NWA CEO SAYS "will be fewer major airlines flying 3 years from now".

BHopper88 · 02-05-2003, 04:57 AM

NWA chief says airline failures loom

Anderson predicts his firm will survive crisis
February 5, 2003

BY JOHN GALLAGHER
FREE PRESS BUSINESS WRITER

In the midst of commercial aviation's worst financial crisis ever, the boss of Northwest Airlines predicted Tuesday that one or more major carriers will disappear in the next few years.

"I believe there will be fewer major airlines three years from now," Northwest CEO Richard Anderson told Wall Street stock analysts Tuesday morning. "Northwest will be one of the ones that survives."

Anderson didn't speculate which of the other top six hub carriers -- American, United, Delta, Continental, and US Airways -- would go out of business or be absorbed in a takeover. But he said industry economics dictate that commercial aviation go through a downsizing.

"When you think about how much capacity is in the marketplace, and how many hubs there are, and how many airplanes there are flying, and the lack of profitability in the industry, it seems only logical that on an economic basis there needs to be fewer" carriers, he said.

While the terror attacks on Sept. 11, 2001 cut demand for high-priced travel, those events accelerated trends that were present in the industry already, he said.

Even so, Anderson doesn't think the industry's basic hub-and-spoke system is flawed. The term means that airlines fly passengers from outlying cities to centralized hubs where they transfer to other flights. The system developed after the government deregulated airlines in 1978.

Without a hub-and-spoke system, Anderson said, smaller cities would see little or no regularly scheduled service. And international flights would not be economically feasible.

Rather than blaming the hub-and-spoke system for the industry's ills, Anderson blamed a high cost structure, especially labor costs. Without citing specifics, he made it clear that Northwest will attempt to lower labor, pension and work rules costs this year. That, of course, could set up fights with unions.

But Anderson said Northwest is not counting on another carrier going broke to make life easier for the Eagan, Minn.-based airline.

"At Northwest we are not planning our recovery on anyone else failing," he told analysts. "It is always in my judgment a fool's errand to pray for rain. It's your responsibility to navigate your ship to a successful result."

tjwgrr · 02-05-2003, 10:19 AM

We could lose:

US Airways
United
American - (stock now below $3.00/ share.)

see below

----------------------------------------------

Associated Press
American Asks Labor for $1.8B Cost Cuts
Tuesday February 4, 6:33 pm ET
By Brad Foss, AP Business Writer
American Airlines Asks Labor Groups for $1.8 Billion in Cost Cuts to Help Avoid Bankruptcy

NEW YORK (AP) -- American Airlines pleaded with employees Tuesday to make steep cuts in wages, benefits and work rules in order to save $1.8 billion annually, stressing that the company's livelihood was at stake.

"Our financial results make it abundantly clear that American's future cannot be assured until ways are found to significantly lower our labor and other costs," the company said in statement issued after a private meeting with labor leaders.

As multibillion losses pile up, a number of analysts have speculated in recent weeks that American is increasingly at risk of becoming the next major carrier to file for bankruptcy, joining United Airlines and US Airways, unless it can dramatically reduce costs.

Executives and labor leaders are scheduled to meet again Friday. Union leaders said the company needs to do a better job of substantiating the proposed cuts before negotiations can proceed in earnest.

John Ward, president of the Association of Professional Flight Attendants, said he wants more information before deciding whether the company's "financial position indeed necessitates concessions."

American president Gerard J. Arpey said in an interview that the $1.8 billion in cuts are absolutely necessary in order for American to regain profitability and is not a negotiating position.

"We need to get all of it," Arpey said, adding that the company was flexible about how to get it done.

Standard & Poor's airline analyst Philip Baggaley said the labor cuts proposed by American were "slightly less" than those proposed by UAL Corp., the parent company of United Airlines.

Fort Worth, Texas-based American has been working for the past 18 months to cut annual non-labor expenses by $2 billion, mostly through changes to its flight schedules and fleet. But executives have repeatedly said that it would take a total of $4 billion in savings to regain profitability. In 2002, labor expenses totaled $8.4 billion.

Late last month American's parent company, AMR Corp., reported a loss of $3.5 billion for the year, the industry's largest annual loss ever. It is currently burning through $5 million a day and has roughly $2 billion in unrestricted cash on hand.

American, the world's largest airline, said Tuesday it is under "unrelenting pressure" from low-cost carriers and rivals that are currently shrinking costs under the protection of bankruptcy courts.

American called the request "a last resort" but stopped short of saying that bankruptcy loomed.

"It's the 800-pound gorrilla in the corner that nobody acknowleged but everybody knows is there," said Rich Bittenbender, an airline analyst at Moody's Investors Service in New York.

The company also announced that it would close two of its 10 domestic reservation centers, affecting more than 900 jobs in Norfolk, Va. and Las Vegas.

The $1.8 billion in cost cuts being sought would come as follows: $660 million from pilots, $350 million from flight attendants, $620 million from mechanics and ground workers, $80 million from ticket agents and $100 million from management.

Shares of AMR fell 8 cents, or 2.7 percent, to close Tuesday at $2.87 on the New York Stock Exchange.

bigredvmi · 02-05-2003, 11:47 AM

the scary thing for American Airlines ... is that on 80% of your route schedule you are facing either JetBlue or Southwest ...

02-05-2003, 02:05 PM

As an AA employee for 14+ years, I feel the management of the company since the departure of the notorious Bob Crandall in 1998 lacked any foresight. They continued to expand as if it were the high-flying 1980s, planning to build new terminals at JFK & MIA, investing in too many 777s, buying Reno Air & TWA, & spent $$$ in areas that were completely unnecessary.

Why didn't AA management know about the downturn in the economy long before 9-11? It was in the Wall Street Journal, the Economist & every other financial periodical out there in 1999 & 2000. Now they're crying as if this is all a big surprise. I'm just a "lowly, stupid" flight attendant & I was aware of all this back then. I just kept watching AA management go ahead with spending as if the economy was going to contiunue to boom.

They continue to shut down more & more of the TWA LLC division, the latest being the grounding of 28 TWA MD-80s for at least 2 years. And then they tell us at the American Airlines division that they have no regrets in buying TWA!

I will admit the labor contract that passed, ironically, on 9-12-01, with the flight attendants was so generous I couldn't believe they were going to pay us that much. I am being paid quite well for what I do, & would be willing to accept concessions only if the company agrees not to spend money in places where it shouldn't, especially in buying more bankrupt carriers! The only thing I can say about the feeling of AA empolyees is that they are frustrated.

Jeremy · 02-10-2003, 09:55 PM

NYCAAer,
I hope you all make it, I don't want to see any carriers go down.
Good luck! From a Southwest Employee.

Tracon Doug · 02-10-2003, 10:18 PM

Quote:

Originally posted by bigredvmi
the scary thing for American Airlines ... is that on 80% of your route schedule you are facing either JetBlue or Southwest ...

Say what?? Considering 80% of the route schedule goes thru DFW, how do you figure? JetBlue doesn't serve DFW, neither does Southwest.....

02-10-2003, 11:05 PM

AA competes with low-cost carriers in 80% of its domestic market if you figure in ALL markets where connections are made. Yes, AA does have a great deal of its traffic flow through DFW & ORD, but 70% of the passengers flowing through those hubs continue on somewhere else. DFW or ORD is not their ultimate destination.

For example, flying from BOS to TUS or something like DCA to ABQ are each considered a market. Neither are operated by AA as a nonstop & you must connect through DFW or ORD. You could fly UA through ORD or DIA in the same market, NW via MSP or DTW, DL via ATL, SLC or DFW, or CO via IAH. All are competing in these same markets, even though the passenger may connect at a different hub. If this is considered, then it can be said AA competes with Southwest & JetBlue in 80% of its markets. Granted, SW doesn't serve DFW, but they serve the same MARKET using DAL (Love Field).

02-10-2003, 11:13 PM

Quote:

Originally posted by Jeremy
NYCAAer,
I hope you all make it, I don't want to see any carriers go down.
Good luck! From a Southwest Employee.

Thanks- I hope we make it, too. I hope the unions are bright enough to realize how bad things are at AA, & I hope the management is bright enough to realize they ALWAYS have to be prepared for a downturn in the economy, no mattter how good it might seem at the time.

AAMD11 · 02-26-2003, 12:55 AM

Im very optimistic that AA will make it through this.

02-05-2003, 04:57 AM	#1
BHopper88 Master Collector Join Date: Feb 2002 Location: Home: Beverly Hills, Michigan (burb of Detroit), School: Grand Forks, North Dakota Age: 30 Posts: 547	NWA CEO SAYS "will be fewer major airlines flying 3 years from now". NWA chief says airline failures loom Anderson predicts his firm will survive crisis February 5, 2003 BY JOHN GALLAGHER FREE PRESS BUSINESS WRITER In the midst of commercial aviation's worst financial crisis ever, the boss of Northwest Airlines predicted Tuesday that one or more major carriers will disappear in the next few years. "I believe there will be fewer major airlines three years from now," Northwest CEO Richard Anderson told Wall Street stock analysts Tuesday morning. "Northwest will be one of the ones that survives." Anderson didn't speculate which of the other top six hub carriers -- American, United, Delta, Continental, and US Airways -- would go out of business or be absorbed in a takeover. But he said industry economics dictate that commercial aviation go through a downsizing. "When you think about how much capacity is in the marketplace, and how many hubs there are, and how many airplanes there are flying, and the lack of profitability in the industry, it seems only logical that on an economic basis there needs to be fewer" carriers, he said. While the terror attacks on Sept. 11, 2001 cut demand for high-priced travel, those events accelerated trends that were present in the industry already, he said. Even so, Anderson doesn't think the industry's basic hub-and-spoke system is flawed. The term means that airlines fly passengers from outlying cities to centralized hubs where they transfer to other flights. The system developed after the government deregulated airlines in 1978. Without a hub-and-spoke system, Anderson said, smaller cities would see little or no regularly scheduled service. And international flights would not be economically feasible. Rather than blaming the hub-and-spoke system for the industry's ills, Anderson blamed a high cost structure, especially labor costs. Without citing specifics, he made it clear that Northwest will attempt to lower labor, pension and work rules costs this year. That, of course, could set up fights with unions. But Anderson said Northwest is not counting on another carrier going broke to make life easier for the Eagan, Minn.-based airline. "At Northwest we are not planning our recovery on anyone else failing," he told analysts. "It is always in my judgment a fool's errand to pray for rain. It's your responsibility to navigate your ship to a successful result."

02-05-2003, 11:47 AM	#3
bigredvmi Master Collector Join Date: May 2002 Location: Michigan Posts: 786	the scary thing for American Airlines ... is that on 80% of your route schedule you are facing either JetBlue or Southwest ... __________________ - Drew Sell crazy somewere else were all stocked up here

02-10-2003, 09:55 PM	#5
Jeremy Master Collector Join Date: Sep 2000 Location: BAA Indianapolis Posts: 583	NYCAAer, I hope you all make it, I don't want to see any carriers go down. Good luck! From a Southwest Employee. __________________ One Nation under God There will be weeping and gnashing of teeth

02-26-2003, 12:55 AM	#9
AAMD11 Master Collector Join Date: Mar 2002 Location: Coruscant Posts: 707	Im very optimistic that AA will make it through this. __________________ American Airlines An airline proud to bear the name, American A mi no me importas tu ni veinte como tu, yo sigo siempre en el goce...El del ritmo no eras tu

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02-05-2003, 10:19 AM	#2
tjwgrr Senior Collector Join Date: Jul 2000 Location: Grand Rapids, MI Posts: 471	We could lose: US Airways United American - (stock now below $3.00/ share.) see below ---------------------------------------------- Associated Press American Asks Labor for $1.8B Cost Cuts Tuesday February 4, 6:33 pm ET By Brad Foss, AP Business Writer American Airlines Asks Labor Groups for $1.8 Billion in Cost Cuts to Help Avoid Bankruptcy NEW YORK (AP) -- American Airlines pleaded with employees Tuesday to make steep cuts in wages, benefits and work rules in order to save $1.8 billion annually, stressing that the company's livelihood was at stake. "Our financial results make it abundantly clear that American's future cannot be assured until ways are found to significantly lower our labor and other costs," the company said in statement issued after a private meeting with labor leaders. As multibillion losses pile up, a number of analysts have speculated in recent weeks that American is increasingly at risk of becoming the next major carrier to file for bankruptcy, joining United Airlines and US Airways, unless it can dramatically reduce costs. Executives and labor leaders are scheduled to meet again Friday. Union leaders said the company needs to do a better job of substantiating the proposed cuts before negotiations can proceed in earnest. John Ward, president of the Association of Professional Flight Attendants, said he wants more information before deciding whether the company's "financial position indeed necessitates concessions." American president Gerard J. Arpey said in an interview that the $1.8 billion in cuts are absolutely necessary in order for American to regain profitability and is not a negotiating position. "We need to get all of it," Arpey said, adding that the company was flexible about how to get it done. Standard & Poor's airline analyst Philip Baggaley said the labor cuts proposed by American were "slightly less" than those proposed by UAL Corp., the parent company of United Airlines. Fort Worth, Texas-based American has been working for the past 18 months to cut annual non-labor expenses by $2 billion, mostly through changes to its flight schedules and fleet. But executives have repeatedly said that it would take a total of $4 billion in savings to regain profitability. In 2002, labor expenses totaled $8.4 billion. Late last month American's parent company, AMR Corp., reported a loss of $3.5 billion for the year, the industry's largest annual loss ever. It is currently burning through $5 million a day and has roughly $2 billion in unrestricted cash on hand. American, the world's largest airline, said Tuesday it is under "unrelenting pressure" from low-cost carriers and rivals that are currently shrinking costs under the protection of bankruptcy courts. American called the request "a last resort" but stopped short of saying that bankruptcy loomed. "It's the 800-pound gorrilla in the corner that nobody acknowleged but everybody knows is there," said Rich Bittenbender, an airline analyst at Moody's Investors Service in New York. The company also announced that it would close two of its 10 domestic reservation centers, affecting more than 900 jobs in Norfolk, Va. and Las Vegas. The $1.8 billion in cost cuts being sought would come as follows: $660 million from pilots, $350 million from flight attendants, $620 million from mechanics and ground workers, $80 million from ticket agents and $100 million from management. Shares of AMR fell 8 cents, or 2.7 percent, to close Tuesday at $2.87 on the New York Stock Exchange.

02-05-2003, 02:05 PM	#4
NYCAAer Guest Posts: n/a	As an AA employee for 14+ years, I feel the management of the company since the departure of the notorious Bob Crandall in 1998 lacked any foresight. They continued to expand as if it were the high-flying 1980s, planning to build new terminals at JFK & MIA, investing in too many 777s, buying Reno Air & TWA, & spent $$$ in areas that were completely unnecessary. Why didn't AA management know about the downturn in the economy long before 9-11? It was in the Wall Street Journal, the Economist & every other financial periodical out there in 1999 & 2000. Now they're crying as if this is all a big surprise. I'm just a "lowly, stupid" flight attendant & I was aware of all this back then. I just kept watching AA management go ahead with spending as if the economy was going to contiunue to boom. They continue to shut down more & more of the TWA LLC division, the latest being the grounding of 28 TWA MD-80s for at least 2 years. And then they tell us at the American Airlines division that they have no regrets in buying TWA! I will admit the labor contract that passed, ironically, on 9-12-01, with the flight attendants was so generous I couldn't believe they were going to pay us that much. I am being paid quite well for what I do, & would be willing to accept concessions only if the company agrees not to spend money in places where it shouldn't, especially in buying more bankrupt carriers! The only thing I can say about the feeling of AA empolyees is that they are frustrated.

02-10-2003, 11:05 PM	#7
NYCAAer Guest Posts: n/a	AA competes with low-cost carriers in 80% of its domestic market if you figure in ALL markets where connections are made. Yes, AA does have a great deal of its traffic flow through DFW & ORD, but 70% of the passengers flowing through those hubs continue on somewhere else. DFW or ORD is not their ultimate destination. For example, flying from BOS to TUS or something like DCA to ABQ are each considered a market. Neither are operated by AA as a nonstop & you must connect through DFW or ORD. You could fly UA through ORD or DIA in the same market, NW via MSP or DTW, DL via ATL, SLC or DFW, or CO via IAH. All are competing in these same markets, even though the passenger may connect at a different hub. If this is considered, then it can be said AA competes with Southwest & JetBlue in 80% of its markets. Granted, SW doesn't serve DFW, but they serve the same MARKET using DAL (Love Field).