Airline antitrust paper

This is an industrial organization paper i've been working on. Comments welcome!

Estimating market power with a generalized supply relation: application to an airline antitrust case

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1973166

6o SET: Veja as fotos

Fotos do 6o Simpósio de Economia dos Transportes do ITA:

https://plus.google.com/photos/112648158067485747694/albums/5684108830631237633

Delta Air Will Buy Minority Stake in Brazil’s Gol Airline for $100 Million

By Jose Sergio Osse and Mary Jane Credeur - Dec 7, 2011 2:49 PM GMT-0200

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A Gol aircraft prepares to depart the Congonhas Airport, in Sao Paulo. Photographer: Marcos Issa/Bloomberg

Delta Air Lines Inc. (DAL) agreed to buy a $100 million stake in Gol Linhas Aereas Inteligentes SA (GOLL4), Brazil’s second-largest airline by market value, and begin booking passengers on each other’s jets.

Gol rose 4.9 percent to 15.69 reais at 2:27 p.m. in Sao Paulo after climbing as much as 9 percent, the most in intraday trading since Nov. 3. Delta, the world’s second-biggest carrier, gained 1.8 percent to $8.62 in New York.

Buying 3 percent of Gol expands Delta’s foothold in Latin America, the region where passenger yields, or the average fare per mile, are highest for U.S. airlines, according to Bloomberg Industries data. Delta trails AMR Corp. (AMR)’s American Airlines and United Continental Holdings Inc. (UAL) in Latin America traffic.

“This is the most important relationship we have in South America, and we’re very, very pleased with it,” Delta Chief Executive Officer Richard Anderson said today in an interview in Sao Paulo, where Gol is based.

This is Atlanta-based Delta’s second investment in a foreign carrier this year, after buying a $65 million stake in Grupo Aeromexico SAB in August to deepen their alliance on flights between their home countries. That accord gave Delta a board seat, as does today’s agreement with Gol.

Delta’s stake in Gol is “very positive” because it implies a higher value for the Brazilian airline and gives the carrier access to a global network, Edigimar Maximiliano Jr., a Banco Bradesco SA analyst, said in a note to clients.

Booking Codes

The companies will place their industry booking codes on each other’s flights, allowing them to take reservations for passengers flying on either airline. Travelers also will be able to accrue and redeem frequent-flier points on both carriers.

Delta will buy the Brazilian airline’s American depositary receipts backed by preferred shares, Gol said today in a regulatory filing. Gol will boost its capital by as much as 280 million reais ($160 million) by issuing preferred shares for 22 reais apiece, 47 percent more than yesterday’s closing price.

Gol also is transferring leases to Delta on two parked Boeing Co. (BA) 767 wide-body jets, saving 50 million reais a year.

Gol isn’t joining the SkyTeam global marketing alliance, of which Delta is an anchor member, CEO Constantino de Oliveira Jr. told reporters. Delta has “no intentions” to increase its stake in Gol, said President Ed Bastian, who will join Gol’s board.

Delta will keep the board seat as long as the U.S. carrier retains at least 50 percent of the acquired shares, according to the Gol filing. Delta agreed not to sell the stake for 12 months and won’t buy additional shares without Gol’s consent.

‘Significantly Undervalued’

“We aren’t making this investment to turn a profit on a stock,” Anderson said in the interview. “We’re making the investment because we are recognizing the inherent value of the relationship we will have together and, candidly, the stock is significantly undervalued in the market today.”

Gol fell 40 percent this year before today. The airline was advised by Morgan Stanley, andBarclays Capital advised Delta.

Gol trails Tam SA (TAMM4) in market value in Brazil. Tam is being acquired by Chile’s Lan Airlines SA (LAN), Latin America’s largest airline by market value, in a $3.3 billion all-stock transaction. The purchase, announced in August 2010, needs approval by Chilean and Brazilian regulators, and the companies expect it to close in next year’s first half.

Yields on Gol’s perpetual dollar bonds tumbled 17 basis points, or 0.17 percentage point, to 10.96 percent at 2:09 p.m. in Sao Paulo, the most since Nov. 18, according to data compiled by Bloomberg. The yield on notes due 2020 fell 16 basis points to 10.89 percent.

To contact the reporters on this story: Jose Sergio Osse at josse1@bloomberg.net. Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net.

American Airlines pede concordata para tentar se manter nos ares

Sílvio Ribas

Publicação: 30/11/2011 09:26 Atualização: 30/11/2011 09:32

Símbolo norte-americano na aviação mundial, a American Airlines decidiu fazer um pouso forçado. A AMR Corp, controladora da empresa, entrou nesta terça-feira (29/11) com pedido de concordata da companhia, a terceira maior do mundo, num tribunal de Nova York, mas assegurou que todas as operações serão mantidas. Para isso, além da proteção judicial garantida pelo capítulo 11 da Lei de Falências norte-americana, a empresa afirmou ter US$ 4,1 bilhões livres no caixa. A reorganização permitirá reduzir custos da aérea e de outras subsidiárias, sobretudo com salários. O objetivo é torná-las competitivas para voltar ao lucro. A última vez que a American esteve no azul foi em 2007.

Última das grandes companhias aéreas dos EUA a pedir proteção judicial desde os ataques terroristas de 11 de setembro de 2001, a American ficou à beira da concordata em 2003, mas decidiu evitar o processo, após fechar acordo com os funcionários para economizar US$ 1,6 bilhão com cortes de salários e outras concessões.

Especialistas ouvidos pelo Correio acreditam que o tombo da companhia foi resultado da combinação de alta dos combustíveis e acirramento de uma concorrência já agressiva no maior mercado do mundo, os EUA, onde operadoras de baixo custo (low cost) avançaram muito. Elas cresceram na contramão da procura interna, afetada negativamente pelo baixo crescimento do país. Diante das dificuldades para ajustar a folha de pagamento, restou apelar para a concordata.

“Temos de fazer frente à estrutura de custos, incluindo salários”, anunciou Thomas Horton, ex-diretor financeiro da empresa e substituto do presidente Gerard Arpey, que renunciou ao cargo. Horton recebeu a missão de buscar a recuperação e seu anúncio veio apenas três semanas após a própria American ter alardeado ser uma das poucas grandes companhias dos EUA a não ter entrado em colapso. O grupo ainda não disse qual será o futuro de um pedido de compra de 460 aeronaves anunciado em julho.

O mercado financeiro sempre duvidou das declarações otimistas e há muito apostava no impasse entre a empresa e seus pilotos, que rejeitavam fazer concessões salariais, necessárias para sanear as contas. Os funcionários alegavam já ter contribuído durante a crise anterior, em 2003, ainda quando o grupo era líder mundial. “A situação serve de alerta para o Brasil, onde está difícil contratar pilotos e cuja falta de mão de obra já provoca pressões salariais sobre as companhias aéreas”, chamou a atenção Alessandro Oliveira, pesquisador de mercados do Instituto Tecnológico de Aeronáutica (ITA).

No limite

O especialista lembra que o sindicato de aeroviários nos EUA é forte o bastante para tirar flexibilidade do mercado, cuja competição cresceu depois do recuo do número de passageiros de negócios. “Lá, as empresas operam no limite. Embora o Brasil ainda não sofra igual impacto das low cost e as taxas de crescimento sejam recordes, os resultados mostram números apertados”, explicou.

Rumores de que a AMR iria apelar para a lei de concordata circularam depois de uma onda incomum de aposentadorias de pilotos, seguida da corrida desses funcionários para se desfazerem de US$ 600 milhões em ações recebidas da empresa como indenização. Os papéis caíram 35% desde novembro. Ontem, antes da abertura das bolsas de valores, custavam US$ 1,62. Contudo, após a notícia da concordata, viraram pó, fechando o dia com desvalorização de 84%.

Apesar da péssima reação de investidores, alguns grandes clientes da American não temem problemas a curto prazo. “A experiência mostra que o modelo de concordata de grandes empresas nos EUA conseguiu manter a operação geral das concordatárias. Também estamos menos expostos à American que outros concorrentes”, informou Joakim Thrane, presidente no Brasil da companhia norte-americana de entregas expressas DHL.

PanAm

Desde 1978, várias grandes companhias aéreas norte-americanas recorreram à lei de concordata. A maioria conseguiu evitar o pior, com exceção da PanAM, que desapareceu em 1991. A Continental recorreu à solução em 1990 e a Hawaiian Airlines, em 1993. A partir de então, iniciou-se uma década de relativa estabilidade, interrompida pelos ataques terroristas de 11 de setembro de 2001, quando o transporte aéreo recuou drasticamente.

Área de turbulência
Dívidas crescentes obrigaram a American Airlines a apelar à Justiça
AA em números
Patrimônio - US$ 24,7 bilhões
Dívidas - US$ 29,5 bilhões
Prejuízo acumulado até setembro - US$ 884 milhões
Empregados - 78 mil
Voos diários - 3,3 mil
Total de aeroportos onde pousa - 260
Total de países onde opera - 50

Operação no Brasil
São Paulo (Guarulhos) para Boston, Las Vegas e Los Angeles
Rio de Janeiro (Galeão) para Dallas, Los Angeles e São Francisco
Belo Horizonte (Confins) para Miami
Brasília para Miami
Recife para Miami
Salvador para Miami

Capítulo 11
Proteção dada pela Lei de Falências dos EUA
Instrumento legal que permite a uma empresa norte-americana em dificuldades financeiras continuar operando e manter o patrimônio, dando-lhe tempo para negociar com credores, sob tutela de um tribunal. A proteção pode ser pedida pela própria companhia ou por um dos credores. O devedor pode adiar pagamentos e até reduzir dívidas. Em troca, informa ao juiz detalhes de suas negociações.

Legislação brasileira
Inspirada nos EUA, a Lei de Falências do Brasil foi sancionada pelo presidente Luiz Inácio Lula da Silva em fevereiro de 2005. Ela prevê a recuperação judicial, que substitui a antiga concordata. Uma empresa em dificuldades deve, após permissão da Justiça, apresentar estudo de viabilidade econômica com plano detalhado de recuperação das finanças, que deve ser aceito pela maioria dos credores. Enquanto isso, as ações contra a empresa ficam suspensas por 180 dias.

Grandes concordatas
Marcas importantes que já recorreram ao Capítulo 11

Enron (corretora de energia) - 2001
United Airlines (companhia aérea) - 2002
US Airways (companhia aérea) - 2002
WorldCom (empresa de comunicação) - 2002
KMart (grupo varejista) - 2002
Delta Airlines (companhia aérea) - 2005
Northwest (companhia aérea) - 2005
Lehman Brothers (banco) - 2008

AMR: What does Chapter 11 bankruptcy mean for American Airlines fliers?

American Airline parent corporation, AMR Corp., filed for Chapter 11 bankruptcy Tuesday. With peak travel season just around the corner, experts are split over what it could mean.

By Mark Trumbull, Staff writer / November 29, 2011
http://www.csmonitor.com

American Airlines' parent corporation filed for Chapter 11 bankruptcy proceedings Tuesday, while simultaneously assuring the flying public that things will be "business as usual" while the company restructures.

American Airlines parent AMR Corp. seeks Ch. 11 protection
AMR shareholders take massive hit, but experts see a less volatile future
Airline stocks: American Airlines hits eight-year low
The parent firm, AMR Corp., said American will keep flying its routes, honoring mileage awards, and paying full salaries and benefits for employees.

That still leaves many travelers wondering about the future of a once-leading airline. And the unsettling news comes with a peak travel season just around the corner.

Users of the social network Twitter revealed the uncertainty with comments like, "probably not going to fly with American Airlines" and "i'm so glad i fly @delta."

At the same time, many fliers are aware that bankruptcy has become a periodic fact of life in this competitive industry. American is just the last holdout among the "legacy" carriers, struggling with higher wage and pension costs than discount rivals.

United Airlines, Delta, US Airways, and other carriers have flown this route before – cutting labor costs and debt burdens in bankruptcy.

Thomas Horton, who was named the new CEO of American's parent company, said the airline may modestly reduce the number of routes it flies.

Such court-approved restructuring can be a tool of survival, by which companies avoid outright failure. But some industry analysts say the maneuver into bankruptcy Tuesday doesn't assure American's future success.

"This did not come as a surprise with AMR's stock trading under $2 a share," says George Hobica of the website Airfarewatchdog, by e-mail. "The real question is whether the airline will survive long-term, or go the way of other iconic 'flag carrier' airlines such as TWA and Pan American."

Can American afford to make the investments needed to retain customer loyalty?

Before entering bankruptcy, the airline agreed to buy lots of new planes from Boeing and Airbus. The airline's stated goal in its bankruptcy filing is to "enable the Company within five years to operate the youngest and most efficient fleet among its U.S. competitors."

Airline blogger Steven Frischling describes this as a gamble, and says it remains to be seen whether a bankruptcy judge in the Southern District of New York will see things the company's way.

"While the airline needs to address more immediate needs, including operating costs, employee salary, benefits ... this financial aspect of the airline’s bankruptcy is unusual," Mr. Frischling wrote Tuesday.

Mr. Hobica says a next step for American to survive will be to look for a merger partner, as other legacy airlines have done.

In the short run, the bankruptcy filing may give some travelers a reason to migrate elsewhere for ticket purchases. Fairly or unfairly, the B-word brings connotations of financial instability and uncertainty.

Longer-term though, a successful run through bankruptcy could open the door to a healthier airline that more customers want to fly.

"American has a chance to straighten up and fly right," travel journalist David Armstrong writes on his website. "The changes will be painful for workers and shareholders but, long-term, travelers will probably benefit from a streamlined, modernized airline."

Under its previous CEO Gerard Arpey, AMR prided itself on having avoided bankruptcy. But higher labor costs resulted in American posting losses even as rivals returned to profitability.

With roughly average ratings on its service quality, and with consumers focused squarely on price, raising fares isn't on American's menu of options for financial revival.

In Chapter 11, a Bid to Cut Costs at American Airlines

BY JAD MOUAWAD AND MICHAEL J. DE LA MERCED
dealbook.nytimes.com


After resisting for a decade, the parent company of American Airlines announced Tuesday that it would now follow a strategy that the rest of the industry chose long ago: filing for bankruptcy protection so it can shed debt, cut labor costs and find a way back to profitability.

American’s parent, the AMR Corporation, was the last major domestic airline that had never sought Chapter 11 protection. Its main rivals, including Delta Air Lines and United Airlines, used the bankruptcy courts to reorganize their businesses in recent years and emerged as stronger, more profitable rivals.


For AMR’s Now-Former Chief, a Long Career Felled by Chapter 11
AMR Filing Is 2nd-Largest by a U.S. Airline
American, meanwhile, has lost more than $11 billion since 2001, while falling off its perch as the nation’s largest airline as mergers between first Delta and Northwest, and then United and Continental, created bigger competitors. The airline’s troubles were compounded by high labor costs, including pensions that are the richest in the industry, and surging fuel prices.

The decision to file for bankruptcy, which was endorsed by a unanimous vote of the company’s board on Monday evening, was a defeat for Gerard J. Arpey, who has run the airline since 2003 and had staunchly resisted such a move.


Ángel Franco/The New York Times
American’s counter at La Guardia Airport on Tuesday. The airline says it will run a full schedule while it is in bankruptcy.

Richard W. Rodriguez/Associated Press and Brandon Thibodeaux/Getty Images
Thomas Horton, left, succeeds Gerard Arpey as chief executive.
“It’s no secret that we have tried exceptionally hard over the last decade to avoid this outcome,” he wrote in an emotional message to employees.

Rather than guide the airline through bankruptcy, Mr. Arpey, 53, decided to retire as chairman and chief executive and take a job in private equity investing. He was succeeded by AMR’s president, Thomas W. Horton, 50, another longtime hand at the airline, who was AT&T’s chief financial officer for four years before returning to AMR in 2006.

Despite Mr. Arpey’s long tenure as AMR’s chief executive, he does not appear to be bailing out with a golden parachute. Under the terms of his contract, he will not receive any severance, according to the research firm Equilar. And with AMR closing at 26 cents a share on Tuesday, his stock holdings are essentially worthless.

As other airlines have done in similar cases, American said it would continue to operate its regular schedule throughout the bankruptcy process. It said flights, ticket sales, overseas alliances and frequent flier programs would not be affected. Employees will continue to be paid and receive health benefits.

Wall Street analysts said AMR, which has about $4.1 billion in cash and short-term investments, was seeking court protection before its financial position completely deteriorated.

“This is not a defensive move, but an offensive bankruptcy where they go after their labor groups to reduce costs,” said Bob McAdoo, an airline analyst at Avondale Partners. “They have a great franchise and a lot of cash. They are not being forced into bankruptcy here. They have a problem with their cost structure that they want to tackle.”

The decision might eventually lead to a smaller airline, with fewer employees, fewer planes and fewer destinations. Seth Kaplan, an aviation specialist with Airline Weekly, said hubs like Dallas and Miami, where American has a strong competitive position, would probably be spared, while Los Angeles and Chicago, where it is not a market leader, might be more vulnerable to cuts.

American has long argued that its labor costs were $800 million a year higher than its rivals’ because its pilots fly fewer hours and have less flexible work rules. Its cost per available seat mile, a common industry metric that includes labor and operating costs, is about 10 percent higher than Delta’s.

But labor is only part of the picture. American owns and operates a regional carrier, American Eagle, that flies 50-seat jets that are among the least efficient to operate. It is also the only major airline to perform most of its major maintenance internally. And more than a third of its 600 planes are McDonnell Douglas MD-80s, an aging design that burns more fuel than newer models.

“If oil was still at $50 a barrel, we wouldn’t be having this conversation,” said Mike Boyd, an airline consultant. “Their bet was to hold on to their older MD-80s until Boeing came up with a new airplane. As we know, that didn’t happen.”

The decision to file for bankruptcy was not entirely unexpected. Speculation about a bankruptcy sent the company’s shares down 79 percent this year even before the filing. However, its timing did take many analysts by surprise because they thought the company had enough cash to finance its operations for at least the next 12 months.

Mr. Horton said in an interview that AMR’s board did not want to wait. “This was the time to move from a position of relative strength,” he said. As of Sept. 30, AMR had $24.7 billion in assets and $29.6 billion in debt, according to a filing with the Federal Bankruptcy Court in Manhattan. Creditors include the holders of AMR bonds as well as companies like General Electric that leased aircraft to the airline.

The airline managed to avoid filing for bankruptcy in 2003 after it obtained major concessions from its labor groups, including lower pay for its pilots. But talks for a new contract had been dragging on since 2008 with no resolution. The latest round stalled in recent weeks when the pilots’ union refused to send a proposal to its members for a vote.

“It appears the board of directors ran out of patience after the last discouraging signals from the pilot unions,” said Philip Baggaley, a managing director at Standard & Poor’s Ratings Services.

Airlines have used federal bankruptcy rules in the past to force new contracts on their employees, and American may now take a tougher position with its own unions.

“We had been hopeful that bankruptcy could be averted, but we were aware of the possibility,” said Gregg Overman, a spokesman for the Allied Pilots Association, which represents American pilots.

James C. Little, the president of the Transport Workers Union of America, which represents 25,000 employees, including ground workers, struck a more defiant tone. The union reached a series of tentative agreements in recent weeks with the airline and American Eagle.

“This is likely to be a long and ugly process, and our union will fight like hell to make sure that front-line workers don’t pay an unfair price for management’s failings,” he said.

The mergers of Delta and Northwest, and United and Continental, helped those airlines cut capacity, increase fares and return to profitability last year. American, meanwhile, has had just two profitable years in the last decade, while losses from 2001 to 2010 were $11.4 billion. It recorded a $982 million loss through the first nine months of this year and is expected to post another loss in 2012.

In the long run, the airline is counting on a significant overhaul of its fleet to cut long-term costs. In July, it announced a $38 billion order for 460 new single-aisle planes from Airbus and Boeing. American’s fleet has an average vintage of 15 years, making it one of the oldest and least fuel-efficient among the six major United States carriers.

The company said it still intended to buy these planes, for which it has already secured $13 billion in financing from the plane makers themselves.

The impact of the bankruptcy is likely to be more immediate for some jet leasing companies. In a letter addressed to lessors, American’s treasurer, Beverly K. Goulet, said the airline could not afford to maintain all of its leased aircraft at their current rates and said it had no choice other than to begin canceling contracts on an unspecified number of planes. American leases roughly 29 percent of its fleet, according to data compiled by Ascend, an aviation consultancy based in London.

Although other airlines have improved their finances by taking a trip through bankruptcy court, some analysts were still skeptical about American’s long-term prospects.

“The industry is chronically oversupplied and AMR has no dominance or significant competitive edge in any particular market — we are not convinced that a reinvented, scaled-down iteration will change that,” said Vicki Bryan, an analyst at Gimme Credit.

fonte: http://dealbook.nytimes.com/2011/11/29/in-bankruptcy-a-bid-to-cut-costs-at-american-airlines/