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Analyst: Q2 Profits For US Airlines Except AMR  
User currently offlineLAXintl From United States of America, joined May 2000, 25758 posts, RR: 50
Posted (3 years 3 months 4 weeks 1 hour ago) and read 5911 times:

Well with the 2nd quarter about to end, analyst have sharpened their pencils and expect overall good performance from the industry.

So even with high oil prices, and weak’ish economy the major US airlines are expect to produce positive earnings with the exception of AMR.

Here is how the numbers are forecasted to land for the airlines excluding special items:

ALK = $80m
AMR = ($133m)
DAL = $402m
HA = $25m
JBLU = $26m
LCC = $152m
LUV = $164m (reporting jointly with AirTran expected to muddy numbers)
UAL = $558m

Source: Yahoo/Google finance.


From the desert to the sea, to all of Southern California
24 replies: All unread, jump to last
 
User currently offlinesmoot4208 From United States of America, joined Jan 2010, 1312 posts, RR: 12
Reply 1, posted (3 years 3 months 4 weeks 1 hour ago) and read 5821 times:

Quoting LAXintl (Thread starter):
Here is how the numbers are forecasted to land for the airlines excluding special items:

ALK = $80m
AMR = ($133m)
DAL = $402m
HA = $25m
JBLU = $26m
LCC = $152m
LUV = $164m (reporting jointly with AirTran expected to muddy numbers)
UAL = $558m

I would bet that LCC will report more than $152m for a profit. I was thinking just below 200. It's also going to be interesting to see what FL would've reported. I wouldn't be surprised if they would've lost money this quarter. They almost always fall below projections


User currently offlineLAXintl From United States of America, joined May 2000, 25758 posts, RR: 50
Reply 2, posted (3 years 3 months 3 weeks 6 days 22 hours ago) and read 5502 times:

Well US Airway's Q1 profit excluding special items was $34mil, so seeing it climb to $152m in Q2 seems good on flat capacity but improvements in revenue.
Also keep in mind US Air is not hedged at all, so its had to fully absorb the higher fuel prices in Q2 vs Q1.

For SWA, I think the accounting will be a bit messy as the AirTran deal closed this quarter, so you'll have some odd transitional figures that need to work their way through the books.

[Edited 2011-06-28 11:40:08]


From the desert to the sea, to all of Southern California
User currently offlinerdh3e From United States of America, joined Mar 2011, 1736 posts, RR: 3
Reply 3, posted (3 years 3 months 3 weeks 6 days 22 hours ago) and read 5364 times:

Quoting LAXintl (Reply 2):
For SWA, I think the accounting will be a bit messy as the AirTran deal closed this quarter, so you'll have some odd transitional figures that need to work their way through the books

Yes, but these estimates are supposed to be "Ex-Special Items" so basically what would each carrier have made, then add them together essentially. Same deal with UAL, they'll have several hundred million in special charges to reduce that $558M down to probably $200M or less on a "Net" basis based on their recent guidance and analyst opinions.

[Edited 2011-06-28 12:18:12]

User currently offlinefxramper From United States of America, joined Dec 2005, 7309 posts, RR: 85
Reply 4, posted (3 years 3 months 3 weeks 6 days 21 hours ago) and read 5264 times:
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Checking stock on my iPhone daily from airport to airport is gut wrenching seeing what AMR stock has done the last 8 months. However, I'm not surprised AMR is the only US airline losing money. They are still a p*ss poor managed company with priorities being bonus checks. A real shame.   


I miss the old Anet.
User currently offlineLAXintl From United States of America, joined May 2000, 25758 posts, RR: 50
Reply 5, posted (3 years 3 months 3 weeks 6 days 21 hours ago) and read 5264 times:

Yes they are ex-special items, but the airlines merged in mid quarter so its not very clear for analyst how things will be reported hence their commentary that things could be muddy.
Its not simply add all revenues up and subtract the cost as the airlines have different accounting and treasury practices.



From the desert to the sea, to all of Southern California
User currently offlinePIEAvantiP180 From United States of America, joined Sep 2009, 545 posts, RR: 0
Reply 6, posted (3 years 3 months 3 weeks 6 days 19 hours ago) and read 5018 times:
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Does anybody know how they came up with 402$ million for DL. Yesterday DL came out and said their profit margin will be 6.5-7.0%. If you do the math from about 8 billion in revenue for the quarter it comes out to 520-560 million before special charges. They did say they are taking a hit of 125 million for Japan so that would be the only explanation I can think of.

User currently offlineScottB From United States of America, joined Jul 2000, 6793 posts, RR: 32
Reply 7, posted (3 years 3 months 3 weeks 6 days 19 hours ago) and read 4925 times:

Quoting PIEAvantiP180 (Reply 6):
Does anybody know how they came up with 402$ million for DL. Yesterday DL came out and said their profit margin will be 6.5-7.0%.

That's an operating margin, and as such, it does not take into account non-operating expenses like interest on debt.

Quoting LAXintl (Reply 2):
For SWA, I think the accounting will be a bit messy as the AirTran deal closed this quarter, so you'll have some odd transitional figures that need to work their way through the books.

And it closed mid-quarter, so not all of AirTran's numbers would be counted for the quarter, either. The United-Continental merger happened right at the end of a quarter, I believe. The numbers for both LUV and UAL are going to be wonky with all manner of "merger-related expenses" for at least the next year.


User currently offlinerobo65 From United States of America, joined Mar 2010, 169 posts, RR: 0
Reply 8, posted (3 years 3 months 3 weeks 6 days 9 hours ago) and read 4249 times:

Quoting PIEAvantiP180 (Reply 6):
Does anybody know how they came up with 402$ million for DL. Yesterday DL came out and said their profit margin will be 6.5-7.0%. If you do the math from about 8 billion in revenue for the quarter it comes out to 520-560 million before special charges. They did say they are taking a hit of 125 million for Japan so that would be the only explanation I can think of.

DL also stated that they would take charges related to their employee buyouts that were offered so after all special items it will be interesting to see the final numbers with both DL and UA which will have merger related expenses as special charges.


User currently offlinelightsaber From United States of America, joined Jan 2005, 13260 posts, RR: 100
Reply 9, posted (3 years 3 months 3 weeks 6 days 4 hours ago) and read 3488 times:
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Good to see the black ink!   

Is there a prediction for VX?

I hope AA is able to turn around, but I've lost the faith.

Quoting fxramper (Reply 4):
They are still a p*ss poor managed company with priorities being bonus checks. A real shame.

Nothing wrong with priorities being the bonus check *iff* the conditions for said check are well set.

AA needs to improve service while cutting costs... How to do that?

Lightsaber



Societies that achieve a critical mass of ideas achieve self sustaining growth; others stagnate.
User currently offlinesancho99504 From United States of America, joined Dec 2005, 570 posts, RR: 0
Reply 10, posted (3 years 3 months 3 weeks 6 days 3 hours ago) and read 3201 times:

What exactly are special items? I always see them say that " exluding specials items, we made a profit"...What does that all mean?

Quoting lightsaber (Reply 9):
AA needs to improve service while cutting costs... How to do that?

You could start with better productivity from labor?



kill 'em all and let God sort 'em out-USMC
User currently offlinetxagkuwait From United States of America, joined Aug 1999, 1803 posts, RR: 42
Reply 11, posted (3 years 3 months 3 weeks 6 days 3 hours ago) and read 3154 times:

Quote:
Checking stock on my iPhone daily from airport to airport is gut wrenching seeing what AMR stock has done the last 8 months. However, I'm not surprised AMR is the only US airline losing money. They are still a p*ss poor managed company with priorities being bonus checks. A real shame.

While AA has made some mistakes, I think that comment is waaaaaaay too harsh.

What American has done (or actually, what it hasn't done) is use the bankruptcy courts to wipe out shareholder equity and render null-and-void their contracts with labor groups.

A lot of a.netters seem to think a Chapter bankruptcy is a good and wonderful thing and it means that management is smart. What it actually means is management has failed, and rather badly at that.

Bankruptcies abrogate contracts in many cases. Some lessors get the shaft. A lot of employees get the shaft. Most all of the shareholders see their investment wiped out.

American's management should be revered, rather than criticized, for trying to rastructure their company to make it competitive while keeping their shareholders intact.

Folks on here also make a lot of snide remarks about WN paying their employees too much. It is tough to go to bankrputcy court and wipe out your union contracts while you are making money. I wonder if the people sniping at them are the same people who used to criticize them 15 yrs ago for not paying their people enough - in those halcyon days when UA and US used to brag about "industry leading contracts">

American has work to do, but American will ultimately be okay. They have what is arguably the best network of the legacy carriers. There's not much wrong with American that a few months of Crandall wouldn't fix, assuming we could keep him from doing things that would send him to prison.


User currently offlineSESGDL From United States of America, joined Jan 2001, 3489 posts, RR: 10
Reply 12, posted (3 years 3 months 3 weeks 6 days 3 hours ago) and read 3011 times:

Quoting txagkuwait (Reply 11):

American has work to do, but American will ultimately be okay. They have what is arguably the best network of the legacy carriers.

This is frequently stated about UA, but for AA this is simply not true, especially with the UA/CO merger. UA has a vastly superior network in terms of coverage and large markets. Also, I also find this statement debatable as DL (and NW, in the past) has done extremely well having hubs spread out in large and mid-sized markets with little competition, for the most part. It's not a one-size-fits-all formula; DL is doing just fine not having hubs in all of the largest markets. A decade ago UA struggled immensely in the largest markets.

Jeremy


User currently offlinelightsaber From United States of America, joined Jan 2005, 13260 posts, RR: 100
Reply 13, posted (3 years 3 months 3 weeks 6 days 2 hours ago) and read 2853 times:
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Quoting txagkuwait (Reply 11):
What American has done (or actually, what it hasn't done) is use the bankruptcy courts to wipe out shareholder equity and render null-and-void their contracts with labor groups.

AA has avoided the courts, but for how much longer?

They put almost all the remaining collateral up for hock for their latest bond offering. If there losses continue at the current rates, they will be in court within 18 months.  
Quoting txagkuwait (Reply 11):
American has work to do, but American will ultimately be okay. They have what is arguably the best network of the legacy carriers.

At this point it is not the network, but the service and the lack of funds for AA to correct anything. AA used to be the favorite airline among my relatives; not anymore due to slacking service. Most have gone back to DL or the LCCs.

Quoting txagkuwait (Reply 11):
American's management should be revered, rather than criticized, for trying to rastructure their company to make it competitive while keeping their shareholders intact.

I agree. Bummer it wasn't enough.

Lightsaber



Societies that achieve a critical mass of ideas achieve self sustaining growth; others stagnate.
User currently offlineLAXtoATL From United States of America, joined Oct 2009, 1603 posts, RR: 2
Reply 14, posted (3 years 3 months 3 weeks 6 days 1 hour ago) and read 2432 times:

Quoting sancho99504 (Reply 10):
What exactly are special items? I always see them say that " exluding specials items, we made a profit"...What does that all mean?

Simplified explanation: Special items are one-time non-recurring charges or credits that took place in the current reporting period. These "special items" must be reported but are often excluded when analyzing a business' performance because they are non indicative of future performance. Such things that would qualify as special items are expenses related to merging two businesses, this can be an expensive process and a long one at that and the business might have charges associated with merger for several quarters or even years but they are still considered special items. In Delta's case, expenses spent on employee buyouts are considered one-time expenses as opposed to salary that is a on-going expense (even though they have offered this several times it is still considered a one-time expense). Special items do not have to always be expenses, I can't think of a good example right now but if a company were to win a giant lawsuit, that revenue would be considered a special item. Basically anything that is not part of the ordinary operation of the business, it is generally treated as a special item, everything gets reported but businesses qualify special items to assist analysts in deriving a clearer picture of the operation's on-going prospects for profitability.


User currently offlineLAXtoATL From United States of America, joined Oct 2009, 1603 posts, RR: 2
Reply 15, posted (3 years 3 months 3 weeks 6 days ago) and read 2392 times:

Quoting txagkuwait (Reply 11):
American's management should be revered, rather than criticized, for trying to rastructure their company to make it competitive while keeping their shareholders intact.

I agree AA management deserves kudos for initially avoiding bankruptcy. However, to this point they have failed at successfully restructuring the businesses without the use of the bankruptcy courts (which is the action or lack thereof that AA management is often and deservedly criticized for). At this point it looks like it was a terrible decision not to file, as their competitors are all in much stronger positions and AA may end up in bankruptcy anyway only after losing billions of dollars and falling competitively behind. If AA can still somehow turn it around without the assistance of the courts then management would have done a great job, but at this point it appears to me that AA management has just been delaying the inevitable while losing ground to competitors. We should know in the next 12 months where this is headed and whether or not AA management successfully avoided bankruptcy court or merely delayed it.


User currently offlineexFATboy From United States of America, joined Jul 2003, 2974 posts, RR: 9
Reply 16, posted (3 years 3 months 3 weeks 6 days ago) and read 2287 times:

Quoting LAXintl (Thread starter):
Here is how the numbers are forecasted to land for the airlines excluding special items:

Do you have a link to the specific article? Couldn't find it on a quick Google search, and I'm interested to see whose forecasts these are.

One problem with following the airline industry from an investors' perspective is just how few top-tier analysts and firms cover it.

Quoting lightsaber (Reply 9):
Is there a prediction for VX?

Probably not, as VX is privately held and thus not covered by sell-side securities analysts. Possible that one or more of the analysts may have a personal projection.


User currently offlineHPRamper From United States of America, joined May 2005, 4076 posts, RR: 8
Reply 17, posted (3 years 3 months 3 weeks 5 days 21 hours ago) and read 2055 times:

Quoting txagkuwait (Reply 11):
American's management should be revered, rather than criticized, for trying to rastructure their company to make it competitive while keeping their shareholders intact.

Yes, they have clearly put the shareholders first, no matter what, which is inherently bad for the long-term success of a business. Hello Enron. FX for instance, on the other hand, had the opportunity to maximize shareholder returns but instead took much of that profit and reinvested it in infrastructure and employee benefits. Perhaps AA would be in better shape now if sometime in the past executive management had said "hey guys, for this quarter, instead of trying to put more money in your pockets, we are going to make some moves and adjustments that in the long run will help the company more."


User currently offlineaklrno From United States of America, joined Dec 2010, 951 posts, RR: 0
Reply 18, posted (3 years 3 months 3 weeks 5 days 21 hours ago) and read 1999 times:

Quoting LAXtoATL (Reply 14):
Quoting sancho99504 (Reply 10):
What exactly are special items? I always see them say that " exluding specials items, we made a profit"...What does that all mean?

Simplified explanation: Special items are one-time non-recurring charges or credits that took place in the current reporting period. These "special items" must be reported but are often excluded when analyzing a business' performance because they are non indicative of future performance. Such things that would qualify as special items are expenses related to merging two businesses, this can be an expensive process and a long one at that and the business might have charges associated with merger for several quarters or even years but they are still considered special items. In Delta's case, expenses spent on employee buyouts are considered one-time expenses as opposed to salary that is a on-going expense (even though they have offered this several times it is still considered a one-time expense). Special items do not have to always be expenses, I can't think of a good example right now but if a company were to win a giant lawsuit, that revenue would be considered a special item. Basically anything that is not part of the ordinary operation of the business, it is generally treated as a special item, everything gets reported but businesses qualify special items to assist analysts in deriving a clearer picture of the operation's on-going prospects for profitability.

One classic special item for an airline is an "involuntary conversion", the euphemism used when the insurance payout for a crashed airplane exceeds the book value of the aircraft. They write down the cost year by year and the current book value may be less than the market value. Insurance pays the market value.


User currently offlineLAXintl From United States of America, joined May 2000, 25758 posts, RR: 50
Reply 19, posted (3 years 3 months 3 weeks 5 days 20 hours ago) and read 1921 times:

Quoting exFATboy (Reply 16):
Do you have a link to the specific article? Couldn't find it on a quick Google search, and I'm interested to see whose forecasts these are.

The public source is going under each carriers ticker on Yahoo/Google Finance and you'll find the analyst EPS estimates. Their forecast are averaged based on the number of analyst covering a company to come up with the consensus number.
Take that and multiply by shares, and you get the expected number.
I happen to get analyst papers which has the math summarized already.



From the desert to the sea, to all of Southern California
User currently offlineDFWEagle From United States of America, joined Dec 2006, 1075 posts, RR: 9
Reply 20, posted (3 years 3 months 3 weeks 5 days 18 hours ago) and read 1809 times:

While other carriers quickly dumped their labor contracts and imposed new ones on their employees in bankruptcy, AA did not. They have been negotiating contracts with all three of their major labor unions for the past 4-5 years and that’s why they have fallen further and further behind the pack in terms of financial performance. Along with the lack of transatlantic antitrust immunity, that’s also why they have been so slow to expand while other carriers have been much more aggressive. It’s been an extremely difficult process with angry unions, but AA has persevered and is now finally approaching the point at which they can sign a competitive, negotiated contract with all three unions outside of bankruptcy. When that happens, AA will instantly become a much more competitive company and will be extremely well positioned to expand and succeed.

[Edited 2011-06-29 15:41:39]


Ryan / HKG
User currently offlineLAXtoATL From United States of America, joined Oct 2009, 1603 posts, RR: 2
Reply 21, posted (3 years 3 months 3 weeks 5 days 18 hours ago) and read 1739 times:

Quoting DFWEagle (Reply 20):
While other carriers quickly dumped their labor contracts and imposed new ones on their employees in bankruptcy, AA did not.

AA received similar concessions from labor using the threat of bankruptcy. So AA did extract a lot of employees, without having to also extract equity from mgmt and other shareholders in bankruptcy.

Quoting DFWEagle (Reply 20):
Along with the lack of transatlantic antitrust immunity

This has certainly held them back. And of all the things you mentioned the only one I see that is likely to actually have a meaningful impact on operations moving forward. However, the delay in getting ATI is on mgmt as well. They were given approval to go ahead with ATI years ago if they were willing to accept concessions - they chose not to agree to the concessions and to continue without ATI.

Quoting DFWEagle (Reply 20):
It’s been an extremely difficult process with angry unions, but AA has persevered and is now finally approaching the point at which they can sign a competitive, negotiated contract with all three unions outside of bankruptcy. When that happens, AA will instantly become a much more competitive company and will be extremely well positioned to expand and succeed.

Interesting. Considering any negotiated contract with the labor unions will raise AA's costs, to think they will instantly become a much more competitive company that is well positioned to expand and succeed is not a realistic expectation. The reason that it has taken AA 4-5 years to negotiate these contracts is because AA mgnt has determined it is in their best interest to continue with status quo.


User currently offlineDFWEagle From United States of America, joined Dec 2006, 1075 posts, RR: 9
Reply 22, posted (3 years 3 months 3 weeks 5 days 17 hours ago) and read 1598 times:

Quoting LAXtoATL (Reply 21):
AA received similar concessions from labor using the threat of bankruptcy. So AA did extract a lot of employees, without having to also extract equity from mgmt and other shareholders in bankruptcy.

That is true, but the 2003 agreements were not as deep as those that other carriers made in bankruptcy.

Quoting LAXtoATL (Reply 21):
The reason that it has taken AA 4-5 years to negotiate these contracts is because AA mgnt has determined it is in their best interest to continue with status quo.

Well, that's your opinion. Having followed the negotiations very closely, I completely disagree. AA was the party that initiated the APA negotiations before it was necessary and has been continually pushing to move on with them. The old APA leadership has been the barrier to progress and while Capt. Hill was in charge, almost no progress was made at all. As soon as new leadership was elected last summer, the change in the pace of the negotiations has been incredible and real progress has been made. AA management has been the same, it has been the union that changed its leadership and strategy. The union has since acknowledged that the lack of progress was caused by its own ultra-hard line position.

Quoting LAXtoATL (Reply 21):
Interesting. Considering any negotiated contract with the labor unions will raise AA's costs, to think they will instantly become a much more competitive company that is well positioned to expand and succeed is not a realistic expectation.

Let's remember that the union contract does not only cover labor cost. It also includes other things like productivity and scope, which currently prevents AA from using the right size aircraft for parts of its network (ie. large regional jets). It currently stops AA from flying very long-haul routes too. These all put AA at a disadvantage to its competitors.

Quoting LAXtoATL (Reply 21):
However, the delay in getting ATI is on mgmt as well. They were given approval to go ahead with ATI years ago if they were willing to accept concessions - they chose not to agree to the concessions and to continue without ATI.

The concessions included surrendering 16 pairs of Heathrow slots, which was the size of AA's entire LHR operation at the time. AA determined that the cost of this would outweigh the financial benefits. If that was true, which seems likely to me, they made the right choice in not pursuing ATI at the time. It's worth noting that was a previous management team anyway, so whether it was right or not, its not a reflection of current mgmt.



Ryan / HKG
User currently offlinesancho99504 From United States of America, joined Dec 2005, 570 posts, RR: 0
Reply 23, posted (3 years 3 months 3 weeks 5 days 17 hours ago) and read 1584 times:

Quoting LAXtoATL (Reply 14):

Ok, thanks. I was always under the impression that it was debt payoffs or fuel hedge writeoffs, but those sound like they may fit into that category already. Thanks again.



kill 'em all and let God sort 'em out-USMC
User currently offlineLAXtoATL From United States of America, joined Oct 2009, 1603 posts, RR: 2
Reply 24, posted (3 years 3 months 3 weeks 5 days 16 hours ago) and read 1536 times:

Quoting sancho99504 (Reply 23):
I was always under the impression that it was debt payoffs or fuel hedge writeoffs, but those sound like they may fit into that category already.

Not sure about the debt payoffs, but writeoffs would definitely be treated as a special item. They are actually one of the more common types of special items as writeoffs / writedowns are actually quite a common occurrence.


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