American to take $1.1-$1.2 billion impairment charge, furlough 900 flight attendants
Thursday July 3, 2008
American Airlines parent AMR Corp. informed the US Securities and Exchange Commission yesterday that it will record a noncash impairment charge of $1.1-$1.2 billion in the second quarter related to the capacity reductions announced in May (ATWOnline, May 22).
The company said the carrying values of its MD-80s and ERJ-135s "are no longer recoverable" and that it will take the charge "to write these and certain related long-lived assets down to their estimated fair value." It also will take a separate $75-$100 million charge for costs related to the accompanying reduction of its workforce, some of which "may" be applied to the third quarter. It said more accounting charges related to the capacity cuts are expected to come.
Meanwhile, the Assn. of Professional Flight Attendants revealed yesterday that AA informed it that owing to the capacity reduction, the carrier's 900 most junior US-based flight attendants are subject to furlough effective Aug. 31. In an effort mitigate possible job losses, AA and APFA reached agreement yesterday on "a one-time voluntary bridge to retirement" that will be offered to flight attendants age 50 and older who will have at least 15 years of company seniority from Aug. 31.
Other News
Monday June 30, 2008 Icelandair will cut 20% of its workforce of 1,230 employees as a result of financial pressures brought on by rising fuel prices, it announced last week. The reduction of approximately 240 staff will occur in the fall. The airline also will reduce its winter flying schedule by 14% and cease serving Berlin Tegel, Toronto and Minneapolis/St. Paul from Keflavik.
Service to Paris Charles de Gaulle will be reduced while flights to New York JFK will increase.
by Kurt Hofmann
MAS prepares to face 'frightening' future
Monday June 30, 2008 Malaysia Airlines is prepared to "take the lead" in increasing fuel surcharges and perhaps raising fares by as much as 50% in order to negotiate a "frightening" economic environment, MD and CEO Idris Jala wrote in an open letter last week.
"Change, and I mean drastic change, is absolutely vital for our survival. That, and a willingness to reinvent the way we operate, including through mergers and acquisitions," Jala said.
He said MAS "kept our head above water" with a first-quarter profit of MYR120.5 million ($37 million) (ATWOnline, May 22) but that it will "face more pressure in the near future."
He said that despite "customer resistance," MAS will raise surcharges on international flights, will be "focused on cutting costs right down to the bone"--including cutting capacity--and will "continue to innovate" to lower costs and increase revenue through programs like its Everyday Low Fares initiative (ATWOnline, May 6).
by Brian Straus
Continental, United reach extensive cooperation pact; CO to join Star
Friday June 20, 2008
Continental Airlines and United Airlines yesterday signed a "framework agreement to cooperate extensively, linking their networks and services worldwide," and CO revealed that it will leave SkyTeam to join Star Alliance with UA and CO planning to form joint venture operations with other Star carriers for transatlantic services as well as flights to Latin America and Asia.
Both airlines recently said they would not enter into any merger agreements and both will remain independent and retain their brands (ATWOnline, June 2). But the pact goes "well beyond a traditional codeshare agreement," UA Chairman, President and CEO Glenn Tilton said. It will include "significant cooperation" on frequent-flier programs, airport lounges, facility utilization, information technology and procurement, the carriers said.
The deal stems from "efficiency opportunities identified and relationships developed during the parties' earlier merger discussions," the airlines said. Domestically, CO and UA plan "a coordinated process for reservations/ticketing, check-in, flight connections and baggage transfer."
CO said it will ask the US Dept. of Transportation to allow it to join UA, Lufthansa, Air Canada and six other Star carriers in an already-established antitrust-immunized alliance. "This will enable Continental. . .to establish transatlantic and other international joint ventures" with Star members that will include pooled revenue, it said. Joint ventures also are planned for Latin America and Asia.
CO has been considering leaving SkyTeam since Delta Air Lines and Northwest Airlines announced a merger agreement. It explored partnering with oneworld's British Airways and American Airlines (ATWOnline, May 2). "In a network business, there is significant value gained from linking with larger networks to provide truly national coverage and expanded global reach," CO Chairman and CEO Larry Kellner said. He and Tilton met in Chicago yesterday to sign a framework accord outlining a "systemwide alliance and cooperation principles," the carriers said.
Both antitrust immunity and codesharing agreements are subject to approval by applicable US and foreign government agencies. "Continental intends to terminate its existing agreements with SkyTeam members. . . although Continental may not be successful," CO cautioned.
UA and DL attempted to form a similar extensive cooperation agreement in 1998 but the deal died in the face of strong opposition by the Air Line Pilots Assn. They formed a more limited marketing partnership that ended in 2003.
by Aaron Karp
Thursday July 3, 2008
American Airlines parent AMR Corp. informed the US Securities and Exchange Commission yesterday that it will record a noncash impairment charge of $1.1-$1.2 billion in the second quarter related to the capacity reductions announced in May (ATWOnline, May 22).
The company said the carrying values of its MD-80s and ERJ-135s "are no longer recoverable" and that it will take the charge "to write these and certain related long-lived assets down to their estimated fair value." It also will take a separate $75-$100 million charge for costs related to the accompanying reduction of its workforce, some of which "may" be applied to the third quarter. It said more accounting charges related to the capacity cuts are expected to come.
Meanwhile, the Assn. of Professional Flight Attendants revealed yesterday that AA informed it that owing to the capacity reduction, the carrier's 900 most junior US-based flight attendants are subject to furlough effective Aug. 31. In an effort mitigate possible job losses, AA and APFA reached agreement yesterday on "a one-time voluntary bridge to retirement" that will be offered to flight attendants age 50 and older who will have at least 15 years of company seniority from Aug. 31.
Other News
Monday June 30, 2008 Icelandair will cut 20% of its workforce of 1,230 employees as a result of financial pressures brought on by rising fuel prices, it announced last week. The reduction of approximately 240 staff will occur in the fall. The airline also will reduce its winter flying schedule by 14% and cease serving Berlin Tegel, Toronto and Minneapolis/St. Paul from Keflavik.
Service to Paris Charles de Gaulle will be reduced while flights to New York JFK will increase.
by Kurt Hofmann
MAS prepares to face 'frightening' future
Monday June 30, 2008 Malaysia Airlines is prepared to "take the lead" in increasing fuel surcharges and perhaps raising fares by as much as 50% in order to negotiate a "frightening" economic environment, MD and CEO Idris Jala wrote in an open letter last week.
"Change, and I mean drastic change, is absolutely vital for our survival. That, and a willingness to reinvent the way we operate, including through mergers and acquisitions," Jala said.
He said MAS "kept our head above water" with a first-quarter profit of MYR120.5 million ($37 million) (ATWOnline, May 22) but that it will "face more pressure in the near future."
He said that despite "customer resistance," MAS will raise surcharges on international flights, will be "focused on cutting costs right down to the bone"--including cutting capacity--and will "continue to innovate" to lower costs and increase revenue through programs like its Everyday Low Fares initiative (ATWOnline, May 6).
by Brian Straus
Continental, United reach extensive cooperation pact; CO to join Star
Friday June 20, 2008
Continental Airlines and United Airlines yesterday signed a "framework agreement to cooperate extensively, linking their networks and services worldwide," and CO revealed that it will leave SkyTeam to join Star Alliance with UA and CO planning to form joint venture operations with other Star carriers for transatlantic services as well as flights to Latin America and Asia.
Both airlines recently said they would not enter into any merger agreements and both will remain independent and retain their brands (ATWOnline, June 2). But the pact goes "well beyond a traditional codeshare agreement," UA Chairman, President and CEO Glenn Tilton said. It will include "significant cooperation" on frequent-flier programs, airport lounges, facility utilization, information technology and procurement, the carriers said.
The deal stems from "efficiency opportunities identified and relationships developed during the parties' earlier merger discussions," the airlines said. Domestically, CO and UA plan "a coordinated process for reservations/ticketing, check-in, flight connections and baggage transfer."
CO said it will ask the US Dept. of Transportation to allow it to join UA, Lufthansa, Air Canada and six other Star carriers in an already-established antitrust-immunized alliance. "This will enable Continental. . .to establish transatlantic and other international joint ventures" with Star members that will include pooled revenue, it said. Joint ventures also are planned for Latin America and Asia.
CO has been considering leaving SkyTeam since Delta Air Lines and Northwest Airlines announced a merger agreement. It explored partnering with oneworld's British Airways and American Airlines (ATWOnline, May 2). "In a network business, there is significant value gained from linking with larger networks to provide truly national coverage and expanded global reach," CO Chairman and CEO Larry Kellner said. He and Tilton met in Chicago yesterday to sign a framework accord outlining a "systemwide alliance and cooperation principles," the carriers said.
Both antitrust immunity and codesharing agreements are subject to approval by applicable US and foreign government agencies. "Continental intends to terminate its existing agreements with SkyTeam members. . . although Continental may not be successful," CO cautioned.
UA and DL attempted to form a similar extensive cooperation agreement in 1998 but the deal died in the face of strong opposition by the Air Line Pilots Assn. They formed a more limited marketing partnership that ended in 2003.
by Aaron Karp
