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AMR's strategies during bankruptcy reorganization and restructuring.

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Preliminary reports cited by The Times of London say Air Traffic Control was understaffed at the time of the accident, a midair collision of American Airlines jet over Washington National Airport. It says only one person was handling landings departures and communications with helicopters in the vicinity of Washington National Airport.

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Discussion with Doug Parker of how he is thinking of pulling off the second large merger in a short period of time, America West, US Airways, and now Delta possibly. What they learnt from their previous experience and what they are planning to do with the new merger, difficulties ahead and how they hope to accomplish this. The experience of US Airways employees with prior managements is telling. Parker realized this when he talked to employees and learned many things that would keep them motivated, instead of being cynical and skeptical. But it still comes too soon to have a second merger, when the first one is still far from having addressed all problems.

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An indepth look at Mexico, its assets, its huge potential and what is holding Mexico back. It ranks much higher than Brazil in many respects- higher investment as a fraction of its GDP, technical education, an easier place to do business, less regulation, better management talent, more industrialized. In 2010 Mexico had $400 billion of business with the U.S. With rising Chinese wages Mexico is an attractive place for foreign investment, with a hardworking and educated workforce. Mexico suffered badly during the 2008 recession in the U.S. It is trying to reduce its dependence on exports to the U.S in key areas such as the automotive industry. Exports to the U.S. by the automotive industry are now 65% of the total, and the auto industry association in Mexico is working to bring this figure to 50% by exporting to Latin America and Europe. Economic growth was 5.4% in 2010, and expected to be 4-5% in 2011. Drug violence may have reduced the growth by one percentage point according to some estimates. The think tank, Mexican Institute for Competitiveness, estimates that economic growth would be 2.5% percentage points higher if labor market and competition laws are changed, and the oil industry is opened up to foreign investment as happened in Brazil. A study by OECD and the Federal Competition Commission (CFC) of Mexico has shown that 31% of Mexican household spending goes to products operating in high price monopolistic or oligopolistic markets. The bottom ten percent spend even higher proportion of incomes, around 38%, for products supplied in such markets. This includes pharmaceuticals, airline travel, banking, and electricity. Taking on these cartels is a difficult task. The CFC is beginning to take the first steps in this direction, in what will be a long road to fair prices for Mexican consumers. Banking was opened to Wal-Mart. The collapse of Mexicana was an opportunity to auction landing slots to other airlines. An auction system has been developed by CFC for drugs. A new competition law sets penalties for collusion in pricing, with upto 10 years in jail. And Carlos Slim's telephone monopoly was fined $1 billion for its telecom monopoly practices. In 2009 the Calderon government shut down Luz y Fuerza, a state electricity company costing the governmment $3 billion in subsidies for an highly inefficient operation. ...

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AMR announces it will purchase 260 A320 planes from Airbus and 200 additional 737's from Boeing. This is the first order from Airbus since the 1980's. Airbus and Boeing have agreed to $13 billion in lease financing to fully cover 230 deliveries . AMR president Horton says financing has been arranged for all othe orders from 2013 to 2016 and for 80% of 2017. This is critical because AMR is still losing money. Its second quarter loss increased to $286 millon from $11 million the prior year. Total debt is at $17.1 billion on June 30, 2011 compared to $16.1 billon the prior year, and cash balance at $5.1 billion the same as prior year. The new order will help reduce fuel costs. They will use 35% less fuel per seat than the old MD-80 planes according to AMR CEO Arpey. The new engines on the aircraft deliveries of A320s and 737s in 2017 and 2018 will provide even more fuel efficiencies compared to the 737s and A320s for this model year. For this reason Standard &Poors says the large order and financial commitment by AMR does not affect its ratings. It said the order will result in an airline that is over time more profitable because of the fuel effiencies gained but also more heavily indebted. S&P estimates of fully adjusted debt are at $24 billon. For Boeing the order means a decision to go with a new engine 737 and not an all new model that would succeed the 737. The technology was there says Jim Albaugh, CEO of the Boeing commercial plane unit, but the production system was not clearly understood to get production to 60 planes a month and avoid delays. For Airbus the AMR order is a significant advance. Except for Southwest which has an all 737 fleet, AMR was the last holdout without any Airbus planes. And the decision by Boeing to stay with a new engine 737 means Airbus wil not have to worry about Boeing leapfrogging the A320neo, which is anew engine A320. ...

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One of the good things after the pandemic is that people are going to spend more time in their home countries instead of travelling overseas, says this report in the DW.com. World tourism has grown too quickly and too fast in the last two decades. Places everywhere are becoming extremely congested. I remember visits to Paris, to Notre Dame cathedral and its surroundings, in the eighties and nineties and compare them to two decades later with regret that it has changed for the worse. By 2010 everyplace looked different, transport, hotels, streets were so congested as to make trips less exciting and less fun to do.  The question posed here is whether having 3 million less people travelling around the world is such a bad thing? It says the tourism industry has grown so quickly and so fast that it poses a danger to the environment, to the quiet of neighborhoods and cities, driving a commodities culture. As this writer says it drives locals away from the cities they have lived in for generations, and robs those who stay of the quiet lives they have enjoyed. In fact once the cities experienced so much less pollution during gradual reopening, and streets had less traffic, a lot of people turned to use bicycles. Bicycle lanes were replacing car traffic lanes. A return to calmer living with enjoyment of one's own neighborhoods and cities, and travel within one's own country, is becoming an attractive alternative. People now remember that it was the huge amount of airline traffic that spread the pandemic from cities in Asia to cities in Europe, and cities in America. It also spread quickly through tourist destinations inside Asia and Africa, and Latin America. Even some of the early clusters in Germany, Italy and the U.S. had their origins in the the spread of globalized supply chains in China, Germany, and Italy for automobiles. Auto industry business people traveled to places in or near Wuhan, then to Bavaria, and on to northern Italy in the global supply chain for automobile manufacturing.  As new nations like China and India with billions of people are added to world tourism this changes everything in a way never imagined before. This pandemic gives one a pause to rethink whether it was a good idea in the first place to seek fulfilment by travel outside one's own country, without first exploring it and one's own neighborhoods in a quieter setting. We travel to new places seeking fulfillment. There comes a time when the tourism today has become so big that it is not sustainable, safe or economical anymore. A rethink and new habits make sense.     ...

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This report in WSJ shows how European countries are maintaining salaries of employees who would otherwise be laid off. Governments have setup programs in France, Britain, Germany and other countries to provide employers with the money for 80-84% of salaries up to 2500 pounds ($3165) in Britain and 5330 euros a month in France. As a result 1 worker out of three in the private sector in France for subsidy applications for 6.9 million workers are already received. For the German program 2.4 million workers will get this benefit. About 1 million companies in Europe retain employees with this program of governments simply sending out the salaries with funds directly to households. This helps to keep out the stress for families, particularly families with children. It is as if the employees are not really laid off but asked to stay at home for manufacturing facilities and work from home in shorter hours where work can be done remotely.  Money is quickly deposited into the bank account of employees in these countries, though it is slower in Italy and Spain. It is as if the European approach is put the whole economy on pause for 2 months and restart it almost like before with only a small dent in employment once the coronavirus is pushed out with lockdowns and strict control actions. This will cap German unemployment at 5.9% compared with 5% last year, only a modest increase. The cost is not that much considering what it accomplishes. 10 billion euros is the cost in Germany where the state fund for this has 26 billion euros. 10 billion pounds in Britain. And 20 billion euros in France.  The U.S. adopts a similar approach also through its $349 billion program which provides loans to companies with less than 500 employees to meet payroll for 8 weeks and pay some overhead. Loans are forgiven based on job retention and employees on the payroll and only if the employees are retained. Another program is for companies larger than this. And a third program targets entire industries such as airlines, aerospace, and companies in other industries so that they do not have to layoff employees. U.S. unemployment insurance is modified to work along similar lines maintaining incomes of employees laid off because of the pandemic. Another program sends checks directly of $1200 to households with lower incomes to help them and to help people at poverty level or without jobs. The thrust of both the European and American efforts is the same, lose as few jobs as possible, keep people's incomes steady, and do this in a way that the economy can pick up quickly to the former level in as short a time as possible. Compared to Europe U.S. unemployment will be higher predicted at 9.8% with the expected rebound lowering the unemployment in 2021. ...