SMU Experts Look At AMR | KERA News

SMU Experts Look At AMR

Dec 14, 2011

The North Texas economy will take a hit from AMR's bankruptcy, even if it's not evident yet. That's according to Southern Methodist University business experts. KERA's Bill Zeeble has more on the school's annual economic review.

When American Airlines filed for bankruptcy November 29th, it told customers to expect business as usual. But economist Michael Davis, with SMU's Cox School of Business, says that cannot last long. The carrier will have to cut costs, even if most local workers keep their jobs.

Davis: Some people are going to have to take paycuts, some people may lose pensions, or part of their pensions. So those folks are going to natuarlaly be more conservative. The're going to buy not so many new cars and take not so many trips to Six Flags.

Union workers may not agree to contract changes, but under bankruptcy, a judge can force changes, says Bernard Weinstein, also an SMU economist. He says American Airlines is the region's top employer, generating up to $150 million a month. Speaking from home, he said he's not sure how far wages might drop.

Weinstein: But remember, those cuts in wages will ripple through the economy. That will affect retailers, that'll affect vendors. So it's not a small matter.

Weinstein says it could also affect DFW Airport, which collects landing fees from its biggest tenant, American. Given the carrier's bankruptcy, Fitch Ratings has put the airport on a negative credit watch.

On the brighter side both economists say DFW Airport is American's fortress HUB, and that will likely stay that way. Even if American cuts some routes, they expect competitors like Spirit or Jet Blue, will move in and provide service.

New Boeing jets on order by American should also help the carrier attract passengers and save jet fuel. But Weinstein worries that under Chapter 11, securing purchase or lease financing could now be tougher.

Email Bill Zeeble