (if at all). Air Tran is still an a la carte airline, and we already paid an extra $80 total to have exit row seats (our nonstop flights are over 4 hours long). I refuse to limit my wardrobe choices to carry ons for my first cruise in 2 1/2 years, though!

[PennyAgain]

Based on past experience, fares will not decrease and for many people who use service out of smaller airports the choices will be reduced on when they can fly.

 

The planes I've been on lately have been sold out or nearly so. No reason to reduce fares.

[scottbee]

AA is the only [major US international] airline that didn't do this 10 years ago post 9/11. Because of that all their competition has had the opportunity to re-write a lot of contracts; and they haven't. it's merely catch up time

[lovethesun40]

http://finance.yahoo.com/news/amr-american-airlines-file-bankruptcy-121926586.html

 

 

:rolleyes: Of course.......we are flying with AA in February to Miami. They had the best price with the earliest departure! I sure hope they continue flying (fingers crossed!!)

[Globaliser]

In my mind, although I don't follow the industry, it would be my first instinct to want more revenue if profits were consistently that low to necessitate Chapter 11.

AA is not in Chapter 11 because it's about to go bust. As scottbee says, it's simply doing what everyone else has (wrongly IMHO) been allowed to do in the last decade, otherwise it can't compete.

And I'm still not sure how I'm the only person who it occurs to that, if you lower prices, you'd make up the per item revenue loss in sheer sales volume. Wouldn't it make sense that if you made your product more affordable, more people would buy it? More people buying your product would mean more profit, would it not?

No, it doesn't.

 

Many air passengers have a naive view that if you pay a couple of hundred dollars to fly half way around the country, the airline is making a profit on that fare. It isn't.

 

In the past, I've illustrated with some back-of-the-envelope calculations here how, because of the way the industry works, an airline can actually make more money by deliberately raising prices and deliberately expecting to fill fewer seats.

 

So I'm with ab0si on this:-

It's unlikely to have any short term effect, but if there is one it will be to RAISE not lower prices.

[Sargent_Schultz]

We're flying Air Tran to San Juan for our upcoming cruise. I am hoping their merger with Southwest may lead to free luggage eventually, but it probably won't happen that fast (if at all). Air Tran is still an a la carte airline, and we already paid an extra $80 total to have exit row seats (our nonstop flights are over 4 hours long). I refuse to limit my wardrobe choices to carry ons for my first cruise in 2 1/2 years, though!

 

Bags Fly Free absolutely will happen, but perhaps not before your trip. :(

[btrbill]

It was overdue. AA was the only airline that did not file bankruptcy after the 9/11 tragedy and downturn in air travel.

 

But the employees gave HUGE wage concessions in 2005-06, all while the top 105 Executives recieved bonuses! That was the end of the crook Crandall.

[FlyerTalker]

AA's load factor in October was 83%. Not a lot of empty seats flying around their system.

 

Yes, there is a certain small amount of elasticity in demand for airline seats, though nowhere near what you find for other products. However, the level of fixed costs, both for each individual flight and for the airline as a whole, affect the supply curve to make for short-term in-elasticity on that side of the equation.

 

Bottom line.....don't expect fares to drop for AA flights.

[6rugrats]

Agree; fares won't drop. More info on restructuring here:

 

http://www.aa.com/i18n/information/restructuring.jsp?anchorLocation=DirectURL&title=restructuring

[PennyAgain]

I just spoke with a neighbor who has been retired from AA for 15+ years. She was a flight attendant.

 

All this time (under the old contract that benefited the 'old' tier employees) she's had free health insurance. She is a year away from Medicare and is worried that AA will not give her the co-payment Medicare insurance as well.

 

I don't feel sorry for her at all or for the need of AA to break the old contracts and obligations.

[Keith1010]

Penny, yes this is part of the benefits of Chapter 11. The airline won't dictate all of this but there will be a lot of room for renegotiation of all contracts including these.

 

I just want to mention that while AA had really no choice on all of this as they were losing tons of money it is not fun to go through Chapter 11 either as a shareholder (of course their stock was quite low) but also for those in top positions. I've been through one and while the end result can work out very well with a good solid reorganization plan there are many challenges and it's not a walk in the park by any means.

 

Keith

[PennyAgain]

Keith, yes.

 

As HR Resources person for our company I am very well aware of what employee benefits cost especially as people grow older. We are feeling some relief as the Baby Boomers trek on to Medical.

 

The local news in the DFW area is full of this news with a great deal of speculation being given out as if apparent fact. Time will tell how this all works out, but we are hoping for the best for the airline.

[donaldsc]

How many airlines have declared bankruptcy in the last 5 years - all of them but SW probably. Have fares gone down?

 

DON

[Keith1010]

Penny, I hope it all works out for them as well. When we moved to the Dallas area in 1991 I had the choice of going with American or Delta as our primary carrier and thank goodness I picked American as some years later Delta pulled their hub from DFW. Much of our flying is still with American and I am fortunate to have achieved their highest status during my working years so we tend to use them as much as possible.

 

I still miss the old day of flying.

 

When you adjust for inflation it is much cheaper to fly today but you feel like you are in a cattle car. On domestic first class I feel that I am just buying a seat and the service is more what coach was like many years ago. It's too bad. I guess the positive is that all of this opened up flying to many people who could never afford it but I am just glad much of the flying I did for work was when things were much better. I would have trouble tolerating a lot of it today. I was able to fly from time to time in the corporate planes and would probably yearn for that much more in today's environment.

 

Keith

[frugaltravel]

For our upcoming cruise (out of Miami), I was debating between flying on Southwest (and not pay a baggage fee) to Ft. Lauderdale and take a shuttle to Miami, or fly on AA to Miami (but have to pay a baggage fee). This could be the deciding factor. Someday, we'll likely see coin operated planes (like the ones in front of department stores). "Please deposit $5.00 for the next three minutes, and do it quickly!!" :D:D

 

The issue is not whether one airline charges a fee for checked luggage or not. The issue is "What is my total cost for flying each airline?" Sometimes Southwest with no baggage fee is cheaper, sometimes another airline, even with a baggage fee, is cheaper. There is no "right" answer all the time for all flights to/from all cities.

[greatam]

How many think the $900,000 American Eagle was just fined by the transportation dept had something to do with this??? Thank you, the American people, for the darn STUPID tarmac rule.

 

"Airlines, which blame unpredictable weather for the delays, say they're canceling more flights rather than risk fines." From a well known airline analyst on Wall Street.

 

And why wouldn't they??? Cancel the flight and let everyone fend for themselves. If I was running the airline, I sure would do that instead of risking the over the top DOT enforcement (who I deal with enough in my line of work) and the FAA. Some of you just don't seem to get it-almost every state in the union is broke and so is the US government. They will take money from wherever they THINK they can get it and most have NO recourse or you risk running up a HUGE legal bill. Just ask one of my drivers who forgot to draw a line in his log book indicating he ran the MA turnpike for 20 miles (MAYBE 40 minutes of driving) in his log book and was fined SIXTEEN HUNDRED and THIRTY TWO dollars. We have already spent almost as much as the fine for a MA lawyer to defend our driver and our company but some things are JUST WRONG.

 

IIRC, the American Eagle plane was on the tarmac for slightly over 4 hours. Uncomfortable, yes. BUT AA brought snacks and drinks for everyone AND they even had the "porti potty" pumper come out once. The tower in Chicago would tell them to take off (when the clouds cleared and the rain/lightning stopped) and then tell them to stay put. It was a weather related incident-truly a force majeure happening. Can no one in the USA stand being a "little uncomfortable" for a few hours???

 

What about the 7.5 hour recent JetBlue incident? NO FINES so far.

 

And what about the almost TOTAL SHUTDOWN of MD-80 AA planes over ONE QUARTER inch zip tie spacing??? It is OK to let Southwest continue to fly with structural cracks in the fuselage but NOT OK to let AA fly with zip ties out of place by 1/4-1/2" and the spacing was disputed/contradicted by various directives??? AA shut the planes down, lost a chunk of money, complied with the contradictory directives and STILL kept flying.

 

I'm pissed. AA held out against all the forces from 9/11, exorbitant fuel prices, no passengers on the planes after 9/11 and all the other economic factors plus outrageous demands from the unions and now they are the "bad guys" and someone wants them to LOWER prices. AA did the honorable thing by NOT filing bankruptcy until they were finally almost forced to by a combination of factors. My futures oil trader told me just this morning to expect oil to be at $114 per barrel in January and $120 by February.

 

I own a small company that buys a lot of fuel for all my semis but nowhere near the fuel an airline buys. I bought a bunch of futures contracts when the price dropped to $89.00 per barrel but that amount of fuel won't last long. If I wanted to sell the contracts I bought just a short time ago, I could already make $10 per barrel on what I purchased. But I NEED my fuel, just like the airlines need their fuel.

 

I have already sent emails to all my customers stating the fuel surcharge is increasing from 23% to 27% until the end of the year. IF the predictions my oil trader has made hold true, I will be increasing it to over 31% just after the first of the year and maybe even more. THAT comes out of YOUR pocket and the airlines are NO different. SOMEONE has to pay for the fuel (forget the price of labor, taxes, insurance, the stupid new health care plan and the price of equipment which all go up year after year)

 

Prices will do nothing but go UP. I would NOT be surprised to see an average fare to Europe next summer at about $1400.

 

Sorry for the rant but this government, the unions and between the EPA, the DOT, the FAA, the Energy Dept and just about every other government agency run amok means YOU, the AMERICAN people are paying for it. And that applies to the airlines!!!

[Eng23]

Southwest hasn't.

Correct you are.

[greatam]

Correct you are.

 

You would be darn hard pressed to even get to Alaska, let alone any place else in the world on WN.

 

WN may be good for somethings but they sure are not a WORLD airline with all the perks and benefits and alliances. Just NO comparison.

[6rugrats]

How many think the $900,000 American Eagle was just fined by the transportation dept had something to do with this???

 

 

I don't think AMR filed for Chapter 11 because of this fine. There's much more to it than that. There's been a large increase in pilot retirements, and these pilots have tried to share their stock in the company. As of this writing, shares in AMR are trading at .31 each.

 

AMR wants to reduce its debt burden, renegotiate union and supply contracts, cut routes and eliminate employees to become more profitable. I think a more likely merger parter would be International Airlines Group, which runs BA and Iberia.

[renech]

The flight I've been waiting for a drop in price on for a few weeks now just dropped $100 this afternoon. I was thrilled and booked it right away - then I heard about the bankruptcy filing. I assumed it was related, but if the drops aren't across the board, then I suppose it was just a lucky coincidence for me.

[Keith1010]

There have been rumors that American Airlines would file for bankruptcy for a year or more. It was not a result of one item which is trivial versus the amount of losses they were realizing. I commend them for trying to avoid bankruptcy but unfortunately that was not possible.

 

Keith

[CruiserBruce]

The flight I've been waiting for a drop in price on for a few weeks now just dropped $100 this afternoon. I was thrilled and booked it right away - then I heard about the bankruptcy filing. I assumed it was related, but if the drops aren't across the board, then I suppose it was just a lucky coincidence for me.

 

I doubt it was related. Most airlines seem to use a capacity monitoring system that causes fare drops to usually happen on Tuesdays and Wednesdays. That is why so many people advise to closely watch fares on those days.

 

A few months ago we got a 20% drop in a business class airfare by buying on a Tuesday. The airline didn't file for bankruptcy.

[greatam]

I don't think AMR filed for Chapter 11 because of this fine. There's much more to it than that. There's been a large increase in pilot retirements, and these pilots have tried to share their stock in the company. As of this writing, shares in AMR are trading at .31 each.

 

AMR wants to reduce its debt burden, renegotiate union and supply contracts, cut routes and eliminate employees to become more profitable. I think a more likely merger parter would be International Airlines Group, which runs BA and Iberia.

 

Didn't mean to imply it was specifically the fine that forced the bankruptcy. But certainly that could have been a tipping point. I certainly understand the market forces at work in the transportation business at least as well as most.

 

And it is just getting MORE and MORE expensive for fuel, which is the largest component of variable costs for ANY transportation company. Kuwait is in an uproar right now (10% of the world's oil) and of course the rest of the Middle East which is in flux. Fuel costs are going up and up. And now to stop the oil sands oil from flowing into the USA from Canada is just another reason for the rise in fuel prices.

 

And people think the prices may fall????? DREAM ON!!! Groceries are going up another 6-9% in the next couple of months just due to the rise in transportation costs. One of the largest grocery wholesalers on the East Coast just sent notices to ALL their customers (some of the largest grocery companies on the East Coast-Giant/Wakefern/Stop and Shop, etc. etc.) that their wholesale prices will rise a MINIMUM of 4.6% by Jan 1 due to the increase in transportation costs. Are we all that stupid to be at the whim of the Middle Eastern fuel markets???

[kenish]

Wondering if any of you who follow the industry closely have any theories.

 

Fares will go up. AA usually has the lowest fares for the routes I fly. Other airlines match AA's fares...but as it gets closer in to the travel date, AA fares tend to stay low while other airlines' fares increase sharply as the cheaper fare buckets sell out. That hints at overcapacity on AA and indeed airline analysts have said AA has too many planes flying too many routes too frequently. (The same also have praised AA for refusing to embrace bankruptcy but it looks like the unions kept playing Russian roulette and the chamber wasn't empty in this round of negotiations).

 

The various reorg documents on AA's website talk about returning aircraft to lessors, cutting routes and frequencies, etc. I've already had to shuffle a relative's itenerary because AA has dropped two of the 10-12 daily SNA-DFW nonstops and a several DFW-BOS and ORD-BOS flights as well. And this is during the peak Christmas travel season! I speculate AA will get rid of MD-80s and 757's even faster than planned and expedite deliveries of the recently announced 737's and 320 Neos.

 

Many air passengers have a naive view that if you pay a couple of hundred dollars to fly half way around the country, the airline is making a profit on that fare. It isn't.

 

CNBC ran a "behind the scenes" series on AA. A JFK-LAX flight using a 767 made a profit of about $200 *for the entire flight*, not per passenger. Most profit on any commercial flight is from full-fare passengers and cargo.

 

I fly JetBlue....and it looks like charging for those bags by AA didn't help them at all.

 

You realize JetBlue has killer financing subsidized by the taxpayers of Europe? That ends in the next few years and the financial press speculates JetBlue will be a bankruptcy candidate as lease payments hit full force.

 

And I'm still not sure how I'm the only person who it occurs to that, if you lower prices, you'd make up the per item revenue loss in sheer sales volume. Wouldn't it make sense that if you made your product more affordable, more people would buy it? More people buying your product would mean more profit, would it not?

 

The old saying..."We can't sell it at a profit, so we will make it up in volume" :) Make a product more affordable and yes, more will buy it. But don't confuse the manufacturing/ retailing business with the transportation biz where cost structures are concerned. The game in any business is gross margin, not volume or revenue.