Just for Tsquare
10-17-2011, 03:37 PM
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Just for Tsquare
Even mainstream media screws "lose" vs. "loose" up...
PATHETIC!
By Christopher Hinton, MarketWatch
WASHINGTON (MarketWatch) — Shares AMR Corp. took a blow Monday after the parent for American Airlines failed to secure a cost-cutting labor contract with its pilots’ union, leaving it vulnerable to continued high costs in a time of shrinking demand.
After meeting over the weekend in great urgency, management and the Allied Pilots Association continue to negotiate, a union spokesperson said in an email.
“Our goal was to have an agreement established by the end of the weekend and we made significant progress in our discussions on scope, work rules, benefits and other outstanding items,” said AMR spokesperson Missy Cousino.
“While some work remains, we are optimistic and believe there is a path to an agreement,” she said.
But it’s not clear whether a deal with pilots would be enough to save the airline, which burned through copious amounts of cash in the third quarter and hasn’t turned an annual profit since 2007.
“They could put into place a two-tiered system, where new pilots would be paid less, and they could switch to a defined-benefit plan from [a more expensive] defined contribution, but that will take time, so the cost disadvantage would remain in place for the long term,” said Basili Alukos, a stock analyst with Morningstar.
Meanwhile, the bond market is losing its appetite for risk as Europe struggles with its financial crisis. As a result, the cost for AMR to refinance its debt is increasing and eating more of its cash.
“AMR is the worst airline in an already terrible industry, “ Alukos said. “Their survival is predicated on the bond market’s willingness to roll over their high-risk debt.”
Shares of AMR /quotes/zigman/217884/quotes/nls/amr AMR +4.35% declined 6% to close at $2.76 each after reaching an intraday low of $2.61. Two weeks ago the stock bottomed out at $1.75 after a 10-fold spike in monthly pilot retirements led to speculation the company was about go bankrupt.
Trading was halted for five minutes at 10:54 a.m. ET, after the stock’s plunge triggered a “volatility trigger” at the New York Stock Exchange.
Bankruptcy was a concern for Craig Hodges, president of Hodges Capital Management, and until recently a long-term holder of more than a million shares of AMR.
“A pilot contract is not going to solve its cost problems in the long run,” Hodges said in an interview.
Hodges Capital traded out of AMR and into US Airways /quotes/zigman/390962/quotes/nls/lcc LCC +3.42% and United Continental /quotes/zigman/617037/quotes/nls/ual UAL -1.13% , which are forecast to have strong earnings in 2012, Hodges said.
AMR, however, could loose up to $2 a share, he said.
The Ft. Worth, Texas-based carrier is scrambling to cut costs as demand begins to decline in the softer economic environment. Read more about the decline in demand for air travel .
On Thursday, AMR said it would close a major pilot base in San Francisco to cut costs, moving a portion of the operations to its base in Ft. Worth.
It also announced on Oct. 10 that it would reduce its fourth-quarter capacity by about 3%, retiring up to 11 Boeing 757 aircraft and shifting its fall and winter schedules.
Resolving the five-year dispute with pilots could go a long way in eventually improving its operations, Wall Street analysts have said. It could also provide a framework for labor deals with the ground workers and flight attendants.
Flight attendants and ground workers have been without a new contract for nearly four years.
But AMR workers harbor a lot of mistrust and often accuse executives of giving themselves raises through lavish stock bonuses. In 2009, for example, Chairman and Chief Executive Gerard Arpey received $5.6 million in total compensation, of which just $669,646 was his base pay.
Employees in 2003 accepted steep cuts in their compensation to help the company avoid bankruptcy, and pilots have said they are working at 1992-wage levels.
PATHETIC!
By Christopher Hinton, MarketWatch
WASHINGTON (MarketWatch) — Shares AMR Corp. took a blow Monday after the parent for American Airlines failed to secure a cost-cutting labor contract with its pilots’ union, leaving it vulnerable to continued high costs in a time of shrinking demand.
After meeting over the weekend in great urgency, management and the Allied Pilots Association continue to negotiate, a union spokesperson said in an email.
“Our goal was to have an agreement established by the end of the weekend and we made significant progress in our discussions on scope, work rules, benefits and other outstanding items,” said AMR spokesperson Missy Cousino.
“While some work remains, we are optimistic and believe there is a path to an agreement,” she said.
But it’s not clear whether a deal with pilots would be enough to save the airline, which burned through copious amounts of cash in the third quarter and hasn’t turned an annual profit since 2007.
“They could put into place a two-tiered system, where new pilots would be paid less, and they could switch to a defined-benefit plan from [a more expensive] defined contribution, but that will take time, so the cost disadvantage would remain in place for the long term,” said Basili Alukos, a stock analyst with Morningstar.
Meanwhile, the bond market is losing its appetite for risk as Europe struggles with its financial crisis. As a result, the cost for AMR to refinance its debt is increasing and eating more of its cash.
“AMR is the worst airline in an already terrible industry, “ Alukos said. “Their survival is predicated on the bond market’s willingness to roll over their high-risk debt.”
Shares of AMR /quotes/zigman/217884/quotes/nls/amr AMR +4.35% declined 6% to close at $2.76 each after reaching an intraday low of $2.61. Two weeks ago the stock bottomed out at $1.75 after a 10-fold spike in monthly pilot retirements led to speculation the company was about go bankrupt.
Trading was halted for five minutes at 10:54 a.m. ET, after the stock’s plunge triggered a “volatility trigger” at the New York Stock Exchange.
Bankruptcy was a concern for Craig Hodges, president of Hodges Capital Management, and until recently a long-term holder of more than a million shares of AMR.
“A pilot contract is not going to solve its cost problems in the long run,” Hodges said in an interview.
Hodges Capital traded out of AMR and into US Airways /quotes/zigman/390962/quotes/nls/lcc LCC +3.42% and United Continental /quotes/zigman/617037/quotes/nls/ual UAL -1.13% , which are forecast to have strong earnings in 2012, Hodges said.
AMR, however, could loose up to $2 a share, he said.
The Ft. Worth, Texas-based carrier is scrambling to cut costs as demand begins to decline in the softer economic environment. Read more about the decline in demand for air travel .
On Thursday, AMR said it would close a major pilot base in San Francisco to cut costs, moving a portion of the operations to its base in Ft. Worth.
It also announced on Oct. 10 that it would reduce its fourth-quarter capacity by about 3%, retiring up to 11 Boeing 757 aircraft and shifting its fall and winter schedules.
Resolving the five-year dispute with pilots could go a long way in eventually improving its operations, Wall Street analysts have said. It could also provide a framework for labor deals with the ground workers and flight attendants.
Flight attendants and ground workers have been without a new contract for nearly four years.
But AMR workers harbor a lot of mistrust and often accuse executives of giving themselves raises through lavish stock bonuses. In 2009, for example, Chairman and Chief Executive Gerard Arpey received $5.6 million in total compensation, of which just $669,646 was his base pay.
Employees in 2003 accepted steep cuts in their compensation to help the company avoid bankruptcy, and pilots have said they are working at 1992-wage levels.
