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American Airlines (AMR)
Rating: 1.00 (1 votes)
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I would most definitely NOT be a buyer of AMR, or any other airline stock, at this time. In fact, the majority of my Marketocracy short fund is made up of short positions on airline stocks. Whether oil goes to $150 as MS predicted or not, AMR in particular is in big trouble. Oil is certainly a key consideration industry-wide, since airlines' shaky business models cetainly weren't built for triple-digit oil, but AMRs got another, perhaps more devastating problem: labor. AMRs labor contracts were last negotiated in 2003, when the company was on the verge of bankruptcy. The pilots union, the flight attendants union, the ground workers union.... all accepted contracts under those macro conditions. Now, that the company's survived, they (the unions) are not going to be as conciliatory. The ground workers' union has already rejected at least one company proposal. The company is currently in thus-far unproductive talks with the pilots' union, and the flight attendants union will begin negotiations later this year. I live in the Dallas area, and personally know two flight attendants. Both have told me that they expect their upcoming negotiations to be bitter and contentious, and both said strikes were definitely a possibility. Plus.... charging people 15 bucks to take their luggage on vacation?!? Come on.... that's VERY bad publicity. Publicly drop that surcharge, enjoy the media kudos, and then quietly raise your fares a commensurate amount. | ||
Comments (1)
I would not invest in American Airlines. They fly too many kinds of aircraft which results in higher costs for training. They have poor labor relations and now they are feeing their passengers to death.
They have poor management which has not tried to hedge their fuel costs and now they are paying the price. In cities where there is an option, they are losing customers to Southwest Airlines. On my last vacation, I switched to Southwest and saved $100 on my airfare and the service so was much better. I think the $15 for the first bag was the last straw for many people. Southwest's new ad company covers the agony for the average consumer about flying on American.
I think that the only way this airline will survive is as a much smaller airline. I would wait until the price of oil drops below $100 or someone buys them like British Airways or management leaves the company.
Posted by trek1red | June 8, 2008 8:02 AM