I am interested in what is happening over at AA.

Unlike most of the major airlines in the USA, American Airlines has avoided bankruptcy. This may change.

Their shares fell 33 per cent yesterday as people expected the worst after a 62 percent drop so far this year. This last fall came amid fears that the airline could be forced into bankruptcy. It has very high debt levels (17 billion), higher cost base, higher ages,  older planes (their average plane is almost 15 years old), a perception of inferior service in a slowing economy.

In July, 2011, the airline placed the world's largest plane order: 260 Airbus A320s and 200 Boeing 737s. This will help reduce their massive fuel bills by up to 25 per cent.

Bankruptcy may help them with staff costings and refinancing.  Their staff morale can't get much lower (AA staff are some of the most negative and disempowered I have seen in the air).

What is the future of AA?

I am not sure why anyone has shares in any airline? It has got to be the worst business in existence for making money?

Airlines fly people around on unsustainable fares so they can fill their planes using what cash they can get to pay for the loans that are on their planes!  When the debts get too high, they re-organise. In the USA this  means going into "Chapter 11 Bankruptcy". This gives the airline the ability to reorganise To my eye, this seems to involve the  cancellation of mountains of debt so they can borrow more money!! In other places in the world, they try and get a government bail out.

If either measure fails, then the airlines goes bust. The number of failed airlines in the last twenty years is extraordinary!

Can anyone explain the economics better?

Some airlines go bust because of bad luck or bad situations-but the reality is most go bust because of bad management - a management that takes its eye off the fundamentals. For example:
"This is the worst airline ever! They should not be allowed to offer flights to anyone. I can't express enough how disappointing my trip with them was."

"Flight from Calgary, Alberta, Canada was overbooked by 19 people! There were 19 of us that were not allowed on the plane. The representatives said this happens all the time"

"THIS IS BY FAR THE WORST AIRLINE EVER!!!! Their customer service is non existent. They have 5 customer service telephone numbers and they are all busy. Finally, when my call went through the person couldn't help me. All I needed was to check in online and their online service wasn't working. If I would have known they were this stupid and rude- I would have tried some other airline. "

These comments belong to Mexicana, one of Mexico's airlines.Mexicana only joined the One World alliance in November, 2009 (One World includes American, British, Cathay, Iberia, Qantas).

Skytrax gives them 3 out of 5 stars. The comments above come from Review Center where the airline is rated a mere 1 out of 5!


I am not sure they are the worst airline ever (my worst airline list) but....


 It has now has filed for bankruptcy protection in the US and Mexico. The airline blames high labour costs and has made their staff two offers. One of my favourite blogs Cranky Flier has a good analysis of the offers and he says they are both unpalatable offers.

Will Mexicana survive? I think so but I would not fly them!  Another reviewer says:
Drive, walk, ride your bike, take the bus, or even hitchhike before booking with this airline.

If you are flying to Mexico be warned: the US Government has downgraded Mexico's airlines from Category 1 safety to Category 2 based on an assessment of day-to-day oversight of carriers by the   government.

So flying to Mexico? I say use Air France, Air Tran, Alaska, Continental,  LAN, Lufthansa and United.

In the meantime, bets please on Mexicana survival?