Wednesday, July 16, 2008

A Billion Here, a Billion There ,,,

About 25 years ago, in a fit of cultural bravado abetted by a bender of prosperity, the Wall Street Journal went on a wild hiring spree and brought in about 100 outside mid-career editors and reporters with solid credentials from big non-financial newspapers around the country.

It created something of a shock to the inbred corporate system down there on Cortlandt St., where Dow Jones then kept its offices in dingy warrens above a former Woolworth’s that had blossomed into a Century 21.

We outsiders were not exactly good fits initially, though mutual accommodations were eventually made.

Most of the staff at the Journal at that time had signed on right out of college (and for some, that meant the days of raccoon coats) and had never worked anywhere else – or, as some of us hot-shots put it before we learned our manners, at an “actual newspaper.”

And alas, few of us intruders from the Outside – some of us who had in fact run newsrooms -- knew the difference between a stock and a bond. But most of us were not shy about asking for explanations of things we did not understand.

It proved to be an interesting experience, because on occasion it became clear that the put-upon house sage you’d consult also didn’t always know what the words meant, not precisely.

“What the hell is a non-convertible subordinated debenture clause?” you'd ask, scowling at a piece of inscrutable copy in which phrases like that sprouted.

“It’s a provision for subordinated debenture that can’t be converted! I can’t talk now, the third-quarter flat-rolled steel report is coming in!” some lifer would hiss with exasperation, looking at you like you’d just wandered in from the Port Authority Bus Terminal with a three-dollar suitcase.

And into the paper the strange words would go. Initially, I assumed the readers all understood those baffling terms that I, a wretch who came from the journalistic world of mob rub-outs and urban machine politics and big-city city-room raucousness, did not.

Not precisely.

The matter comes to mind today as I read terribly earnest stories on the various wires about the combined quarterly losses – what is it? Sixteen quadrillion U.S. dollars? – at American Airlines and Delta.

I know the accountants and analysts understand these things, which have to do with how the books are manipulated. I also understand how three-card monte works.

But I’m not sure a general reader gets it when a news account reports breathlessly that Delta Air Lines, for example, said today that it had lost $1 billion in the second quarter -- when, it is quite clearly stated in the data, Delta actually made $137 million, all things considered.

The fly in the ointment seems to be a massive write-down of good will. Good will, as we all know, is an intangible asset of some sort, like grace or fairy dust.

I know the basic accounting principles. But would somebody please explain to me, in plain English, precisely what the hell they did with the books? My bus leaves the Port Authority this afternoon for Podunkville, so please hurry.

Likewise, AMR (American Airlines), seems to have actually lost $248 million in the quarter, and not $1.4 billion, as some headlines say. (The $248 million loss was really a gain, see, because the analysts had expected it to be worse. Thus the stock will rise, see.)

Again, I get it that it's all in the accounting, and somewhere in there is a bundle of somebody's money. But again, I am not sure I know what the hell is going on when AMR says the $1.4 billion loss reflects an accounting write-down of "the value of certain aircraft and related long-lived assets to their estimated fair value."


Actually, I am writing this from Tucson, a mere 20 miles from the burgeoning Evergreen aircraft storage facility at Pinal Air Park in Marana, where literally hundreds of unused airliners are parked for in the desert, and more are arriving each day.

Does this mean there are insane bargains to be had in the used airplane market, as there are in the used S.U.V. market?

(Actually, it does. Anybody with an American Express Platinum card can probably start up his or her own airline. As early as this afternoon. Unfortunately I have that bus to catch. )


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