April 23, 2012 The AA Bankruptcy: The Creditiors
Meet the nine votes that will determine the fate of AA:
Three AA Unions (APA, APFA, TWU)
HP Enterprise Services
Wilmington Trust Bank
Bank of New York
Manufacturers and Traders Trust Co
Remember what I said earlier about the Ch. 11 process. AA has to present a plan to these 9 that shows it can operate profitably. Other entities can present a take over plan to the committee that if approved will end AA’s existence. The Bankruptcy judge has final approval, but they generally follow what the committee approves.
The three banks: Manufacturers and Traders Trust Co; Wilmington Trust Bank; and Bank of New York will do whatever is in the interest of their bottom line. They are going to side with the people that promise to pay them more. Representing the bondholders, their votes are a toss up.
The three unions are another issue. I wondered why US was inking deals with AA’s unions, now it makes sense. These deals will give US three yes votes.
The Pension Benefit Guarantee Corporation is a lot like the FDIC for pension programs. When AA kills their pension program, the PBGC takes over the obligation. They are no fan of AA but I can’t image they are a fan of US. They are going to put the employee’s interest first. This vote is up in the air. With AA wanting to kill the pension program, I can imagine this vote leaning US
HP is an interesting creditor. There were rumors of AA developing a new passenger service system to be called “jetstream” developed by HP. Apparently AA owns HP such a substantial amount of money they got a seat. HP owns SHARES the current PSS for UA and US. If US kills Jetstream then HP may want to vote for AA. HP want’s to get paid, I think they lean to AA
Boeing is the last creditor. AA inked a huge deal with Boeing to lease over a 100 new aircraft in the coming years. US has promised to honor these leases. I am not buying it. US hasn’t ordered any new Boeing aircraft in a long time and is looking to retire the aircraft they do have. Airbus continues to cut US sweetheart deals on planes just to increase US market share. I think Boeing has to vote for AA. AA’s got rid of the A300’s and is looking to accelerate the retirement of the MD-83s in favor of 737-800’s.
Banks, ? ? ?
Unions, US, US, US
If I was AA, I would forget the PBGC vote and focus solely on inking deals with the bondholders. If I was US, I would assume the AA pensions and pay off one bank or pay off two banks whichever is cheaper. Either way the banks are going to be the swing votes here.
Ch. 11. is a blessing and a curse. Right now AA’s future is in the hands of three banks. On the other side of the table you have one the most capable CEO’s of all time in Doug Parker.
People always discount Doug Parker because of how poor U.S. Airways is. This underestimation has hidden the facts, that will three second tier hubs, a marginal route network, a mutinous workforce, and a southwest airlines incursion at two hubs, US is making money. Something neither pre-merger United nor American could apparently pull off.
BTW Southwest is starting to pull back out of PHL.
Doug Parker ranks as either the number one or number two Airline CEO’s of all time. Gordon Bethune may beat him out for the number one spot for saving Continental Airlines, but it is close.
Will AA survive, maybe, but it is going to be very very close.