American Airlines files Chapter 11 Bankruptcy

[alexgv1]

I can.

It's called REAL LIFE - the owner of a company can't be held liable for paying the bills of a company he works for, he is merely an employee who is employed by the company to help run it properly. Clearly he did not do his job well, granted, and the company is now suffering, but you cannot blame the owner of a company that hasn't paid the bills they owe you when it is up to you to choose wisely who or who not to sell your product to. Poor judgement on the part of your friend is not the fault of a chapter 11 bankruptcy filing, the courts, the company or any of the companies employees. If you don't sell to one person, usually that means one should find another buyer - and you can still make money. One lost sale is just one lost sale, pick another buyer and sell to them instead. Usually they pay the bills. The second you point a finger at someone else for something that failed, you're just blaming others for poor planning and judgement on your part.

Regardless, when did this topic turn into why chapter 11s are bad?

Cheers,
ICEcold

Wow getting told about real life by a 14 year old. Now that's real talk.

I know little of it myself, but don't go to profess it to others, least of a my superiors.

Main point is wapp's friend got f*cked and we can't be having that.

[alexgv1]

Come on 99% who's with me. Let's go Occupy somewhere and not wash for a week.

[Dasha]

What's the whole thing with Obama has to do with AA?

Frankly the rest of the world (yes America, there is more) would like Obama to stay. He opens up to the rest of the world, he's got a brain, he's got a vision.

The alternatives are frankly downright dangerous... like Bachmann who's stupid as a lamppost and still thinks the Soviet Union is alive and Cain who's keeping his own brothel so it seems.

That aside,

what I meant to say earlier in this whole conversation.

Although a Chapter 11 might be fair in the domestic market of the USA, globally, it's unfair competition. When AF/KL or BA or whatever airline does what AA has been doing for years, they'd go bust. Finito. The end.

In my opinion and I'm guessing I'm not the only one who thinks that, Chapter 11 is a free ticket for mismanagement and incompetence as it will all turn out alright in the end. The CEO gets his bonus and the airline stays afloat. If that's America's idea of a free economy... 

[alexgv1]

I think the question were all wanting to know is when can we get Chapter 11 in AWS. If you make a mistake you can now get away from your bad managerial decisions rather than permanently crippling your airline.

Can't afford to cancel leases? Chapter 11.

Need to drop or restructure some unwanted debt? Chapter 11.

Russian fleet type needs dropping? Chapter 11.

Want to fire staff or lower wages without legal consequences? Chapter 11.

Sounds sweet. Maybe only problem would be a CI and credit rating hit.


If anyone cares I'm not from USA but I'm not a big Obama fan.

[Sigma]

what I meant to say earlier in this whole conversation.

Although a Chapter 11 might be fair in the domestic market of the USA, globally, it's unfair competition. When AF/KL or BA or whatever airline does what AA has been doing for years, they'd go bust. Finito. The end.

In my opinion and I'm guessing I'm not the only one who thinks that, Chapter 11 is a free ticket for mismanagement and incompetence as it will all turn out alright in the end. The CEO gets his bonus and the airline stays afloat. If that's America's idea of a free economy...  

I understand what you're saying, but what you're not getting is that this isn't something that's unique to the US.

Processes similar or identical to what are called "Chapter 11" bankruptcy proceedings exist all over the world.

In the UK BA could take advantage of what is called "Administration".  In France, AF could take advantage of "procédure de sauvegarde" which is almost identical to Chapter 11, right down to letting everyone at the top keep their jobs.  KLM could take advantage of what is called "surseance" in the Netherlands, again very similar to Chapter 11.  Over the past 10 years or so, with so many European companies being at or near going into bankruptcy, in areas where these bankruptcy laws did differ from Chapter 11, most countries have been passing reforms to get their laws similar to Chapter 11, particularly in the area of the odds of "coming out" of the proceedings.

You just hear about "Chapter 11" more than all these other things simply because the major media is way too focused on the US for whatever reason and because there are so many large companies headquartered within the US that there will undoubtedly be more occurrences of it.

The problem as you see it isn't with "Chapter 11".  The spirit of the law is not a "get out of jail free" card where the management gets to keep their jobs and all that, though I will agree that its morphed into that in many of these high-profile cases.  Under Chapter 11 the management loses control of the company and the creditors take over.  That's very much not a good thing for the company.  Or at least, it shouldn't be.  The problem is that all too often the creditors are "in bed" with the management, the same guys they loaned money to knowing full well that they would be unlikely to ever repay it, and just let them keep their jobs.  True "shake-ups" are fairly uncommon.  That's not a fault of the law; the law itself is very similar to that in the rest of the world.  That's a fault of a corrupt system and a culture of not taking responsibility for ones actions that permeates modern capitalism.

And AA got rid of their CEO the day they announced the bankruptcy.  Granted they let him bow out respectably as a "retirement" with undoubtedly a nice paycheck.  But he is gone.

[wapp11]

I think the question were all wanting to know is when can we get Chapter 11 in AWS. If you make a mistake you can now get away from your bad managerial decisions rather than permanently crippling your airline.

Can't afford to cancel leases? Chapter 11.

Need to drop or restructure some unwanted debt? Chapter 11.

Russian fleet type needs dropping? Chapter 11.

Want to fire staff or lower wages without legal consequences? Chapter 11.

Sounds sweet. Maybe only problem would be a CI and credit rating hit.


If anyone cares I'm not from USA but I'm not a big Obama fan.

Agreed!

[swiftus27]

One example is a friend who has a sod farm.  He delivered $10k worth of sod to a landscaping company, the company, before paying the sod bill files chapter 11.  Now it has been years in court deciding who, and what gets paid first, and what the sod is worth in the courts mind.  Maybe someday he will get part of his money.  In the mean time the owner of the landscaping company, buys a new house, and drives a new car because he himself didn't file bankruptcy, the company did, so why should he be liable for the sod bill.  

This is most likely a Chapter 7.   A chap 11 is simply a debt restructuring.  Landscapers rarely get to file a reorganization plan... let alone let one sit in BK court for that long.    Also, if the landscaper is a C corp, they are paying taxes on the business income AND the personal income.  It seems as if the luxury of the double taxation also comes the benefit of bankrupting the business only.  The gain/loss in an S corp goes right to the owners.  Even then, if it was an S corp, the owner(s) would have to pay income taxes on any portion of the debt forgiven.  

Here are your friend's errors:  1.  He didn't have his customer sign a personal guarantee.   2.  He probably didn't have a clause in his contract stating that the owner was liable after XX day net terms.      Did he pull credit on the borrower or business?  I highly doubt it.

Landscaping companies are one of the highest risk businesses out there.  You can put them in the same category as Bars/Restaurants and car washes.  Their charge off percentage far exceeds norms.  There are few entry barriers for this type of work.   I can start a landscaping company in a day (unlike an auto plant which would take a long time and billions).  

In the end, you are talking about $10,000.  I HARDLY think that this is getting 'royally screwed' by the US BK system.  
Personally, I won't do business with a company that doesn't have 6 months reserves (in the case of high risk business) or 3 months in normal risk business.  I personally evaluate the fiscal health of the company I am working with before ever lending dollar 1.   I bet your friend didnt.  

Guys, not getting paid on your A/R happens ALL the time.  When I issue a line of credit, I look at only what is under 90 days in A/R.   And then I only give up to 80% of that value because it is expected to have A/R fallout.  

Again, this example is poor at best.   If you don't want to get screwed, don't get into a high risk business floating merchandise to other high risk industries without something in place.  

[LemonButt]

What's the whole thing with Obama has to do with AA?

Frankly the rest of the world (yes America, there is more) would like Obama to stay. He opens up to the rest of the world, he's got a brain, he's got a vision.

The alternatives are frankly downright dangerous... like Bachmann who's stupid as a lamppost and still thinks the Soviet Union is alive and Cain who's keeping his own brothel so it seems.

That aside,

what I meant to say earlier in this whole conversation.

Although a Chapter 11 might be fair in the domestic market of the USA, globally, it's unfair competition. When AF/KL or BA or whatever airline does what AA has been doing for years, they'd go bust. Finito. The end.

In my opinion and I'm guessing I'm not the only one who thinks that, Chapter 11 is a free ticket for mismanagement and incompetence as it will all turn out alright in the end. The CEO gets his bonus and the airline stays afloat. If that's America's idea of a free economy... 

Obama's involvement is speculated because he's from Chicago, AA has a huge hub at O'Hare, and gets tons of money from the unions that will be involved in the proceedings.  On top of this, he has a track record of giving unions gold plated packages in previous bailouts like GM.

The rest of the world may like Obama, but in the States where we follow his every move, I think the majority of Americans will agree the guy can talk the talk, but he can't walk the walk.  He has failed to back up his rhetoric with action and to the free market, is probably the most dangerous President we've had in modern history.  He's never had a job in the private sector and doesn't know how business works.  He is obligated by the constitution to present a budget to Congress every year and the Senate voted down his last budget that would have increased government spending by $1 trillion in a bipartisan vote of 0-97.  The US has not had a budget in nearly 4 years now.  In regards to foreign relations, you can say what you want about the GOP nominees, but Michelle Obama touched the Queen of England, Barack bows to foreign leaders, and spent the first year on his "apology tour" going around the world apologizing for the US being the greatest nation in the world.  Michelle even said she was finally proud to be an American now her husband is President.  Of course everyone outside the US likes him.

The reason that the US is the greatest economic power in the world is because our government was the last to take away economic freedom (per Ludwig von Mises).  The general idea of many of the replies here on the concept of bankruptcy and the view that economic freedom is dangerous can only come out of higher education.  To think that people are too stupid to make their own choices and do what is best for themselves versus having a government official or lawmaker tell them what's best is absolutely ridiculous.  Free Enterprise works because there is no exchange of goods/services/money unless two parties agree to the terms.  Banks and debtors entered into a mutual agreement to lend money to AA.  Unions entered into a mutual agreement to supply labor.  Consumers enter into a mutual agreement to purchase tickets.  To say that any of these parties are getting the shaft when they made their own decisions and calculated risks in entering into said agreements is absolutely ridiculous.  In the real world, decisions have consequences.

Yes--C-level execs still get paid and get bonuses.  Again, it takes higher education to come up with the idea that these guys are not earning their keep.  If a gate agent at an airline makes a mistake, it might cost the airline a few thousand.  If a C-level exec makes a mistake, it can cost millions if not billions.  If you think someone answering a phone and entering reservations into a computer should earn more than someone responsible for keeping thousands of people employed, strategic route planning, strategic marketing, fleet replacement, tax compliance, and the myriad of other hornets nests they have to deal with, you're kidding yourself.

Anyone who has worked in the private sector (at least in the US) can tell you that you get what you pay for and there is no free lunch.  The American Red Cross is a non-profit and the CEO makes millions.  Why is someone running a non-profit making millions?  Because in order to attract qualified candidates that can run a billion dollar operation it requires a very specific skillset to be successful--its not something that just anyone can do.  If the Red Cross paid their CEO $100k/yr and they were truly qualified, they wouldn't be there long as they could earn $1 million/yr walking across the street and taking a C-level position at a Fortune 500 company.

At the end of the day, everyone involved in the AA bankruptcy exercised their freedom of choice to enter into agreements with AA with exception of union members.  This is where things fall apart: groups of people don't have rights, individuals do.  Many states are not right-to-work states, which means they are legally obligated to join a union to be employed with unionized companies such as AA and if someone doesn't want to join the union, they need to move to another state.  The union employees, therefore are pigeonholed and required to be represented by the union which bargains on their behalf, which means employees aren't in control of their own destiny and union reps will be calling the shots on their behalf.  This almost always leads to spreading the misery--not spreading the wealth.

[LemonButt]

In the end, you are talking about $10,000.  I HARDLY think that this is getting 'royally screwed' by the US BK system.  

I have an outstanding receivable worth $10,000 for services performed as well that we'll never see.  Hopefully our lawyers can recover half of this, but we've already written it off as well.  Our cutoff here is 45 days--anything older than we have a very very slim chance of collecting on (at least in full).

[Dasha]

The reason that the US is the greatest economic power in the world ...

WAS my dear... was...


There is no way you can convince me that a country with a budget deficiency and a state debt the size America has, is the world's greatest economic power. If Japan pulls out of the US, the country crumples and withers. Same with Europe. Yes you might have the most money (something I doubt as well) but other than that the US is not the richest. Still better than Europe though, I painfully admit

[Dave4468]

WAS my dear... was...


There is no way you can convince me that a country with a budget deficiency and a state debt the size America has, is the world's greatest economic power. If Japan pulls out of the US, the country crumples and withers. Same with Europe. Yes you might have the most money (something I doubt as well) but other than that the US is not the richest. Still better than Europe though, I painfully admit

China is the future. Dragons eat eagles for breakfast and all that. If I was in power at the moment I'd be spending a hell of a lot more time forging links with China.

[RushmoreAir]

As long as we are talking about politics and bankruptcy . . .

Two weeks ago,  I watched Inside Job, a really good documentary about the financial crisis.  I was stunned to see the blatant disregard for the rules both from the big banks and from the government.  I was surprised to find that the pattern of governmental economic incompetency dated back to the Clinton administration:  http://en.wikipedia.org/wiki/Inside_Job_(film)

I encourage everybody to watch this, it really is an eye-opener.   

[swiftus27]

WAS my dear... was...


There is no way you can convince me that a country with a budget deficiency and a state debt the size America has, is the world's greatest economic power. If Japan pulls out of the US, the country crumples and withers. Same with Europe. Yes you might have the most money (something I doubt as well) but other than that the US is not the richest. Still better than Europe though, I painfully admit

China, not Japan. 

Also, the US has built itself in to a symbiotic relationship with China.  Neither can survive without the other.  If the US defaults and doesn't buy goods from China, China disappears overnight. 

My Palestinian marketing professor said it best:   China is the manufacturer, India is tech support, the USA is innovation and Europe is a museum.

[swiftus27]

As long as we are talking about politics and bankruptcy . . .

Two weeks ago,  I watched Inside Job, a really good documentary about the financial crisis.  I was stunned to see the blatant disregard for the rules both from the big banks and from the government.  I was surprised to find that the pattern of governmental economic incompetency dated back to the Clinton administration:  http://en.wikipedia.org/wiki/Inside_Job_(film)

I encourage everybody to watch this, it really is an eye-opener.   

Every bank was forced to take government money in the TARP bailout because if they didn't only the weak would have been exposed and caused even more havoc.

[JumboShrimp]

Frankly the rest of the world (yes America, there is more) would like Obama to stay. He opens up to the rest of the world, he's got a brain, he's got a vision.

If I was a really mean spirited person, I could say you can have him.  But I don't wish the misfortune of living under his "vision" on anybody.  The only legacy of his "vision" will be ~$6 trillion of debt.

In my opinion and I'm guessing I'm not the only one who thinks that, Chapter 11 is a free ticket for mismanagement and incompetence as it will all turn out alright in the end. The CEO gets his bonus and the airline stays afloat. If that's America's idea of a free economy... 

In a market based system, you are free to succeed, and free to fail.  An good system of picking up the piesces left behind failed companies only helps the overall efficiency of the market and the economy.

[JumboShrimp]

Every bank was forced to take government money in the TARP bailout because if they didn't only the weak would have been exposed and caused even more havoc.

Yup, I heard that interesting nugget of information, and you have to give the shadowy figures behind TARP credit for being good at being the shadowy figures.... 

[swiftus27]

If I was a really mean spirited person, I could say you can have him.  But I don't wish the misfortune of living under his "vision" on anybody.  The only legacy of his "vision" will be ~$6 trillion of debt.

In a market based system, you are free to succeed, and free to fail.  An good system of picking up the piesces left behind failed companies only helps the overall efficiency of the market and the economy.

When 46% of Americans pay NO federal income tax ...   sheesh... dont get me started.  They tell us all that they need more breaks on taxes when they pay none to begin with. 

[alexgv1]

When 46% of Americans pay NO federal income tax ...   sheesh... dont get me started.  They tell us all that they need more breaks on taxes when they pay none to begin with. 

Who is they? The 99%? No wait the 46% of the 99%.... the 45%?

[alexgv1]

NSFW.... parental consent required lots of swearing.

http://www.youtube.com/watch?feature=player_embedded&v=J0SPio6RE

UK had a load of strikes yesterday, Wednesday 30th November.

Network finds itself ever so true again in this day and age.

http://www.youtube.com/watch?v=dib2-HBsF08

Rename this thread to the Occupy AWS Thread?

[swiftus27]

Who is they? The 99%? No wait the 46% of the 99%.... the 45%?

46% of American Households pay zero federal income tax.

If they actually pay any taxes, it is solely state income tax (not all have it), and municipal taxes (not all have it)...  Only if they own a home they pay property taxes.   Everyone pays sales tax (food in most states is not taxable).    There is no value added tax in the USA.  There is no GST/PST like in Canada.  

In the USA the top 1% of income earners pay 37% of all income taxes paid
The top 10% pay over 70%.  

There is a definite problem in the system because the lowest 25% pull in an ungodly sum in government services and $$$$$... Many believe, myself included, is so those people continue to vote the same way. 

Demonize the American right, the Republican Party for being Bible-thumping war-mongering idiots.     
This stat I always find interesting:

TOP 10 POOREST CITIES IN THE USA
What do the top ten cities with the highest poverty rate all have in common?
Detroit, MI (1st on the poverty rate list) hasn't elected a Republican mayor since 1961;
Buffalo, NY (2nd) hasn't elected a Republican mayor since 1954;
Cincinnati, OH (3rd) hasn't elected a Republican mayor since 1984;
Cleveland, OH (4th) hasn't elected a Republican mayor since 1989;
Miami, FL. (5th) has never had a Republican mayor;
St. Louis, MO (6th) hasn't elected a Republican mayor since 1949;
El Paso, TX (7th) has never had a Republican mayor;
Milwaukee, WI (8th) hasn't elected a Republican mayor since 1908;
Philadelphia, PA (9th) hasn't elected a Republican mayor since 1952;
Newark, NJ (10th) hasn't elected a Republican mayor since 1907.