American Airlines: How does a carrier make money?

We love the new American Airlines because of the information it shares with employees — information that is, I think, designed to leak to the media.

American this week shared some nifty charts and figures that its executives used earlier in their 2013 earnings call. This information is all available in various places, but American did a nice job of making the numbers digestible. Let’s take a look:

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What American Airlines CEO Doug Parker told employees this week

Tuesday was 'Customer Day One' at the new American Airlines Group. Photo: US Airways.

American will retire its MD80s by 2018, according to a letter this week to employees. Photo credit: US Airways

In a communique today to employees, American Airlines Group summarized some of what top executives said earlier this week in a “state of the airline” discussion.

There are some interesting tidbits, many of which have been previously reported. But it is worth noting that American plans to retire all of its Super80s by 2018. And it’s interesting that AAG will take delivery of 93 airplanes this year.

As for that $10 billion in cash American has tucked away? ““The first thing we’ll do is look at any debt we have,” CEO Doug Parker said.

Read on for the entire Q and A, taken from American’s latest employee newsletter.

Could you shed any light on the fleet plan?
During Tuesday’s State of the Airline, President Scott Kirby explained that “between American and US Airway, we have a fleet order of about 600 mainline aircraft and 90 large regional jets coming to refresh and modernize the fleet. We’ll retire the older Boeing 737s and Super 80s, with the last S80 leaving the fleet in 2018 We’ll taking delivery of 93 aircrafts this year - that’s almost two aircraft a week. We also have a lot of widebody growth coming and as these aircraft come in, and depending on the economic climate, they can be replacement aircrafts for the Boeing 767. In today’s world, the biggest growth opportunities for American are international and the widebodies will allow for that. The domestic market is much more mature, but international economies, like China, are growing much faster and we think there are growth opportunities there. We have the Boeing 787s and 777s, and Airbus A330s still coming and also have Airbus A350s coming in 2017.”
What is AAL planning to do now with the $10 billion in cash? What is AAL planning to do now with the $10 billion in cash?
“The first thing we’ll do is look at any debt we have,” Doug answered. “We still have a very large amount of debt between the two airlines, so it would be in our interest to pay down the debt that’s out there at a high interest rate. After we do that, and we’re sure we’re comfortable in the economic environment, we’ll want to ensure that we have enough cash to invest in projects around the company that also provide returns for us, because we have equipment and things that could use some refurbishment. Then we’ll look to see if there’s something to return to our shareholders because it is their cash. We’re holding it, but they loaned it to us, and rather than leaving it in the bank to earn one percent interest or less, we should return it to them and let them get the returns
that they invested for. We’ll look to that, but we’re a ways away. But, I think we can all agree that $10 billion is a lot of cash.”
What are we doing to improve our operations?
Chief Operating Officer Robert Isom weighed in saying, “When you think about serving our most basic customer needs, it’s all predicated on being ready. One of the things that I’ve noticed in my short time here is that as a company, we’re not yet ready to achieve greatness. It’s not because we’re not trying hard – it’s because we’re not all put together yet in the way we need to be. We’re not in position, rested, prepared, resourced, in uniform, ready to go, where we need to be each time. First and foremost, to really start the day right we have to have our aircraft set up and ready to go first thing in the morning, meaning they have to be out of maintenance. And that also means throughout the day, deferring as little maintenance as possible so that we’re always ready and that we have all resources ready where they need to be.”
He continued, “If I take a look at all of the things we need to do in the airline – and exceptional customer service and meeting needs on every level is really important – at the base you start with safety and compliance. Everything else after that is really dependent on core reliability. That core reliability is tied to departing on time and having everybody and everything ready to go. We’re not ready yet, but believe me, we’re going to get everybody within management and all our frontline employees on board with the concept of, ‘Are we ready? Do we have the equipment, the tools, the resources, so that we can deliver our customers’ needs when they need to go?’ Then we can all be proud at the end of the day of the product we’re delivering.”

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Airport Security: Former TSA screener writes confessional in Politico Magazine

A former TSA screener in Chicago says the agency was not a great place to work. Photo: Associated Press.

A former TSA screener in Chicago says the agency was not a great place to work. Photo: Associated Press.

UPDATE: Politico published a piece Friday detailing the TSA response. “Every passenger deserves to be treated with dignity and respect and Transportation Security Administration policy upholds this standard. TSA does not tolerate any form of unethical or unlawful behavior by its employees and takes swift disciplinary action if discovered,” the agency said, apparently in a statement.

ORIGINAL POST: Politico Magazine this week published “Confessions Of A Former TSA Screener” — a tell-all piece by former Chicago O’Hare screener Jason Edward Harrington. And it’s ugly.

Harrington says everyone at the TSA knew right away that the full-body scanners introduced a few years ago didn’t work — “The only thing more absurd than how poorly the full-body scanners performed was the incredible amount of time the machines wasted for everyone” — and that the machines showed way to much of everyone’s bodies.

Many of the images we gawked at were of overweight people, their every fold and dimple on full awful display. Piercings of every kind were visible. Women who’d had mastectomies were easy to discern—their chests showed up on our screens as dull, pixelated regions. Hernias appeared as bulging, blistery growths in the crotch area.

Perhaps equally concerning, he says officers were told to give extra screening to passengers based on nationality. He said there was something called “the Selectee Passport List.”

It consisted of 12 nations that automatically triggered enhanced passenger screening. The training department drilled us on the selectee countries so regularly that I had memorized them, like a little poem:

Syria, Algeria, Afghanistan
Iraq, Iran, Yemen
and Cuba,
Lebanon-Libya, Somalia-Sudan
People’s Republic of North Korea.

Harrington says he’s the author of Taking Sense Away, a blog in which he made some of the same allegations, albeit anonymously.


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Investors want to resurrect Eastern Airlines as charter operator

Investors want to start a new Eastern Airlines using this iconic branding.

Investors want to start a new Eastern Airlines using this iconic branding.

Is Eastern Airlines primed for a comeback?

A group of investors seeking to start a new airline with a familiar name filed papers this week with the Department of Transportation to fly a single A320 in charter operations, with possibility of later adding two more planes. At its core, this filing, first reported by the Miami Herald, is no different than one for any other emerging airline.

But what’s amazing here is that these investors bought the intellectual property of the former Eastern Airlines, which shut down in 1991. Eastern’s branding was pretty iconic for its era, and it seems to hold up nicely. You can see more examples on the airline’s website —

Another rendering of what the Eastern A320 might look like.

Another rendering of what the Eastern A320 might look like.

I don’t know whether the new Eastern will make it. Like with all new airlines, the likelihood is not so good. This is a tough business.

But the filing with DOT, officially called a Certificate of Public Convenience and Necessity, has some interesting information on the economics of new air service.

Read on for some fascinating details, like the fact that it costs $175,000 to rent an A320 for a month.

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PHOTOS: See the item LAX police thought might have been a bomb

Earlier today, Los Angeles International Airport police responded to a report that there was a bomb that an airport cargo facility used by US Airways. It turned out to be a false alarm. 

But police took photographs of the item, which I obtained through an inside source. Here’s what officers found when they arrived at the facility. Can you see why they were alarmed?





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