(Not Chapter 7 liquidation)
http://money.cnn.com/2011/11/29/news/companies/american_airlines_bankruptcy/index.htm?hpt=hp_t2
No real surprise there. It was coming for months. This was published about 1 or 2 weeks ago though:
http://www.aa.com/i18n/amrcorp/newsroom/fp_amr_fleet_agreement.jsp?v_locale=en_US&v_mobileUAFlag=AA
QuoteUnder the new agreements, American plans to acquire 460 narrowbody, single-aisle aircraft from the Boeing 737 and Airbus A320 families beginning in 2013 through 2022 – the largest aircraft order in aviation history.
To me, being from Europe, it doesn't make any sense that a company with 4.6 billion USD in the bank, who've just made the largest order in history, can file for bankruptcy protection and it almost reeks of some form of 'dirty' business.
Had they not made that order, Airbus wouldn't give a flipping toss about AA going bankrupt, but now, with this order in place, Airbus might step up and support the bankruptcy protection. If something like this would have happened in Russia or something I would understand and accept it, but in America, I think somebody should at least do some research into it.
I think this chapter 11 is unfair competition for the whole industry. AA gets away with incompetent management and then make a big order to 'protect' them from bankruptcy. Any other company in another part of the world would have gone bankrupt and ceased to excist but somehow the American carriers won't.
Don't get me wrong I don't want AA to go bankrupt simply because it would affect so many people but from a competition point of view, I don't understand it at all.
Quote from: Dasha on November 29, 2011, 02:13:30 PM
No real surprise there. It was coming for months. This was published about 1 or 2 weeks ago though:
http://www.aa.com/i18n/amrcorp/newsroom/fp_amr_fleet_agreement.jsp?v_locale=en_US&v_mobileUAFlag=AA
To me, being from Europe, it doesn't make any sense that a company with 4.6 billion USD in the bank, who've just made the largest order in history, can file for bankruptcy protection and it almost reeks of some form of 'dirty' business.
Had they not made that order, Airbus wouldn't give a flipping toss about AA going bankrupt, but now, with this order in place, Airbus might step up and support the bankruptcy protection. If something like this would have happened in Russia or something I would understand and accept it, but in America, I think somebody should at least do some research into it.
I think this chapter 11 is unfair competition for the whole industry. AA gets away with incompetent management and then make a big order to 'protect' them from bankruptcy. Any other company in another part of the world would have gone bankrupt and ceased to excist but somehow the American carriers won't.
Don't get me wrong I don't want AA to go bankrupt simply because it would affect so many people but from a competition point of view, I don't understand it at all.
Chapter 11 is bankruptcy protection, which means that AA will get a chance to restructure their debt and renegotiate existing contracts. It's actually much more fair than the alternative of just shutting the doors. The company I work for went through Chapter 11 earlier this year. They may have $4.6 billion in the bank, but ratios are more important than your bank statement. Negative cashflow is really the only thing that matters. AA hasn't made money in 4 years now and they are bleeding cash. Filing for Chapter 11 means they can restructure their debts and liabilities to better match their revenue stream and hopefully return to profitability. The alternative? That would be liquidation--all assets are sold off and debtors and shareholders receive a percentage of what their investment was, which could be pennies on the dollar. That means if you're holding a $5 share of stock, you may get $1. If you are a bank owed $1 billion, you may get $200 million and then the bank has an $800 million loss.
Aircraft orders are a moot point. They have an aging fleet that needs replacing (lots of MD-80s for one). The orders represent a net cost savings since fuel is one of the biggest operating costs. It wouldn't make any sense for a company bleeding cash to hold onto gas guzzlers versus transitioning to fuel efficient aircraft.
Unions don't help the situation. AA could simply stop flying those gas guzzling aircraft, but they'd have to lay off lots and lots of pilots, mechanics, etc. which means HUGE severance packages. Filing for bankruptcy protection means they can renegotiate union contracts and offer optional early retirement buyouts. Delta (and virtually every major competitor) filed for bankruptcy years ago and were able to "trim the fat" and greatly reduce their labor costs--two friends of our family took early retirement as a result.
On top of all this, most banks are strapped for cash. This means if AA owes a bank $1 million/month--they want their $1 million. Businesses don't file for bankruptcy on a whim and they have certainly have already approached their debtors about restructuring their debts. Now a bankruptcy court will force their debtors to restructure their debt with the alternative being liquidation where everyone loses.
Now a bankruptcy court will force their debtors to restructure their debt with the alternative being liquidation where everyone loses.
This is the part I don't understand. Well I understand what you are saying I just don't see how it's fair. Sure the alternative of liquidation is far worse but let's say I'm company A.
I do things for AA and work my ass off for them. In return they pay me. I make costs for AA but as I'm smart, they pay me more than the costs I make. AA keeps spending money and at some point they cannot pay me anymore. In the meanwhile I'm still making costs for them. They are a big company so I'm guessing they can file for Chapter 11, me being a small company, I can say goodbye to my money, because AA (in my point deliberately) kept spending money they didn't have.
What if I'm getting in trouble because I cannot pay my debts because the money I get from AA get's restructured? Do I get to file for Chapter 11?
I understand why they order new planes and in my opinion they should have done so a long time ago but I just think doing so, a week before you are filing Chapter 11 is a bit of a fishy deal.
Here's to AA unveiling a fresh, modern new identity, and coming out of Ch11 as a leaner, more competitive company! The big news here for me is that Arpey is retiring! :P
EDIT: Also want to add that I hope the layoffs won't be too severe, because potentially thousands of people could lose their jobs... But I imagine that's what is going to happen for AA to become more competitive... It has always been my understanding that AA pilots for example were some of the highest paid in the industry.
This is how it works in America... Buy a lot of stuff you can't afford, then file bankruptcy, and screw over the hard working people that just sold you the stuff.
Wow, now that is not called for.
You clearly don't know the diff from chap 7 and 11.
While you're there why not talk about the fact that Greece just did something similar to what americans know as a chapter 13 screwing banks out of billions. No one is saying AA will get the massive writedown that Greece had.... or to mention Italys debt or Icelands complete bankruptcy/failure. Honestly, if it weren't for germany bailing europe out, the euro would have failed by now
In the end it is the big banks who are taking the hit. The same evil ones many are protesting.
Quote from: wapp11 on November 29, 2011, 04:36:11 PM
This is how it works in America... Buy a lot of stuff you can't afford, then file bankruptcy, and screw over the hard working people that just sold you the stuff.
Word.
Let's go Occupy somewhere!
Let's Occupy DFW!!!!!
Quote from: swiftus27 on November 29, 2011, 05:21:45 PM
Wow, now that is not called for.
You clearly don't know the diff from chap 7 and 11.
While you're there why not talk about the fact that Greece just did something similar to what americans know as a chapter 13 screwing banks out of billions. No one is saying AA will get the massive writedown that Greece had.... or to mention Italys debt or Icelands complete bankruptcy/failure. Honestly, if it weren't for germany bailing europe out, the euro would have failed by now
In the end it is the big banks who are taking the hit. The same evil ones many are protesting.
That is not fair either...
I don't know the difference between all the different chapters of bankruptcy but the way I see it (from a none American perspective) is that the whole Chapter 11 is a free ticket to mismanagement because in the end when things go sour, you file a chapter 11 protection and all will be well.
Maybe in the US market that is fair since MOST of the US carriers have at one point in there lives done it, on a global level, it's not fair. That's the point I'm trying to make. When AF-KL does the same mismanagement as happened with AA, they would go bust.
Look at the USA and UK. You can mismanage your company for years (like ENRON). Then when you f*ck up and it hits the fan you will get a government bail out... see RBS et ali. At the taxpayers expense.
Quote from: Dasha on November 29, 2011, 03:49:19 PM
Now a bankruptcy court will force their debtors to restructure their debt with the alternative being liquidation where everyone loses.
This is the part I don't understand. Well I understand what you are saying I just don't see how it's fair. Sure the alternative of liquidation is far worse but let's say I'm company A.
I do things for AA and work my ass off for them. In return they pay me. I make costs for AA but as I'm smart, they pay me more than the costs I make. AA keeps spending money and at some point they cannot pay me anymore. In the meanwhile I'm still making costs for them. They are a big company so I'm guessing they can file for Chapter 11, me being a small company, I can say goodbye to my money, because AA (in my point deliberately) kept spending money they didn't have.
What if I'm getting in trouble because I cannot pay my debts because the money I get from AA get's restructured? Do I get to file for Chapter 11?
I understand why they order new planes and in my opinion they should have done so a long time ago but I just think doing so, a week before you are filing Chapter 11 is a bit of a fishy deal.
Of course it's fair. The reason that banks loan money to companies with an interest rate versus doing it for free is because there is risk involved. We have a credit rating in AWS that works the same way--the worse of your airline is financially, the higher the interest rate. If the company goes bankrupt, you get your fair share. Since the risk is greater, the interest rate is higher. Everyone who made loans to AA took a calculated risk. Normally, companies don't go under, but there will always be failures and writeoffs.
If a bank makes enough bad loans because they miscalculated the risk, then the banks go bankrupt as well and gets sold off to the highest bidder via FDIC sealed bid auction. In the small town I live in North Carolina, we've had probably 5 local multi-branch banks go under from bad loans and get bought out by larger ones. Heck, even the big bad Wachovia out of Charlotte got purchased by Wells Fargo and the Wachovia brand is now gone.
As a result of this, most banks are strapped for cash. The conservative banks making money can buyout the debt owed to less conservative banks to maintain their own cashflow. For example, if AA has $5 million in debt to a bank, another bank might give $4 million in cash to the bank and then AA owes the new bank the same $5 million with restructured terms. Everyone comes out ahead with the original bank taking a $1 million loss, but also has $4 million in cash to take care of short term business. The alternative is liquidation where all the assets are sold and each debtor receives their fair share, which means that $5 million in debt might see a $2 million payment.
As mentioned, the company I work for went through Chapter 11. Our company is very profitable, but not profitable enough to cover the payments on the mound of real estate debt our owner racked up in using our company's value for financial leverage. We can pay off our debts because we're profitable, we just can't pay them off as quickly as we agreed to originally because of the current circumstances.
As a sidenote, American, Southwest, and jetBlue were the only 3 major carriers who have not filed for bankruptcy post-9/11. I read an article that said if they were able to restructure their labor agreements similar to their competitors, American would save $800 million/year.
Quote from: alexgv1 on November 29, 2011, 06:01:08 PM
Look at the USA and UK. You can mismanage your company for years (like ENRON). Then when you f*ck up and it hits the fan you will get a government bail out... see RBS et ali. At the taxpayers expense.
Actually ENRON didn't get a bailout, nor did Lehmann Brothers and many of the large airlines that have fallen (TWA, Pan-Am, Eastern, etc.). Most companies don't want bailouts because it comes with a whole lot of government oversight and regulation that most sane people would rather not deal with.
Quote from: LemonButt on November 29, 2011, 06:13:06 PM
Actually ENRON didn't get a bailout, nor did Lehmann Brothers and many of the large airlines that have fallen (TWA, Pan-Am, Eastern, etc.). Most companies don't want bailouts because it comes with a whole lot of government oversight and regulation that most sane people would rather not deal with.
Nope, never said they did but just couldn't think of a better example of a mismanaged company.
They get these bailouts because the government is too heavily invested in them or they convince them that they can't function without them. Yeah like you said there are many clauses attached with these bailouts, part of Northern Rock bank was sold a few weeks ago to Virgin Money and there were strings on that deal too.
There is no free lunch.
I think we should all put in some money and attempt a hostile takeover of AA. Then we can try our hand at running a real airline. Its market cap is only 120 million now.
Quote from: coopdogyo on November 29, 2011, 07:19:55 PM
I think we should all put in some money and attempt a hostile takeover of AA. Then we can try our hand at running a real airline. Its market cap is only 120 million now.
Hahaha yes... if only US banks was doing sub-prime mortgage lending... then I'm sure an asset-less student like me could raise a couple of mill in no time.
Quote from: coopdogyo on November 29, 2011, 07:19:55 PM
I think we should all put in some money and attempt a hostile takeover of AA. Then we can try our hand at running a real airline. Its market cap is only 120 million now.
Im sure they are trading lower than book value after todays news
Quote from: wapp11 on November 29, 2011, 04:36:11 PM
This is how it works in America... Buy a lot of stuff you can't afford, then file bankruptcy, and screw over the hard working people that just sold you the stuff.
Or more precisely, people who lend you money to buy all this stuff...
But creditors generally still come out ok out of these bankruptcy proceedings (when normal rules are followed, unlike Chrysler bankruptcy, where Obama administration acted like Hugo Chavez does).
The people who get screwed the most in general are the shareholders, since the creditors, as part of the restructuring will end up with some equity (shares). Shareholders of old shares end up with little or nothing...
Quote from: JumboShrimp on November 29, 2011, 09:14:22 PM
Or more precisely, people who lend you money to buy all this stuff...
But creditors generally still come out ok out of these bankruptcy proceedings (when normal rules are followed, unlike Chrysler bankruptcy, where Obama administration acted like Hugo Chavez does).
The people who get screwed the most in general are the shareholders, since the creditors, as part of the restructuring will end up with some equity (shares). Shareholders of old shares end up with little or nothing...
GMs shareholders were given next to nothing. The Union got a large stake and the government held a majority ownership in them. They only recently began spinning them back off.
Quote from: swiftus27 on November 29, 2011, 09:47:53 PM
GMs shareholders were given next to nothing. The Union got a large stake and the government held a majority ownership in them. They only recently began spinning them back off.
It was all political pay off. Unions gave Obama $100s of
millions in campaign contributions (without which he still might be just a junior senator from IL), Obama paid them back giving them gifts in $
billions from taxpayers and $
billions confiscated from sharholders and creditors.
The whole spin-off is a joke. There are losses for the taxpayers as fa as eye can see.
The biggest insult was when GM ran ads that they repaid the taxpayers. I wish somebody took them to court for false advertising...
As far as the actual bankruptcy, the cause of GM going bankrupt were the union contracts. The biggest liability of GM were the union contracts. Normally, bankruptcy gives you a clean start, all contracts are null and void, and all creditors get to stand in line. Secured creditors first, unsecured next.
The mockery of the process was when Obama put his campaign contributors first. Even ahead of secured creditors in case of Chrysler. That clearly unconstitutional (Article 1 Section 10 of the constitution). Being a secured creditor is a contract, and US government is prohibited from impairing obligations under contracts.
Then there was preference of one set of unsecured creditors (Unions) vs. other unsecured creditors. That is not supposed to happen in general.
While there was some renegotiation of the Union contracts for new and future employees, the most heinous contacts for long time union employees (and retirees) were left in place. GM creditors and US taxpayers are paying the bill for that...
Let's just hope that Obama will not get involved in AA bankruptcy, so that the normal rules of business are not subverted further. (We have to wonder how much AA unions paid to Obama campaign). If the normal process is followed, AA will emerge out of this a healthy company, able to compete with United and Delta...
Quote from: JumboShrimp on November 29, 2011, 10:15:05 PM
It was all political pay off. Unions gave Obama $100s of millions in campaign contributions (without which he still might be just a junior senator from IL), Obama paid them back giving them gifts in $ billions from taxpayers and $ billions confiscated from sharholders and creditors.
The whole spin-off is a joke. There are losses for the taxpayers as fa as eye can see.
The biggest insult was when GM ran ads that they repaid the taxpayers. I wish somebody took them to court for false advertising...
As far as the actual bankruptcy of the US, the cause of GM going bankrupt were the union contracts. The biggest liability of GM were the union contracts. Normally, bankruptcy gives you a clean start, all contracts are null and void, and all creditors get to stand in line. Secured creditors first, unsecured next.
The mockery of the process was when Obama put his campaign contributors first. Even ahead of secured creditors in case of Chrysler. That clearly unconstitutional (Article 1 Section 10 of the constitution). Being a secured creditor is a contract, and US government is prohibited from impairing obligations under contracts.
Then there was preference of one set of unsecured creditors (Unions) vs. other unsecured creditors. That is not supposed to happen in general.
While there was some renegotiation of the Union contracts for new and future employees, the most heinous contacts for long time union employees (and retirees) were left in place. GM creditors and US taxpayers are paying the bill for that...
Let's just hope that Obama will not get involved in AA bankruptcy, so that the normal rules of business are not subverted further. (We have to wonder how much AA unions paid to Obama campaign). If the normal process is followed, AA will emerge out of this a healthy company, able to compete with United and Delta...
Normally I'd say we should avoid discussing politics, but everything you said is dead on the truth. AA does have a major hub at O'Hare, so it wouldn't surprise me if Obama got involved somehow someway. The handling of the GM bankruptcy/bailout met the definition of unconstitutional with a massive dilution of shares bought by the federal government which made shares of stock from pre-dilution nearly worthless.
Give a man a gun and he can rob a bank, give a man a bank and he can rob the world.
I don't think the political stuff is called for here.
Some thoughts:
1. Shareholders typically get the shaft in any bankruptcy. They are on the lowest rung. Delta, Northwest, USAirways, etc. (and non-airlines, as well) shareholders are left with nothing.
2. Management will be given a chance to come up with a plan to come out of bankruptcy. This will be presented to the judge in the case. It will need to be negotiated with...
3. Creditors (banks and vulture funds, typically, at this point, given that it's been pending for some time). There are often a couple of levels (junior, senior bondholders, etc.). Senior debtholders get paid first. Juniors after. The creditors can also come up with their plan for coming out of bankruptcy. All these plans include various payments of pennies on the dollar to creditors in exchange for an ownership stake later on.
4. Chapter 11 allows a company to negate and renegotiate all contracts. Examples in this case might include unprofitable gates/hubs, leased aircraft, building leases, and, most importantly union contracts. In all likelihood, unions will be asked to take whatever Delta et al are paying. Often all of this is negotiated before the company even goes under -- a so-called pre-packaged bankruptcy.
5. What I expect to happen out of this is that senior and junior bondholders will agree to take a major haircut and that the unions will be asked to take major wage concessions all in exchange for ownership stakes (I expect the union would get less than 10 percent, but probably one seat on the board), that uneconomical leases will be terminated and that shareholders will be screwed. I also expect that it will take about a year for the new company to emerge from bankruptcy.
I am from America so I can slam America... right? I have friends that have screwed people, and friends getting screwed, all because of chapter 11. Also I would like to add.... WHAT JUMBO SAID!!! Good to see someone else knows what really happens.
Anyone reckon Obama will be assassinated before his term ends?
Quote from: alexgv1 on November 30, 2011, 02:57:30 PM
Anyone reckon Obama will be assassinated before his term ends?
Don't ask questions like that or the secret service will be at your door.
Quote from: wapp11 on November 30, 2011, 02:45:55 PM
I am from America so I can slam America... right? I have friends that have screwed people, and friends getting screwed, all because of chapter 11. Also I would like to add.... WHAT JUMBO SAID!!! Good to see someone else knows what really happens.
You're statement was implicitly factually inaccurate. How are your friends being screwed here? Please explain.
Quote from: swiftus27 on November 30, 2011, 05:14:37 PM
Don't ask questions like that or the secret service will be at your door.
Yeah maybe not a good place to discuss it I guess they monitor all Internet now.
Quote from: alexgv1 on November 30, 2011, 02:57:30 PM
Anyone reckon Obama will be assassinated before his term ends?
Anyone who tries to assassinate Obama would be a fool. Obama may not be a good President, but he's not stupid--his Vice President who would succeed him is even more incompetent than himself.
Quote from: LemonButt on November 30, 2011, 07:51:00 PM
Anyone who tries to assassinate Obama would be a fool. Obama may not be a good President, but he's not stupid--his Vice President who would succeed him is even more incompetent than himself.
Hill-Dogg?
The us presidential succession line is detailed in the 25th amendment to the constitution.
We sadly cant just call no confidence votes and re elect like many parliamentary governments can.
Also our elections are mandatory (first Tuesday in november). Terms are a set length.
Quote from: alexgv1 on November 30, 2011, 09:38:24 PM
Oh yeah she's foreign secretary isn't she.
Sec of State is actually after the vp, speaker of house, president pro temp of the senate...
Quote from: swiftus27 on November 30, 2011, 05:16:19 PM
You're statement was implicitly factually inaccurate. How are your friends being screwed here? Please explain.
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.
BOOM!
Wapp gone in hard. Don't think anyone can argue with that.
Quote from: Dasha on November 29, 2011, 02:13:30 PM
To me, being from Europe, it doesn't make any sense that a company with 4.6 billion USD in the bank, who've just made the largest order in history, can file for bankruptcy protection and it almost reeks of some form of 'dirty' business.
Europe or not, AA's money in the bank or orders outstanding makes little difference to their bankruptcy and there's hardly anything 'dirty' about it.
AA's cash of about $4B (this is often misquoted by the media -- they actually only have $300M in cash, the rest of that "$4B" is actually in short-term securities), though seemingly a lot of money, is chump change for a company like AA. They pay out more cash than that every 30 days on day-to-day bills.
To give you an idea of how bad a shape the company was in -- they had $4B in cash, they own
hundreds of planes and billions of dollars worth of facilities totalling over $15B, but up until Tuesday you could have bought the entire company for a mere $0.5B -- just $500M in cash. That was the total value of 100% of its shares on the market. Why? Because it's debt was STAGGERING (over $30B) and its potential to make profits in the future was virtually nil, what with the costs it was bearing.
So how does a company like that manage to place such a big aircraft order? Well, first and foremost, the planes haven't even been bought yet. It's only PLANS for purchases that have been talked about. The terms of the agreements haven't even been cemented yet. And secondly, creditors buy planes, not the airlines. American hasn't, and wouldn't, put up a dime of its own money. It will borrow every penny of it. Being in bankruptcy actually makes it easier to get favorable terms from creditors than they would have gotten before when creditors were worried about going into bankruptcy where the status of their getting paid would have been in jeopardy.
QuoteHad they not made that order, Airbus wouldn't give a flipping toss about AA going bankrupt, but now, with this order in place, Airbus might step up and support the bankruptcy protection. If something like this would have happened in Russia or something I would understand and accept it, but in America, I think somebody should at least do some research into it.
Don't see what 'research' there is to do. Your guess is probably a very valid one and I'm sure it played a small role in the decision to place the order for a couple reasons. There's nothing illegal, immoral, or even unethical about getting your big and influential suppliers to support your efforts to get out of bankruptcy. Regardless, one does not "support" bankruptcy. You get it. Every single person or company in the US has the rights to do it. You don't need companies to campaign for government support or anything like that. So whether or not Boeing or Airbus or anyone "supported" it, is really fairly moot.
QuoteAny other company in another part of the world would have gone bankrupt and ceased to excist but somehow the American carriers won't.
Oh hardly. How many times in the past couple decades have governments all over the world stepped up to bail out, loan, re-organize, or even full-on nationalize (or simply remain nationalized) their air carriers? The protection of ones air carriers is an
EXTREMELY common event
worldwide. And this isn't even a government-supported activity at this point, it's simply the way things work in Chapter 11 bankruptcy protection in the US for ALL businesses -- a protection that exists in somewhat similar forms throughout much of the Western world.
QuoteI do things for AA and work my ass off for them. In return they pay me. I make costs for AA but as I'm smart, they pay me more than the costs I make. AA keeps spending money and at some point they cannot pay me anymore. In the meanwhile I'm still making costs for them. They are a big company so I'm guessing they can file for Chapter 11, me being a small company, I can say goodbye to my money, because AA (in my point deliberately) kept spending money they didn't have.
For one, the guys who make the stuff for AA, provide the food, the gas, whatever -- 99%, maybe even 100%, of them will get their money. Business as usual on a day-to-day basis will continue and AA will continue to pay their normal operating bills. That's why you declare Chapter 11 before you are completely out of cash, so that you can continue to pay your suppliers while the courts rule on reorganization. If AA was dead and completely broke it would be declaring Chapter 7 and go into immediate liquidation.
The guys who get screwed are the ones who lend money to AA -- the ones who continued to loan AA money even when they were $30B in debt and not making profits for the better part of a decade. They loaned money to AA
knowing there was a risk, a substantial risk, to their getting paid back. And they charged an interest rate to AA accordingly. And that's why companies in bad shape continue to remain in bad shape -- their interest rate just grows and grows and they're paying huge amounts of interest on the debt that they have that they can't get out of it. That's the entire reason Chapter 11 exists. It's basically a big giant reset button that stops the endless cycle of continuously-growing debt that a company can find itself in.
But even those people aren't likely to get completely screwed. They'll get most, if not all, of their money back. They're just not likely to get the interest on it that they were planning on because the Courts will rule that they need to restructure their debt and they'll get a lower interest rate on it. Bondholders are usually the most screwed -- they have no material interest in the company (i.e. they don't own a leveraged asset like a bank lending AA money backed by a plane), they aren't part of AA's day-to-day cash operations, and they lent the money (usually very long-term) on the basis of making decent interest. When that interest is slashed the bonds become money losers.
And it's very important to note that the Creditors have to AGREE that that is the plan they want. Chapter 11 is not necessarily a "get out of jail free" card and the creditors just all get screwed and don't get a dime. The company poses reorganization plans or even creditors propose plans and then the creditors all get to vote on the plan that they want. Since it is a vote inevitably there may be some people that end up not getting much out of the deal since those who are owed the most money get the most say, but most creditors come out just fine in a bankruptcy provided the company actually turns things around and "comes out" of bankrupcty in good shape. This is a FAR better alternative than not getting a dime. In this manner, most creditors are actually HAPPY to see a company in trouble go into bankruptcy because it's far more likely to pay its bills.
Quote from: alexgv1 on December 01, 2011, 03:20:24 AM
BOOM!
Wapp gone in hard. Don't think anyone can argue with that.
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
http://www.airliners.net/aviation-forums/general_aviation/read.main/5320934/
AA filed to reject 24 leases . . . 4 of which are Fokker 100s, which were retired in 2004 :o :o
What kind of bonehead agreed to a lease on these Fokkers that was so bad that it was cheaper to park them (and pay the lease) in the desert than use them or cancel the lease!!
Quote from: ICEcold on December 01, 2011, 04:01:51 AM
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.
Come on 99% who's with me. Let's go Occupy somewhere and not wash for a week.
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... :o
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.
Quote from: Dasha on December 01, 2011, 10:07:24 AM
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... :o
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.
Quote from: alexgv1 on December 01, 2011, 01:03:52 PM
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!
Quote from: wapp11 on December 01, 2011, 03:07:25 AM
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.
Quote from: Dasha on December 01, 2011, 10:07:24 AM
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... :o
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.
Quote from: swiftus27 on December 01, 2011, 02:39:05 PM
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).
Quote from: LemonButt on December 01, 2011, 03:32:43 PM
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 :)
Quote from: Dasha on December 01, 2011, 03:41:53 PM
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.
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. :o :o
Quote from: Dasha on December 01, 2011, 03:41:53 PM
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.
Quote from: RushmoreAir on December 01, 2011, 05:02:55 PM
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. :o :o
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.
Quote from: Dasha on December 01, 2011, 10:07:24 AM
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.
Quote from: Dasha on December 01, 2011, 10:07:24 AM
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... :o
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.
Quote from: swiftus27 on December 01, 2011, 07:07:54 PM
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.... ;)
Quote from: JumboShrimp on December 01, 2011, 07:19:03 PM
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.
Quote from: swiftus27 on December 01, 2011, 07:46:52 PM
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%????
NSFW.... parental consent required lots of swearing.
http://www.youtube.com/watch?feature=player_embedded&v=J0SPio6RE (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 (http://www.youtube.com/watch?v=dib2-HBsF08)
Rename this thread to the Occupy AWS Thread?
Quote from: alexgv1 on December 01, 2011, 08:39:32 PM
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.
It's triage, you either drop the lowest and most vulnerable in society or you help them at your expense. There is no free lunch.
What's the difference if income tax goes to state or federal government?
Quote from: alexgv1 on December 01, 2011, 09:46:12 PM
It's triage, you either drop the lowest and most vulnerable in society or you help them at your expense. There is no free lunch.
It is not that there are 46 or 47% of the population that are unemployed, or not earn any income. Most of them work, earn incomem but they are not contributing anything. If you are not asked to contribute anything, you have no stake in the country and its solvency.
Quote from: alexgv1 on December 01, 2011, 09:46:12 PM
What's the difference if income tax goes to state or federal government?
Every state has a different tax system. Some don't even have a state income. So to talk to general, you talk about federal income taxes, that apply to all 50 states.
I'm down with the Republicans.... McCain would have looked after the troops.
Quote from: ICEcold on December 01, 2011, 04:01:51 AM
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
The owner can and will be held responsible for the debt of a company, no matter what. If the company is a small, unincorporated business, the owner likely has his/her personal money invested and used, at least to an extend, personal credit to build the business. IF the business collapses, they are on the hook for the debt incurred. If they can not pay off the creditors, they may have to file a personal bankruptcy. If the company is publicly traded, the "owners" (share holders) are held responsible in the form of losing their investment as shares will normally be worthless after a bankruptcy filing. In an LLC, the company is "owned" by the creditors (banks, investors, etc.) so if that company collapses, those "owners" have lost their money.
Don
B/K is all good as long as they don't do it 5 times otherwise it will cost them another 5 credits ;D
Quote from: Kadachiman on December 02, 2011, 06:40:04 AM
B/K is all good as long as they don't do it 5 times otherwise it will cost them another 5 credits ;D
Post of year. ;D
Quote from: alexgv1 on December 01, 2011, 04:27:07 AM
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.
I'm not 14, thank you. :-\
Oh happy birthday for your 15th then Austin.
keep going.
Quote from: jetwestinc on December 02, 2011, 06:04:28 AM
The owner can and will be held responsible for the debt of a company, no matter what. If the company is a small, unincorporated business, the owner likely has his/her personal money invested and used, at least to an extend, personal credit to build the business. IF the business collapses, they are on the hook for the debt incurred. If they can not pay off the creditors, they may have to file a personal bankruptcy. If the company is publicly traded, the "owners" (share holders) are held responsible in the form of losing their investment as shares will normally be worthless after a bankruptcy filing. In an LLC, the company is "owned" by the creditors (banks, investors, etc.) so if that company collapses, those "owners" have lost their money.
Don
Sorry I didnt see this post before.
NO. The owner is NOT responsible for any debt that a Corporation signs for. This is why banks who lend to smaller corporations make the owners (anyone who has more than 20%) sign a personal guarantee along with the corporations guarantee. A corporation is a de facto person. It files its own taxes. It is viewed as a legal entity. Without the personal guarantee, the company could bankrupt and the owner could walk away. Without the guarantee, all the bank could do is to go after the business' assets only. This is why when we file liens in the USA, we file with the UCC (Commerical Code). You can't sell your assets without the bank having first crack at getting its money back. Sorry Mr Small Business Owner, your company doesn't have the credit to stand on its own without you being a co-signer for it.
This is why I find the stories listed above about 'how my friend was screwed by bankruptcy law' to hold much water. I know better. Sorry, I am a business banker. This is one area of expertise I really do have.
My dad is, too - and I'm taking Corporate Law as one of my minors. So i know a thing or two about corporations. ;)
Cheers,
Austin
Quote from: Dasha on December 01, 2011, 10:07:24 AM
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... :o
I agree with Dasha up to a point. She's right when she says that Chapter 11 is for top managers the same thing as the "Leave prison for free" in Monopoly. IMHO there should be some kind of responability on behalf of the top management for these outcomes. And I'm writing you from Italy, where the government bailed out Alitalia a lot of times (since it was a government owned company).
I reckon that one of the aims of Chapter 11 is to give companies a second chance and to avoid "serial bankrupcies": killing a company could lead to a chain reaction of bankrupcies in the country because we are not talking about peanuts. It would also shock the whole air transport industry both in the USA and abroad (AA is part of One World). So, for a quiet living, Chapter 11 is the answer... There would be some layoffs, but not as many as if AA went bankrupt. Banks will have their money back, sometime in the future and probably not the whole amount, but it is better than than a kick in the t***s, I reckon! :)
Chapter 11 is not an anti competitive practice: as Sigma rightly pointed out, it exists in almost every country of this world even if it has different rules and has different names.
Moreover, it can probably be a parachute for incompetent managers, but it is also a parachute for honest employees of the company who have no faults for the behaviour of their managers and their wrong decisions.
The purchase of new a/c is probably the wisest choice made by the managers of AA. I have no idea of which reason led to the break up between unions and management, but I somehow have the feeling that it is realted to this huge order as well. Probably some memebers of the crews (both pilots and cabin staff) would have to be laid off...
Regards
PS: I find quite funny that Dasha, coming from a country which once was the living symbol of socialism, speaks in such anti-socialist terms, eheheh! :)
Quote from: swiftus27 on December 01, 2011, 07:07:25 PM
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.
I have to disagree with your palestinian professor. Just would like to remind him that he teaches marketing, not economics and that Germany alone is the second biggest exporter in the world immediately after China, with more tha 1000BILLIONS of Euro of export goods. And I'm talking about GOODS, not paperwork generated by banks... :) I'd say that China is the manufacturer of crap, Europe makes quality stuff, the USA makes money circulating around the world and India does the Tech Support. Japan and the USA make innovation together...
Germany needs a weak euro to continue growing. I don't think he considered eurozone exports as true exports, though. The guy is brilliant. To give you an example, he taught one class over a summer on thurs night. The company contracting him flew him first class back on thurs, back to boston on friday and back home fri night. He lives alone in a monster house because he married his job instead. He taught us our 'capstone' class for our MBA program.
Well, if you consider that Germany is not big country but the secondi biggest exporter of the world, and 80% of its export are quality goods, the concept of "Eurozone export" is quite useless.
I do not know the exact figures but I can tell you that Germany is always in the first three position when we talk about exchange between developed and developing countries. And between developed and developed countries as well. The nice thing about those guy who eat wurestel and bratkartoffelnd is that they make such good products that nobody really cares that much about their prices. Just to give you an example: BMW, Audi and Mercedes made record profits during the years when the Euro was at its peak on the USD. And the country where the bulk of Maybach limousine are sold is the US, then the UAE, Qatar, Kuwait and Russia.
The Euro is not so weak on the chinese RMB, and I can tell you so because my sister lives in China and she said that the ex-rate has not changed that much in the last three years. But the inflation rate in China is just very high and that's what hurts her salary.
And let's talk about first class flight: I flew from Italy to Abu Dhabi at the end of August, and my customer (we were in a hurry) paid a first class ticket for me with Lufthansa. And I'm just a guy in a junior position in a low managerial job. So, no big deal... ;) Nobody pays you a price if he/she can not get more of what he/he pays you for, ehehe! :)
Regards
Quote from: swiftus27 on November 29, 2011, 05:21:45 PM
Wow, now that is not called for.
You clearly don't know the diff from chap 7 and 11.
While you're there why not talk about the fact that Greece just did something similar to what americans know as a chapter 13 screwing banks out of billions. No one is saying AA will get the massive writedown that Greece had.... or to mention Italys debt or Icelands complete bankruptcy/failure. Honestly, if it weren't for germany bailing europe out, the euro would have failed by now
In the end it is the big banks who are taking the hit. The same evil ones many are protesting.
We are protesting the banks % state's earlier decisions that lead to them being screwed. Removing limits for example, enabling banks to give loans with too high risks. Capitalism to it's extent at the moment won't simply work and a good indication of that is the constant bankruptcies. Simply put, everyone should start realising, if you have 100€ and take a loan of 20€ to loan someone 120€ with a good fee, it just won't work. When you loose the 120€ and the fee, you can't pay the 20€ and the guy who loaned you 20€ gets screwed and most likely he borrowed 40€ to borrow 20€ for you and another guy and the guy he borrowed it from also gets screwed. It goes on and on and on and. You shouldn't ever be able to take a loan to loan someone something. You do that and everything slowly collapses. And the euro is basically gone already. Anyone who studies currencies can tell you that reviving the euro will just make the hit harded the next time and harder and harder and harder. The problem is you need to keep convincing everyone the euro will revive 'cause that helps the euro reviving. It affects the markets for example. And of course there are some sides in the whole mouse and cat game who only gain things from the euro's current state. Germany for example.
Quote from: Fariiniq on March 05, 2012, 10:59:50 PM
We are protesting the banks % state's earlier decisions that lead to them being screwed. Removing limits for example, enabling banks to give loans with too high risks. Capitalism to it's extent at the moment won't simply work and a good indication of that is the constant bankruptcies. Simply put, everyone should start realising, if you have 100€ and take a loan of 20€ to loan someone 120€ with a good fee, it just won't work. When you loose the 120€ and the fee, you can't pay the 20€ and the guy who loaned you 20€ gets screwed and most likely he borrowed 40€ to borrow 20€ for you and another guy and the guy he borrowed it from also gets screwed. It goes on and on and on and. You shouldn't ever be able to take a loan to loan someone something. You do that and everything slowly collapses. And the euro is basically gone already. Anyone who studies currencies can tell you that reviving the euro will just make the hit harded the next time and harder and harder and harder. The problem is you need to keep convincing everyone the euro will revive 'cause that helps the euro reviving. It affects the markets for example. And of course there are some sides in the whole mouse and cat game who only gain things from the euro's current state. Germany for example.
nice argument.
Quote from: swiftus27 on March 08, 2012, 12:17:40 AM
nice argument.
You mean you understood it? I didn't.
He did, and he should. Otherwise we're all screwed as civilization :laugh:
Quote from: Fariiniq on March 05, 2012, 10:59:50 PM
We are protesting the banks % state's earlier decisions that lead to them being screwed.
???
Quote from: Fariiniq on March 05, 2012, 10:59:50 PM
Removing limits for example, enabling banks to give loans with too high risks.
There are no limits to risky loans. But there are some capital requirements for banks.
Quote from: Fariiniq on March 05, 2012, 10:59:50 PM
Capitalism to it's extent at the moment won't simply work and a good indication of that is the constant bankruptcies.
Bankrutcies are part of healthy economy. There were no bankruptcies in Soviet Union, until the whole system collapsed.
Don't confuse "capitalism" with a system where companies (Banks, General Motors) get bailed out by the government. Soviet Union bailed out every failing company.
Quote from: Fariiniq on March 05, 2012, 10:59:50 PM
Simply put, everyone should start realising, if you have 100€ and take a loan of 20€ to loan someone 120€ with a good fee, it just won't work. When you loose the 120€ and the fee, you can't pay the 20€ and the guy who loaned you 20€ gets screwed and most likely he borrowed 40€ to borrow 20€ for you and another guy and the guy he borrowed it from also gets screwed. It goes on and on and on and. You shouldn't ever be able to take a loan to loan someone something. You do that and everything slowly collapses.
See "capital requirements" and "bankruptcies" above
Quote from: Fariiniq on March 05, 2012, 10:59:50 PM
And the euro is basically gone already. Anyone who studies currencies can tell you that reviving the euro will just make the hit harded the next time and harder and harder and harder. The problem is you need to keep convincing everyone the euro will revive 'cause that helps the euro reviving. It affects the markets for example.
You may have a point there
Quote from: Fariiniq on March 05, 2012, 10:59:50 PM
And of course there are some sides in the whole mouse and cat game who only gain things from the euro's current state. Germany for example.
Can you explain what you consider to be the current state of Euro and how Germany benefits from it? All I see are losses for Germany:
- loss of D Mark
- credit worthinness (even thugh Germany has not been downgraded - yet)
- Germany's cost of bailout
- losses by banks some of which are German
Quote from: JumboShrimp on March 08, 2012, 12:24:51 AM
You mean you understood it? I didn't.
I was probably baked.
http://www.youtube.com/watch?v=g8hQ4eaohzQ
Discuss. :o