Bankruptcy Q Players

[mrholty]

As someone very intimate with this industry and how it negotiates this will take a while to fully play out I believe.

The keys to be aware of here are:

1. When are the debt payments due. (like any BK looming)
2. Cash balance (like normal)
3. Future aircraft orders and obligations.
4. Seniority of workforce (pension issues and potential gov't intervention - they don't want another

Also to note that AMR and formerly Northwest have the worst labor relations in the industry (outside of Spirit ;)) That said most pilots belong to ALPA wher APA only represents AMR pilots. This is good/bad for the pilots. They probably don't have the finances to really strike but they also don't have to worry about how their contract will aftect ALPA pilots representing regional carriers. Its just about them.

Looking at some lists of Airline Pilot pay their rates are right in the pack so my guess of the industry is in the work conditions section. American has some old contract terms that make scheduling very inflexible and cost them considerable money in the amount of reserves needed and the inflexibility leads to operational issues which is where the real money savings are.

My guess is AMR is pretty senior so the senior guys will agree to lower pay to maintain their pensions (BK would turn it over to the gov't and be shrunk between 20-80% IIRC for United). Also of note AMR used to play up the fact that they had never filed BK but Gerard Arpey has stated that they would have been better off in the mid 2000s if they have so he's clearly willing to play that card.

My guess is they ultimately settle after the Holidays for 3% raises, with worse work rules and new hires get worse benefits but since they have not been hired they can't vote against it.

FD: I recently bought March calls.