The cited source is a sketchy website originally about Cryptocurrency, who has been blocked by Google in the past. Like the others said, AA is in a good financial position. The SEC Annual Report also contradicts this article, as the high-cost debt has already been paid off, and AA has paused CapEx spend for the time being. CLT’s low cost puts us in a unique position, as we were in previous airline downturns, where the hub survives because other hubs are too expensive to operate.

chonetsao wrote:

There is nowhere I can find evidence to suggest that [The median age of those who have died in Italy is 80]. Please kindly post your source of this statement.

I saw it on the news (Bloomberg specifically), but the article below is on the first page of Google hits for: "Age dead coronavirus Italy". There are lots of other stories on this as well.

https://time.com/5799586/italy-coronavirus-outbreak/

I was wrong it's 81 not 80.

Most every company in America will file for bankruptcy in 6 months if the media hysteria doesn't stop soon.

3holer wrote:

So who plagiarized who with this “article”?

This has a date prior to the Sam Chui post....

https://www.ccn.com/fasten-your-belts-american-airlines-investors-flying-into-another-bankruptcy/

Anything for clicks.

This Sam Chui couldn't tell the difference between 747 and a bicycle few years ago, now he is industry guru. It's funny.

This thread is as frivolous as the medias coverage of the Covid19. AA has been making hundreds of millions of dollars. UA DL AA WN are all just as exposed.

AA is more leveraged than the other domestic airlines so that's more problematic, particularly when it comes to parking planes. We don't know what really will happen. Holders of that debt or leases may offer a temporary deferment. Lots of moving parts and to come out and say AA will file bankruptcy is moronic.

Sam Choi is an American Airlines lawsuit waiting to happen.

When did he become one that provides financial analysis? Should he not stick to seat recline angles and inside aircraft cabin review videos on YouTube?

Errrybody be an expert up in hurrrr.

I wonder if Doug Parker regrets his statement that AA would never lose money again...

AA's higher proportion of guaranteed compensation versus variable compensation is also going to bite hard. Profit sharing is a tool to help you in a downturn versus guaranteed compensation, which was something that buried all these companies before.

I feel like I need to quote myself because we are strangely still giving this article life.

D L X wrote:

Just so everyone is aware, Sam Chui is not an aviation industry insider. He's more a prolific photographer, with almost 5000 (fantastic) photos on this site.

For instance:

https://www.airliners.net/index/photogr ... ui/2814/76

I would not suspect that Mr. Chui would have ANY inside information to be trusted here.

Aviation photographer. Not industry insider.

Aviation photographer.



Aviation photographer.

What a sensationalist post this is.

I can see many airlines filing bankruptcy ... today .. no ... in the coming months, yes. If they don't take the proper steps ... whatever that may be at this stage.

United borrows $2billion to help cope with loss. https://www.reuters.com/article/us-unit ... SKBN20Z1VP

Nick614 wrote:

The amount of debt relative to other operators is irrelevant. While serious, the Wuhan Virus will be gone by the summer.

How do you know this?

Let's just run the math for folks...

United said April revenue is expected to be down 70%. We can assume March is probably down 25% also based on comments at the JP Morgan conference.

Let's run through AA's numbers...based on 2Q 2019.
Revenue for the quarter: $12B ($4B per month), profits were $1.1B operating profit or about $367m per month.
If April revenue is down 70% that means $2.8B less revenue and March being down 25% would mean $1B less revenue. That was all before Europe impact was known.
March capacity is basically flat as they redeployed the widebodies to other routes. April flying will be down maybe 10%, but they will still have to pay basically everybody because it is tooc close in, so they will only save probably 2.5% in costs to cut 10% of flying. That saves them $273m. Fuel prices are down a lot. That will probably cut their costs in April by a full 10% which is $1.09B.
So, $3.8B less revenue and $1.3B in reduced costs means about $2.5B net worse on the bottom line when they would normally have a profit of $734m in March and April. So that implies a net loss of $1.766B at AA. They have $3.8B in cash and short term investments and many of the investments may have just suffered a big loss. They only had $280m in cash at the end of December. That wiped out half of their liquidity. They can't go for long, although they may have credit lines.

The only positive thing is that American does not operate even close to as many Europe flights as Delta and United.

RDUDDJI wrote:

peterinlisbon wrote:

The alternative is to let 5% of the population die.

Don't be ridiculous. The mortality rate so far is around 3%, but that's only 3% of confirmed* infected. By that logic even if every human on Earth were infected, it would still not get to 5%. *The amount of infected is likely many times higher than the "confirmed" infected, which will drop the mortality rate significantly. Then, of course, it's also highly unlikely that every human on Earth will get it. It's far more likely less than 1% of the population will be infected than the whole World. Stop the fearmongering.

That's not true. The healthcare system is not overloaded right now and that's what's keeping the mortality rate low. Once everyone gets sick and our healthcare system is overloaded, you will see the mortality rate go up. At that time, the doctors choose who to die instead of try to save everyone

AA is going to be less affected by the Virus in Asia then Delta or United for two specific reasons. They have less Asian routes and the largest part by far of their European operations are to London Heathrow. Delta has huge operations to Paris CDG and Amsterdam plus United is huge to Germany. The Atlantic ban is NOT to the UK but to Continental Europe.

I can't wait for them to get tons of bailout money and then accuses ME3 or any other foreign airlines for cheating.

jfk777 wrote:

The Atlantic ban is NOT to the UK but to Continental Europe.

So far...

Totally understand why everyone is discounting the original blog post. Too speculative and sensational...

With that said and as Enilria posted earlier, there are legitimate concerns about AA’s liquidity. Here’s an article today from CBS News:

https://www.cbsnews.com/news/american-airlines-and-other-travel-stocks-suffer-after-coronavirus-travel-ban/

Brandon Oglenski, an analyst at Barclays, told clients on Thursday that American Airlines would have to raise as much as $3 billion in cash in the next few days to avoid a credit crunch.

All the airlines will be bankrupt.

You cannot shut down significant operations for 30+ days in a capital and labor intensive industry like the airlines. Load factors on all airlines are EXTREMELY low and given the mass histeria, all companies are telling their employees not to travel. Consumers are not traveling. This is enormous guys. If everyone is hibernating, what do you expect??

airlineaddict wrote:

Totally understand why everyone is discounting the original blog post. Too speculative and sensational...

With that said and as Enilria posted earlier, there are legitimate concerns about AA’s liquidity. Here’s an article today from CBS News:

https://www.cbsnews.com/news/american-airlines-and-other-travel-stocks-suffer-after-coronavirus-travel-ban/

Brandon Oglenski, an analyst at Barclays, told clients on Thursday that American Airlines would have to raise as much as $3 billion in cash in the next few days to avoid a credit crunch.

Another quote in that article: "The problem is American has the most debt — nearly $30 billion, or about double the amount owed by Delta and United combined."

Emphasis is mine. That is going to be hard to overcome if this drags out too long.

Mergers of airlines in the U.S. should not be allowed for some time. Merging two bad companies doesn't suddenly make one good company. Let the weak die out. The strong will swoop in to pick up the slack. If AA is so badly in debt and they cannot survive, then let them go bust. Should have happened with airlines post 9/11. All we did was delay the inevitable.

Indy wrote:

Mergers of airlines in the U.S. should not be allowed for some time. Merging two bad companies doesn't suddenly make one good company. Let the weak die out. The strong will swoop in to pick up the slack. If AA is so badly in debt and they cannot survive, then let them go bust. Should have happened with airlines post 9/11. All we did was delay the inevitable.

Whatever happens, I don’t see the big US3/EU3 going away... They have pretty much become the framework of the current airline industry.

Serious question: how long can the big 3 ride out the storm if the planes are empty? As somebody pointed out - I’m sure there would be financial relief or potentially even bailouts, but I have to imagine the cash on hand at the legacies won’t cover them if this lasts well beyond just a few months

enilria wrote:

Let's just run the math for folks...

United said April revenue is expected to be down 70%. We can assume March is probably down 25% also based on comments at the JP Morgan conference.

Let's run through AA's numbers...based on 2Q 2019.
Revenue for the quarter: $12B ($4B per month), profits were $1.1B operating profit or about $367m per month.
If April revenue is down 70% that means $2.8B less revenue and March being down 25% would mean $1B less revenue. That was all before Europe impact was known.
March capacity is basically flat as they redeployed the widebodies to other routes. April flying will be down maybe 10%, but they will still have to pay basically everybody because it is tooc close in, so they will only save probably 2.5% in costs to cut 10% of flying. That saves them $273m. Fuel prices are down a lot. That will probably cut their costs in April by a full 10% which is $1.09B.
So, $3.8B less revenue and $1.3B in reduced costs means about $2.5B net worse on the bottom line when they would normally have a profit of $734m in March and April. So that implies a net loss of $1.766B at AA. They have $3.8B in cash and short term investments and many of the investments may have just suffered a big loss. They only had $280m in cash at the end of December. That wiped out half of their liquidity. They can't go for long, although they may have credit lines.

I would bet all I have that your 2.5% figure is much higher. Fixed costs aren't that high for airlines. Think of it the other way. When an airline grows by 10%, does their cost only go up ~2.5%?

airlineaddict wrote:

Brandon Oglenski, an analyst at Barclays, told clients on Thursday that American Airlines would have to raise as much as $3 billion in cash in the next few days to avoid a credit crunch.

Better, but still too focused on one number of debt instead of total liquidity and trying to use past financial results as a prediction of how they will survive the future. For example, no one really knows which airline will lose the least. Past results can be thrown out the window. AA's prior free cash flow was already scheduled to improve this year with the end of their aggressive CapEx winding down. And going back to the debt, those numbers have already changed. For example, we know DL has an underfunded pilot pension, and I've heard AA's has one as well. What has been reported on DL's fund is that the math was based on a very optimistic rate of return in the equity markets. Clearly the market crash will have "created" more debt for DL. In other words, even public debt totals are changing rapidly. Picking one airline out of the pile is short-sighted and evidence of repeating a narrative over facts.

klkla wrote:

Another quote in that article: "The problem is American has the most debt — nearly $30 billion, or about double the amount owed by Delta and United combined."

Emphasis is mine. That is going to be hard to overcome if this drags out too long.

I didn't catch that the first time I read it, but it's not even close to accurate.

Naturally calls into question the entire article.

xwb777 wrote:

According to the article, which is published by Sam Chui, AA is going to files bankruptcy again after they have did the last time post 11/9 attacks in New York City. At that time, the airline had a debt of $29.55 billion

Sam Chui...who? never mind

AMR did NOT file for bankruptcy in the aftermath of 911. AA Employees kept AMR afloat through substantial pay & benefit cuts.

AMR was the last Legacy to ever file for bankruptcy in 2011.

MSPNWA wrote:

klkla wrote:

Another quote in that article: "The problem is American has the most debt — nearly $30 billion, or about double the amount owed by Delta and United combined."

Emphasis is mine. That is going to be hard to overcome if this drags out too long.

I didn't catch that the first time I read it, but it's not even close to accurate.

Naturally calls into question the entire article.

This is another article that measures it as Debt-to-Equity ratio. The amount of debt per $1 of equity. Data is from 2019 Q4.

United Airlines
177.35
Allegiant Airlines
166.48
Spirit Airlines
157.34
Hawaiian Airlines
125.92
Delta Airlines
117.17
Alaska Airlines
74.28
JetBlue
65.68
Southwest Airlines
40.70

American Airlines (AAL) is not included as it is currently running a negative debt-to-equity ratio.

https://www.investopedia.com/ask/answer ... panies.asp

OA412 wrote:

STT757 wrote:

And Continental, whom was the first major carrier to return to profitability after 9/11.

In large part because their costs were already low relative to the rest of the industry given their two prior Ch. 11 filings, a process UA, US, NW, DL, and AA didn't have to go through until after 9/11 rocked the industry.

The biggest problem for CO was debt and high lease rates on a lot of new planes. This debt was due by 2010-2011 which which have resulted in another BK for CO and possible subsequent liquidation (hence why they merged with UA.)

AA, CO, and NW were some of the most profitable (marginally) legacies in the mid-2000s following 9/11 but AA's costs were completely out of control and waited way longer than should've to file for it.

The only useful info in this thread is the great photo of the Battleship 747

WingsOfLove wrote:

xwb777 wrote:

According to the article, which is published by Sam Chui, AA is going to files bankruptcy again after they have did the last time post 11/9 attacks in New York City. At that time, the airline had a debt of $29.55 billion

Sam Chui...who? never mind

AMR did NOT file for bankruptcy in the aftermath of 911. AA Employees kept AMR afloat through substantial pay & benefit cuts.

AMR was the last Legacy to ever file for bankruptcy in 2011.

AMR didn't, but US Airways did, twice. That's part of AA's 'proud legacy', too.

The first major carrier to file Ch 11 following 9/11: https://www.cnn.com/2002/TRAVEL/NEWS/08 ... index.html

And again 25 months later: https://money.cnn.com/2004/09/12/news/f ... /index.htm

And, continuing our happy trip down AA memory lane, here's where AA tried to terminate pension plans and dump them onto the PBGC, a move the PBGC rejected: http://inthesetimes.com/working/entry/1 ... ill_looks_

There is lots of fake news around and I won’t trust them unless a statement from the airline says yes. Did anyone found statement from AA regarding this?

SQ789 wrote:

There is lots of fake news around and I won’t trust them unless a statement from the airline says yes. Did anyone found statement from AA regarding this?

No airline is going to come out and say they "may" declare bankruptcy.

That being said, this is just hype based on their debt load. Much of the debt is not due currently and AA has at least $6.5-7.5B in liquidity that it can pull the trigger on to help with the downturn.

alasizon wrote:

SQ789 wrote:

There is lots of fake news around and I won’t trust them unless a statement from the airline says yes. Did anyone found statement from AA regarding this?

No airline is going to come out and say they "may" declare bankruptcy.

That being said, this is just hype based on their debt load. Much of the debt is not due currently and AA has at least $6.5-7.5B in liquidity that it can pull the trigger on to help with the downturn.

Premature? Probably. Hype? No.

All airlines have already started the clocks on the countdown to bankruptcy. Some clocks are running faster than others. Just because the average worker doesn't know about it doesn't mean it is not so. Drastic measures are being analyzed and sent up to leadership for discussion/decision making.

3holer wrote:

So who plagiarized who with this “article”?

This has a date prior to the Sam Chui post....

https://www.ccn.com/fasten-your-belts-american-airlines-investors-flying-into-another-bankruptcy/

Anything for clicks.

Not the first time, won't be the last. Just making his pockets fatter by posting it here.

alasizon wrote:

SQ789 wrote:

There is lots of fake news around and I won’t trust them unless a statement from the airline says yes. Did anyone found statement from AA regarding this?

No airline is going to come out and say they "may" declare bankruptcy.

That being said, this is just hype based on their debt load. Much of the debt is not due currently and AA has at least $6.5-7.5B in liquidity that it can pull the trigger on to help with the downturn.

They might have debt covenants to hold some of that in the bank, but regardless it's not like AA can weather out a downturn as long as DL and UA can simply because of their debt situation, they should have been more proactive in getting that down over the years, especially being as drunk they are with new airplanes.

American does have some advantages despite their quite mixed service reputation currently. Their biggest partner, BA is so far much less exposed to the impact as they have not been banned from flying to the US. Also, they are currently not hedged at all for fuel, all agree? WN is what, 50% hedged for next year?

berari wrote:

Sam Choi is an American Airlines lawsuit waiting to happen.

When did he become one that provides financial analysis? Should he not stick to seat recline angles and inside aircraft cabin review videos on YouTube?

Errrybody be an expert up in hurrrr.

Maybe Sam Chui should replace Doug Parker. While they both may not know how to run an airline, the front cabins will have the best seats and best food, as the red ink flows

Lootess wrote:

alasizon wrote:

SQ789 wrote:

There is lots of fake news around and I won’t trust them unless a statement from the airline says yes. Did anyone found statement from AA regarding this?

No airline is going to come out and say they "may" declare bankruptcy.

That being said, this is just hype based on their debt load. Much of the debt is not due currently and AA has at least $6.5-7.5B in liquidity that it can pull the trigger on to help with the downturn.

They might have debt covenants to hold some of that in the bank, but regardless it's not like AA can weather out a downturn as long as DL and UA can simply because of their debt situation, they should have been more proactive in getting that down over the years, especially being as drunk they are with new airplanes.

Or just plain drunk in the C-Suite.

AA is obviously a very large company that can sustain the current losses, it can weather the storm... for now. But in the long run, I wouldn't rule out any possibility, as the current crisis has some huge impacts in the airline industry right now. DL and UA are in the same boat of course, but I understand from different sources that AA debt is much larger than these two.

MIflyer12 wrote:

AMR didn't

always nice to find some common grounds

0newair0 wrote:

All airlines have already started the clocks on the countdown to bankruptcy. Some clocks are running faster than others. Just because the average worker doesn't know about it doesn't mean it is not so. Drastic measures are being analyzed and sent up to leadership for discussion/decision making.

By now every airline has been in discussion with all their lenders and lessors, has had lines cancelled or not renewed, has asked for lease, interest and repayment holidays, has tried to defer or re-finance deliveries, has sought to reduce monthly lease charges by adding to final balloon payments...............

A significant difference to previous aviation crises, is air frame and engine OEM's are not in a position to assist their customers. This time Boeing, GE and RR may need help from their customers, by not deferring deliveries and withholding monthly maintenance fees.

FRNT787 wrote:

2 days ago, on the JPMorgan Industrials Call, the management team identified they have ~$7.3 Billion in liquidity (above their standard target of ~$7 billion and well above their stated debt covenants requiring ~$2 Billion). They identified a further ~$10 billion in unencumbered assets. They have significant debt, but few maturities over the next couple of years. High debt is bad, but the company is pretty well positioned to ride through this. They were asked on the call about aircraft deliveries and said they have no plans to defer them.

One note Doug Parker made, is that the airline industry today is very different than before 2013. Large airlines have the financial ability to power through this without assistance, bailouts, or restructuring, because the restructure was already completed.

Attached is the slide deck for the conference, their investor page has links to a recording of their segment of the conference.

https://americanairlines.gcs-web.com/st ... 9a1eb4aea5

Forbes had an article on this.

https://www.forbes.com/sites/tedreed/20 ... this-year/

The big problem is that AA only has 4 billion of real liquidity and 3 billion of "revolver capacity", ie overdraft capacity that could be wiped out any minute as financing companies start to dig their trenches.

So the situation is not as solid as DP makes it sound, he is trying to sooth the worries.

AA is too big to fail so don't worry about it too much. When the sh*t will hit the turbofan, uncle Sam will be there to pay the bill for his 3 nieces, although current investors may lose their share of the pie.

RDUDDJI wrote:

chonetsao wrote:

There is nowhere I can find evidence to suggest that [The median age of those who have died in Italy is 80]. Please kindly post your source of this statement.

I saw it on the news (Bloomberg specifically), but the article below is on the first page of Google hits for: "Age dead coronavirus Italy". There are lots of other stories on this as well.

https://time.com/5799586/italy-coronavirus-outbreak/

I was wrong it's 81 not 80.

Except this figure is from 5th March.

See: https://www.thelocal.it/20200311/corona ... s-in-italy

Paragraph 10:

This is according to the latest available data, released by Italy's Higher Health Institute (Istituto Superiore di Sanità, or ISS) on March 5, which is based on a preliminary study of 105 patients in Italy.

So if you go back to its original source, ISS of Italy. The link is:
https://www.iss.it/en/comunicati-stampa1

And in this website, you go to the 6th news release. It was posted on 5th March, and states:

This was stated in an analysis of the data of 105 Italian patients who died on 4 March, conducted by the Istituto Superiore di Sanità, which underlines that there are 20 years of difference between the average age of the deceased and that of the virus positive patients.

The original texts in Italian is

05/03/2020 ISS, 5 marzo 2020 L'età media dei pazienti deceduti e positivi a COVID-2019 è 81 anni, sono in maggioranza uomini e in più di due terzi dei casi hanno tre o più patologie preesistenti.

if you are interested.

Since then, the number has changed. Because now we have 1,016 deaths in Italy instead of the 105 ISS sampled on that day only. And ISS in its latest report saying

22% of Sars-CoV-2 buffer positive patients are between 19 and 50 years old.

ISS had not updated any new average age study. But, I would highly question the intend to generalize the whole situation by using one day's data only and that sample size is only one tenth of the total.

I would like to see an updated study from ISS. But, China used to promote that Covid-19 only kills elderly and vulnerable but since then being quiet about it following the death of the Doctor Li Wenliang. If you look at Worldometer stats the death is across all ages while people over 70 seems to have a higher rate of mortality. What happened in Italy was at the beginning there seemed to be a lot of elderly people dying. But it would slowly change to all ages following the explosion of infection.

If you have time, please read the reports by Italian doctors on their personal account of the hospital condition.

Your source of stats is reliable and true, but unfortunately the origin of the number suggest it is only 105 sample from the day of 5th March ONLY. I would not take it to describe the whole situation in Italy over the whole time. It is a fallacy and misrepresentation of statistics.

Waterbomber2 wrote:

FRNT787 wrote:

2 days ago, on the JPMorgan Industrials Call, the management team identified they have ~$7.3 Billion in liquidity (above their standard target of ~$7 billion and well above their stated debt covenants requiring ~$2 Billion). They identified a further ~$10 billion in unencumbered assets. They have significant debt, but few maturities over the next couple of years. High debt is bad, but the company is pretty well positioned to ride through this. They were asked on the call about aircraft deliveries and said they have no plans to defer them.

One note Doug Parker made, is that the airline industry today is very different than before 2013. Large airlines have the financial ability to power through this without assistance, bailouts, or restructuring, because the restructure was already completed.

Attached is the slide deck for the conference, their investor page has links to a recording of their segment of the conference.

https://americanairlines.gcs-web.com/st ... 9a1eb4aea5

Forbes had an article on this.

https://www.forbes.com/sites/tedreed/20 ... this-year/

The big problem is that AA only has 4 billion of real liquidity and 3 billion of "revolver capacity", ie overdraft capacity that could be wiped out any minute as financing companies start to dig their trenches.

So the situation is not as solid as DP makes it sound, he is trying to sooth the worries.

AA is too big to fail so don't worry about it too much. When the sh*t will hit the turbofan, uncle Sam will be there to pay the bill for his 3 nieces, although current investors may lose their share of the pie.

I agree with you.

I think AA and DP still have additional weapon besides government support, one of which in my mind is to bend to Qatar for a temporary relief of debts (i.e. allow Qatar to purchase shares or debts instrument). Qatar Airways wanted to buy AA shares at $45. Now at $15 and would go lower in future, Qatar would be interested. Now it depends on AA to allow that to happen by removing restriction it imposed on shareholder ownership.

I think it remains a possibility. AA could sell terminals it owns or leases to Qatar with a buyback clause for exchange of cash injection.

A lot of people being overly defensive here by attacking Sam. Obviously he’s come close to the truth .

If AA go bankrupt let them fail , this cycle of inefficient bloated unsuccessful US airlines being protected by the US government and dragging the global airline industry down has to come to an end . If a fantastic airline like Norwegian is going to close the rubbish US ones should go too ...

Galwayman wrote:

A lot of people being overly defensive here by attacking Sam. Obviously he’s come close to the truth .

If AA go bankrupt let them fail , this cycle of inefficient bloated unsuccessful US airlines being protected by the US government and dragging the global airline industry down has to come to an end . If a fantastic airline like Norwegian is going to close the rubbish US ones should go too ...

So that means Doug Parker has failed as a CEO of the airline then? I see most people said that he has failed at AA.

Galwayman wrote:

A lot of people being overly defensive here by attacking Sam. Obviously he’s come close to the truth .

If AA go bankrupt let them fail , this cycle of inefficient bloated unsuccessful US airlines being protected by the US government and dragging the global airline industry down has to come to an end . If a fantastic airline like Norwegian is going to close the rubbish US ones should go too ...

You lost credibility by stating Norwegian is a fantastic airline. Also different situations, AA/UA/DL are massive airlines, Norwegian however.....

MSPNWA wrote:

I would bet all I have that your 2.5% figure is much higher. Fixed costs aren't that high for airlines. Think of it the other way. When an airline grows by 10%, does their cost only go up ~2.5%?

Trust me I am extremely aware of the variability of airline costs. You are confusing short term variability with long term variability. Short term they can't get rid of aircraft, they have to pay the crew 100% inside the crew bid, and they only really save inflight food, landing fees, and fuel. As you saw, I already cut their systemwide fuel bill significantly. So no, I'm dead on. Plus I'd say 70% down for April is now VERY conservative. It's gonna be worse.