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Analyst: AA Might Show 2Q Profit

Thu Jul 15, 2004 1:59 am

Some analysts are predicting that AA might show a profit in the second quarter when results are released shortly. This is in large part thanks to thier excellent turn around plan, to cut $4 billion, that worked out quite well. Great news for AA! ope the profits become reality.
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RE: Analyst: AA Might Show 2Q Profit

Thu Jul 15, 2004 2:51 am

From the article:
Instead, the outlook is gloomy because of... glut of available seats

I guess I don't understand how the media is still reporting that there is a glut of available seats or there is a capacity problem, when airlines are reporting record load factors. Wasn't it CO and AS that reported record June load factors, and NW that reported an all-time record load factor? I can understand low fares hurting revenues and high fuel prices raising costs, but how on earth is there still a capacity problem (which there was just following Sept. 11) when most airlines are reporting load factors between 85 and 90 percent?
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RE: Analyst: AA Might Show 2Q Profit

Thu Jul 15, 2004 3:04 am


The reason the load factors are so high are because the yields are so low. It is artificially created loadfactors. Remove the millions of extra ASM,s you will see fares go up, and load factors may slightly go down. Airlines are adding capacity for competative reasons, however to fill that capacity it has to be at lower yields
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RE: Analyst: AA Might Show 2Q Profit

Thu Jul 15, 2004 3:42 am

Airlines are adding capacity for cash flow reasons.

There is demand. There is not overcapacity. There IS the ongoing cost differential between the LCC's and Legacy carriers.

We are seeing the same demand for air travel as we did pre-9/11--in fact, we should see more because of the rebound in the economy(despite the political rhetoric downplaying this).

The LCC's are experiencing a financial letdown because of the jump in fuel prices. The Legacies are continuing to hurt because of the jump in fuel prices AND the fact that they are STILL 5-6 cents above the CASM for the LCC's while generally being forced to charge the same fares.

AA has much more cost cutting to do before they are in the clear. Tick, tick, tick... The race against time.

Their plan to generate a 30% revenue premium over the LCC's is looking suspect.TC
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RE: Analyst: AA Might Show 2Q Profit

Thu Jul 15, 2004 3:57 am

I don't believe it, and even so, this means that in the weak Q1, AA would once again lose money. The airlines can't continue down the path of only being able to make money when load factors are 85% and the economy is finally beginning to pick up.

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RE: Analyst: AA Might Show 2Q Profit

Thu Jul 15, 2004 5:31 am

I think for any airline to think they can get a 30% premium on other carriers is a joke. Maybe its because I am a non business passenger but my guess is that, much like I do, most passengers are now going for the lowest fare.

Why would someone pay more just to fly on AA. Yes they may live at one of the AA hubs and want to take advantage of the N/S, I could understand paying more for that. The only other overwhelming reason I could think of would be to take advantage of the FF plan. But then how are they going to get more money out of those frequent fliers when they are not setting the pace on fares?