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AA747123
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Posts: 283
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AA can only survive for 4 months

Thu Apr 09, 2020 3:11 pm

Just came across this article. Even after the government bailout, AA only has enough cash to survive for 4 months before it will collapse.

Very sad. First major casualty of Corona!

https://thepointsguy.com/news/us-airlin ... 0sC4b-WKrU
 
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enilria
Posts: 10151
Joined: Fri Feb 22, 2008 7:15 pm

Re: AA can only survive for 4 months

Thu Apr 09, 2020 3:15 pm

AA747123 wrote:
Just came across this article. Even after the government bailout, AA only has enough cash to survive for 4 months before it will collapse.

Very sad. First major casualty of Corona!

https://thepointsguy.com/news/us-airlin ... 0sC4b-WKrU

"The estimates do not include any potential CARES Act grants that at least eight carriers applied for on April 3."
 
PSU.DTW.SCE
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Re: AA can only survive for 4 months

Thu Apr 09, 2020 3:20 pm

While directionally true, there is a whole lot of context that needs to be applied. What assumptions at they looking at? Do they assume zero revenue during the forecast period?
The word "collaspe" is a bet dramatic. There are numerous financial levers and tools that can and will likely be used including the obvious like restructuring, cost-cutting, raising cash via taking on more debt, government funding/loans. Not to mention Ch.11.

The reality is that the airlines are better as a going concern for all stakeholders. They aren't in their position because of a poorly-run business. Its in everyone's best interest to let each airline restructure or use bankruptcy protection as way to restructure if necessary.

This is true more many businesses, not just airlines, in this time that are going through a cash-crunch because of no incoming revenue.
 
airtran737
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Re: AA can only survive for 4 months

Thu Apr 09, 2020 3:20 pm

Make no mistake, come October 1st, AA is going to take a machete to their staffing as well as their regional agreements.
Nice Trip Report!!! Great Pics, thanks for posting!!!! B747Forever
 
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Polot
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Re: AA can only survive for 4 months

Thu Apr 09, 2020 3:26 pm

airtran737 wrote:
Make no mistake, come October 1st, AA is going to take a machete to their staffing as well as their regional agreements.

That’s going to be true with all the US airlines. October 1st is going to be a massacre in the US aviation industry.
 
WayexTDI
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Re: AA can only survive for 4 months

Thu Apr 09, 2020 3:31 pm

As it's not coming from the airlines themselves, but from some "analysts", I would take it with a grain of salt.

Not only does that not include the CARES Act grants, but it's also a tactic to "prepare" investors for further stock price dip, and potentially manipulate the stock market.
Some (including senators) have been playing the stock market, with some insider information; it's not only illegal, but it's unethical to play like that with peoples lives.
 
Blueknows
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Re: AA can only survive for 4 months

Thu Apr 09, 2020 3:31 pm

What is the October 1st significance
 
CriticalPoint
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Re: AA can only survive for 4 months

Thu Apr 09, 2020 3:33 pm

Blueknows wrote:
What is the October 1st significance


The airlines that take the government Manet cannot involuntarily furlough or involuntarily reduce pay until after September 30th
 
WayexTDI
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Re: AA can only survive for 4 months

Thu Apr 09, 2020 3:34 pm

Blueknows wrote:
What is the October 1st significance

One of the conditions in the CARES Act is that airlines do not lay off anyone until September 31st, 2020. No one knows what'll happen on October 1st; but, if air travel is not back to a semi-normal schedule, the lay-offs will start then.
 
MIflyer12
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Re: AA can only survive for 4 months

Thu Apr 09, 2020 3:35 pm

PSU.DTW.SCE wrote:
There are numerous financial levers and tools that can and will likely be used including the obvious like restructuring, cost-cutting, raising cash via taking on more debt, government funding/loans. Not to mention Ch.11.


Big increases in debt - be it drawn-down from existing credit lines or establishment of new facilities - get announced in SEC filings within a few days. It is very public information.

Example: https://americanairlines.gcs-web.com/st ... 09020e00f3

For any publicly-traded U.S. carrier (every major carrier other than Frontier), just google 'airline name SEC filings'.

The terms of grants and loans under the CARES Act will be interesting, to see how much they request/what they're awarded, what they offer in equity/warrants for grants, what they offer as collateral for loans. We can hope these terms are just as quickly announced by SEC filings.

It's not like AA has a lot of unencumbered assets (not at current market valuations) relative to ongoing expenses. If they accept CARES grants their ability to furlough employees and suspend destinations is limited - through 9/30/2020, anyway.

Expect the Mods will append this to the AA Bankruptcy thread.
 
kalvado
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Re: AA can only survive for 4 months

Thu Apr 09, 2020 3:36 pm

Do we believe traffic would fully recover in a few months? As for me, I would expect virus to have the same effect as some believe fax machines had on Concorde - a drop in demand.
Choosing between all airlines downscaling and some of the airlines biting the dust while competitors can maintain schedule and connectivity (and prices, uhm) is a tough one. But I would probably choose option 2.
And among US airlines, AA would be my first choice to get rid of. Tough for those working for AA. But demand - aka total flying seat-miles and revenues - are likely to drop anyway, and that means fewer crews flying anyway.
 
nwcoflyer
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Re: AA can only survive for 4 months

Thu Apr 09, 2020 3:40 pm

Every airline is in a world of hurt. There are a lot of levers that can be pulled over the next several months and no doubt AA and others will do so to survive. It should be noted that the same article you are referencing shows UA and DL running out of cash 6 to 8 WEEKS later. This situation is not unique to AA.

Everyone likes to speculate, but only time will tell. There are many scenarios that could play out making the situations better or worse.
 
JAMBOJET
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Re: AA can only survive for 4 months

Thu Apr 09, 2020 3:42 pm

MIflyer12 wrote:
It's not like AA has a lot of unencumbered assets (not at current market valuations) relative to ongoing expenses.

Does any airline have a lot of unencumbered assets at current market valuations?
 
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chepos
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Re: AA can only survive for 4 months

Thu Apr 09, 2020 3:47 pm

AA747123 wrote:
Just came across this article. Even after the government bailout, AA only has enough cash to survive for 4 months before it will collapse.

Very sad. First major casualty of Corona!

https://thepointsguy.com/news/us-airlin ... 0sC4b-WKrU

I take it you did not read the fine print at the end of the article.


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Fly the Flag!!!!
 
tys777
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Re: AA can only survive for 4 months

Thu Apr 09, 2020 3:57 pm

Already being discussed

viewtopic.php?f=3&t=1442723

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