Moderators: jsumali2, richierich, ua900, PanAm_DC10, hOMSaR

  • 1
  • 4
  • 5
  • 6
  • 7
  • 8
 
User avatar
Midwestindy
Posts: 5119
Joined: Sun Mar 12, 2017 3:56 am

Re: FT: Investors bet AA will file for BK

Sat Jun 20, 2020 4:39 pm

MIflyer12 wrote:
dfwking wrote:
Whether AA files for bankruptcy or not, depends on if it can get to zero / breakeven cash flow before it runs out of cash. Here, "runs out of cash," means it has enough cash to fund operations during chapter 11 bankruptcy proceedings. So, "runs out of cash" is about ~$1 - $2 Bn in remaining liquidity.


No, it's probably quite a bit more than that to remain in compliance with loan covenants on its (now many) borrowings. I'm not going deep into AA's (again, now many) 8-K filings for its borrowings of the last five years but, IIRC, UA stated recently they had a minimum of $3+ Billion. AA, being the riskier borrower (lower credit ratings reflecting more debt, lower unencumbered asset value, and higher rate of cash burn) probably is obligated to keep more.

But, yes, they'll need enough liquidity to operate through Chapter 11 (could be 2+ years) because getting DIP financing would be tough once they've already pledged aircraft, gates, routes, intellectual property and AAdvantage to their limits.

Nobody should be thinking 'Hey, they've got $10 Billion in unencumbered assets. That means they still have $10 Billion in borrowing capacity.' Southwest - still investment grade! - this week announced that they ended $1.8 Billion in borrowing that had tied up $4.5 Billion in aircraft assets. (And 737NGs are still pretty good collateral. Lots of operators worldwide.)

http://otp.investis.com/clients/us/sout ... F&hasPdf=1


"We don't have any covenants on this airlines debt until that liquidity number is down to $2 billion"
https://seekingalpha.com/article/433092 ... conference

With regards to debt, its next major majority is $750M due in 2022
https://www.barrons.com/articles/airlin ... 1584145003
Status for 2019/2020: AAdvantage Platinum, Delta Gold, Southwest A-List
 
User avatar
DL717
Posts: 2148
Joined: Wed May 23, 2018 10:53 pm

Re: FT: Investors bet AA will file for BK

Sat Jun 20, 2020 4:52 pm

MIflyer12 wrote:
Detroit313 wrote:
The delusion on this forum that somehow AA will file for bankruptcy and give DFW and CLT to Delta and United while DL and UA won't file and be in a position to take over AA's massive hubs makes me laugh. What are you all smoking? Give us some.


I think DL717's hub assessment is pretty fanciful. Among other reasons there's no reason substantially to duplicate the American (nation, not airline) hub structure, especially in a demand-dimmed environment. (UA leaving EWR? Right after DL abandons Atlanta! Hah hah hah.)

I don't think a Chapter 11 filing by AA is impossible. (AA has said it thinks it can get to zero cash burn by the end of the year but hasn't outlined the market environment necessary to achieve that. If, for example, they need December passenger demand across domestic and international to be 90+% of December '19 demand, avg fares to be 100% of December '19 levels, and their planes to be 80% full, well, that seems very unlikely.) Here's the vague statement that lit the stock on fire. Note the use of the word 'seeks.'

The Company seeks to reduce its cash burn rate to approximately zero by the end of
2020 as expected demand conditions continue to improve and its cost initiatives continue to gain traction. The Company defines cash burn
as the sum of all net cash receipts less all cash disbursements but excluding the effect of new financings and new aircraft purchases.


I don't think a Chapter 7 liquidation is likely but I wouldn't put all my money betting against it, either.


Been to EWR lately? Their Terminals are a dumpster fire and the airfield configuration under poor weather drops to as low as 20 ops an hour. JFK is the far superior choice to EWR. EWR could vanish as a hub overnight and no one would notice except the people living in New Jersey. Never mind the Port Authority desires to beef up JFK in such a scenario. If AA were to collapse and UA didn’t jump in to JFK, Delta will. Delta will pounce on LAX as well and UA won’t want to be in the wind with their butts hanging out.

The hub shifts and closures I mention are not overlapping and voids at the remaining hubs will need to be filled. You can add PHL to the closure list as well. WN can pick up the pieces.

Never or fanciful aren’t terms anyone should consider using in this environment. Bankruptcy, merger, or collapse. It also wouldn’t be a duplication. It will be an imperative. UA would treat EWR the way DL treated CVG. Surplus.
Last edited by DL717 on Sat Jun 20, 2020 5:06 pm, edited 1 time in total.
Welcome to Nothingburgers. May I take your order?
 
airtran737
Posts: 3475
Joined: Mon Apr 05, 2004 3:47 am

Re: FT: Investors bet AA will file for BK

Sat Jun 20, 2020 5:05 pm

I wonder how long it will take for AAG to start coming to the unions for concessions? I’m sure they’ll single out the regionals first.
Nice Trip Report!!! Great Pics, thanks for posting!!!! B747Forever
 
User avatar
Midwestindy
Posts: 5119
Joined: Sun Mar 12, 2017 3:56 am

Re: FT: Investors bet AA will file for BK

Sun Jun 21, 2020 9:58 pm

https://americanairlines.gcs-web.com/ne ... or-secured

https://www.reuters.com/article/us-amer ... SKBN23S0QA

"American Airlines Group Inc (AAL.O) is planning to raise around $1.5 billion by selling shares and convertible notes"
Status for 2019/2020: AAdvantage Platinum, Delta Gold, Southwest A-List
 
Boof02671
Posts: 1990
Joined: Sun Jul 10, 2016 12:15 am

Re: FT: Investors bet AA will file for BK

Sun Jun 21, 2020 10:07 pm

Make that $3.5 billion in new funds.

https://www.bloomberg.com/news/articles ... tible-sale
 
User avatar
janders
Moderator
Posts: 1103
Joined: Mon Dec 11, 2017 4:27 pm

Re: FT: Investors bet AA will file for BK

Sun Jun 21, 2020 10:27 pm

Lets see how the market reacts and under what terms will they are able to issue the notes. Suppose prospectus to be filed tomorrow.
"We make war that we may live in peace." -- Aristotle
 
MrPeanut
Posts: 141
Joined: Fri Nov 23, 2018 8:36 pm

Re: FT: Investors bet AA will file for BK

Sun Jun 21, 2020 11:29 pm

It’s alarming the amount of cash airlines are trying to raise. The industry is in dire straights and because airlines are missing out on the profitable summer season, I would expect several BK’s early next year, if not sooner. At some point over the next several months, the financial composition of these airlines will breach covenants and then the well will then dry up. Management has to do everything possible before declaring BK, but the writing is clearly on the wall.
 
USAirKid
Posts: 621
Joined: Mon Jun 13, 2016 5:42 am

Re: FT: Investors bet AA will file for BK

Mon Jun 22, 2020 12:23 am

I'm a bit confused... From the AA Press release:

The Notes will be guaranteed on a senior unsecured basis by American Airlines Group Inc


Later in the release:

The Notes and the Term Loan will be pari passu obligations secured (i) on a first lien basis by a diverse pool of certain slots, gates and routes collateral that the Company uses to provide non-stop scheduled air carrier services between certain airports in the United States and certain airports in Australia, Canada, the Caribbean, Central America, China, Hong Kong, Japan, Mexico, South Korea, and Switzerland, and (ii) on a second lien basis by a pool of certain slots, gates and routes collateral the Company uses to provide non-stop scheduled air carrier services between certain airports in the United States and certain airports in the European Union and United Kingdom.


I'm a bit confused.. How can this be both unsecured and secured?
 
User avatar
Midwestindy
Posts: 5119
Joined: Sun Mar 12, 2017 3:56 am

Re: FT: Investors bet AA will file for BK

Mon Jun 22, 2020 1:06 am

MrPeanut wrote:
It’s alarming the amount of cash airlines are trying to raise. The industry is in dire straights and because airlines are missing out on the profitable summer season, I would expect several BK’s early next year, if not sooner. At some point over the next several months, the financial composition of these airlines will breach covenants and then the well will then dry up. Management has to do everything possible before declaring BK, but the writing is clearly on the wall.


Are you referring to US airlines? If so, several bankruptcies by early next year is not likely.

All the US ULCCs are close break even on a cash basis, the US LCCs have plenty of cash on hand for the next 2 years, so you are left with the US3.

DL expects to end June with $15b in liquidity, they are currently burning $30M/day, so using current cash burn rates (rates that will come down over the course of the year) that's still 1 year and 2 months of cash to get down to even $2b in liquidity.

UA expects $17B in liquidity at the end of September, so bankruptcy in early 2021 would be virtually impossible unless they started burning $100M/day again, which won't happen.

AA is likely to revise their expected liquidity soon with their new offerings, but needless to say, it is very unlikely we'll see widespread bankruptcies of US airlines early next year.

The writing is not clearly on the wall, at this point.
Status for 2019/2020: AAdvantage Platinum, Delta Gold, Southwest A-List
 
MrPeanut
Posts: 141
Joined: Fri Nov 23, 2018 8:36 pm

Re: FT: Investors bet AA will file for BK

Mon Jun 22, 2020 2:10 am

Midwestindy wrote:
MrPeanut wrote:
It’s alarming the amount of cash airlines are trying to raise. The industry is in dire straights and because airlines are missing out on the profitable summer season, I would expect several BK’s early next year, if not sooner. At some point over the next several months, the financial composition of these airlines will breach covenants and then the well will then dry up. Management has to do everything possible before declaring BK, but the writing is clearly on the wall.


Are you referring to US airlines? If so, several bankruptcies by early next year is not likely.

All the US ULCCs are close break even on a cash basis, the US LCCs have plenty of cash on hand for the next 2 years, so you are left with the US3.

DL expects to end June with $15b in liquidity, they are currently burning $30M/day, so using current cash burn rates (rates that will come down over the course of the year) that's still 1 year and 2 months of cash to get down to even $2b in liquidity.

UA expects $17B in liquidity at the end of September, so bankruptcy in early 2021 would be virtually impossible unless they started burning $100M/day again, which won't happen.

AA is likely to revise their expected liquidity soon with their new offerings, but needless to say, it is very unlikely we'll see widespread bankruptcies of US airlines early next year.

The writing is not clearly on the wall, at this point.


Oh it is clearly on the wall. I don’t think you fully comprehend how this works.

Cash burn rates worsen in the off season so you can’t use current burn rates. But even if I were to entertain you with current burn rates, that is close to $1 billion per month. By March of next year that is $9 billion in cash. Now try getting additional money in the marketplace when a highly leveraged company tries to request even more money after blowing through $9 billion in cash.

These companies will have already pulled down their credit lines and sold assets. When it comes time next spring to get additional funding, they will have a combination of too much debt and not enough assets. Their balance sheets will be so far beyond repair that their financial ratios will be too poor for conventional financial institutions to invest in them. There is a reason why AA’s most recent debt yields 30+%. It is because the likelihood of bankruptcy is priced into that offering. Any company that borrows at those yields is in bad bad financial shape and they are the ones that can least afford to pay those type of rates, thus compounding the issue even more.

Keep in mind that when airlines declare bankruptcy, they don’t declare it with $0 in the bank. When American declared for bankruptcy in 2011, they had $4 to $5 billion in cash on hand. They need money to get them through the bankruptcy process.

Run the numbers yourself including impacts on the balance sheet and you will see how bad the situation is.
 
User avatar
Midwestindy
Posts: 5119
Joined: Sun Mar 12, 2017 3:56 am

Re: FT: Investors bet AA will file for BK

Mon Jun 22, 2020 2:42 am

MrPeanut wrote:
Midwestindy wrote:
MrPeanut wrote:
It’s alarming the amount of cash airlines are trying to raise. The industry is in dire straights and because airlines are missing out on the profitable summer season, I would expect several BK’s early next year, if not sooner. At some point over the next several months, the financial composition of these airlines will breach covenants and then the well will then dry up. Management has to do everything possible before declaring BK, but the writing is clearly on the wall.


Are you referring to US airlines? If so, several bankruptcies by early next year is not likely.

All the US ULCCs are close break even on a cash basis, the US LCCs have plenty of cash on hand for the next 2 years, so you are left with the US3.

DL expects to end June with $15b in liquidity, they are currently burning $30M/day, so using current cash burn rates (rates that will come down over the course of the year) that's still 1 year and 2 months of cash to get down to even $2b in liquidity.

UA expects $17B in liquidity at the end of September, so bankruptcy in early 2021 would be virtually impossible unless they started burning $100M/day again, which won't happen.

AA is likely to revise their expected liquidity soon with their new offerings, but needless to say, it is very unlikely we'll see widespread bankruptcies of US airlines early next year.

The writing is not clearly on the wall, at this point.


Oh it is clearly on the wall. I don’t think you fully comprehend how this works.

Cash burn rates worsen in the off season so you can’t use current burn rates. But even if I were to entertain you with current burn rates, that is close to $1 billion per month. By March of next year that is $9 billion in cash. Now try getting additional money in the marketplace when a highly leveraged company tries to request even more money after blowing through $9 billion in cash.

These companies will have already pulled down their credit lines and sold assets. When it comes time next spring to get additional funding, they will have a combination of too much debt and not enough assets. Their balance sheets will be so far beyond repair that their financial ratios will be too poor for conventional financial institutions to invest in them. There is a reason why AA’s most recent debt yields 30+%. It is because the likelihood of bankruptcy is priced into that offering. Any company that borrows at those yields is in bad bad financial shape and they are the ones that can least afford to pay those type of rates, thus compounding the issue even more.

Keep in mind that when airlines declare bankruptcy, they don’t declare it with $0 in the bank. When American declared for bankruptcy in 2011, they had $4 to $5 billion in cash on hand. They need money to get them through the bankruptcy process.

Run the numbers yourself including impacts on the balance sheet and you will see how bad the situation is.


Without breaking down why I disagree with nearly everything you are saying or getting into specifics about cash burn rates, let me ask you this:

If you are so sure of imminent bankruptcy for the airlines, then explain to me why credit agencies, industry analysts, investors, and so on are estimating a return to positive EBITA by 2021. Even AA, which I would say is in the worst financial position, S&P estimates having an EBITA of at least 4 Billion in 2021.

https://finance.yahoo.com/news/p-cuts-a ... 27434.html

Stifel analyst Joseph DeNardi (discussing UA's liquidity):
“That provides sufficient liquidity, in our view, for United to survive most of 2021 even in a very low revenue environment,” DeNardi said

https://www.barrons.com/articles/airlin ... 1592329465
Status for 2019/2020: AAdvantage Platinum, Delta Gold, Southwest A-List
 
dfwking
Posts: 61
Joined: Mon Apr 11, 2005 2:16 pm

Re: FT: Investors bet AA will file for BK

Mon Jun 22, 2020 4:31 am

Boof02671 wrote:
Make that $3.5 billion in new funds.

https://www.bloomberg.com/news/articles ... tible-sale


I don't believe these are all new funds. The first $2 Bn ($1.5 Bn Notes and $500 Mn term loans) are to be borrowed against their slots, gates, and routes. They have included slots, gates, and route assets as part of their previously stated $11 Bn liquidity position. They are turning these assets into cash. See quote from the press release below:

https://americanairlines.gcs-web.com/news-releases/news-release-details/american-airlines-announces-proposed-offering-senior-secured
The Notes and the Term Loan will be pari passu obligations secured (i) on a first lien basis by a diverse pool of certain slots, gates and routes collateral that the Company uses to provide non-stop scheduled air carrier services between certain airports in the United States and certain airports in Australia, Canada, the Caribbean, Central America, China, Hong Kong, Japan, Mexico, South Korea, and Switzerland


The additional $1.5 Bn ($750 Mn in common stock and $750 Mn in convertible notes) seems to be new money. It will be interesting to see how the market reacts. One way or another, they will be paying a steep price for these new funds.
 
dfwking
Posts: 61
Joined: Mon Apr 11, 2005 2:16 pm

Re: FT: Investors bet AA will file for BK

Mon Jun 22, 2020 4:55 am

Midwestindy wrote:
If you are so sure of imminent bankruptcy for the airlines, then explain to me why credit agencies, industry analysts, investors, and so on are estimating a return to positive EBITA by 2021. Even AA, which I would say is in the worst financial position, S&P estimates having an EBITA of at least 4 Billion in 2021.

https://finance.yahoo.com/news/p-cuts-a ... 27434.html


I don't know to what extent the S&P estimates are realistic. The article states:
The credit rating agency expects the U.S. airline to generate adjusted negative EBITDA of at least $2 billion in 2020


Looking at Q1 alone, they posted a net loss of $2.2 Bn ($0.5 Bn depreciation, $0.3 Bn interest expense). So we are looking at a negative EBITDA of $1.4 Bn in Q1 alone.

Q1 Financials:
https://americanairlines.gcs-web.com/static-files/aa139a6e-987e-405c-912c-655b3662a641

I think it is safe to assume that they do not have positive EBITDA in Q2 or the rest of the year. So, the S&P estimate of negative $2 Bn EBITDA in 2020 is too rosy and probably should be taken with a grain of salt.

p.s. AA could recognize the $4.1 Bn in CARES act grant as income. Even with that I don't think a negative $2 Bn EBITDA can be achieved.
 
User avatar
Midwestindy
Posts: 5119
Joined: Sun Mar 12, 2017 3:56 am

Re: FT: Investors bet AA will file for BK

Mon Jun 22, 2020 11:45 am

dfwking wrote:
Midwestindy wrote:
If you are so sure of imminent bankruptcy for the airlines, then explain to me why credit agencies, industry analysts, investors, and so on are estimating a return to positive EBITA by 2021. Even AA, which I would say is in the worst financial position, S&P estimates having an EBITA of at least 4 Billion in 2021.

https://finance.yahoo.com/news/p-cuts-a ... 27434.html


I don't know to what extent the S&P estimates are realistic. The article states:
The credit rating agency expects the U.S. airline to generate adjusted negative EBITDA of at least $2 billion in 2020


Looking at Q1 alone, they posted a net loss of $2.2 Bn ($0.5 Bn depreciation, $0.3 Bn interest expense). So we are looking at a negative EBITDA of $1.4 Bn in Q1 alone.

Q1 Financials:
https://americanairlines.gcs-web.com/static-files/aa139a6e-987e-405c-912c-655b3662a641

I think it is safe to assume that they do not have positive EBITDA in Q2 or the rest of the year. So, the S&P estimate of negative $2 Bn EBITDA in 2020 is too rosy and probably should be taken with a grain of salt.

p.s. AA could recognize the $4.1 Bn in CARES act grant as income. Even with that I don't think a negative $2 Bn EBITDA can be achieved.


-681M in EBITA for Q1
https://www.wsj.com/market-data/quotes/ ... -statement

I have yet to see any industry analyst or credit agency arguing for a high likelihood of bankruptcies in early 2021 since April (and no I'm not including seeking alpha articles). Maybe there have been analysts who are saying multiple bankruptcies are likely, but that's definitely not the consensus.

With how much cash most of these airlines have, things would need to get worse demand wise & even if that happened airlines would make massive cost reductions. Kirby mentioned in an analyst call that UA could break even on a cash basis with 20% of yoy revenue, but that it wouldn't be pretty.

It's highly unlikely that UA could burn through $17B (make it $14B to build in a buffer) in less than 8 months by that point in the recovery.
Status for 2019/2020: AAdvantage Platinum, Delta Gold, Southwest A-List
 
tphuang
Posts: 5061
Joined: Tue Mar 14, 2017 2:04 pm

Re: FT: Investors bet AA will file for BK

Mon Jun 22, 2020 12:19 pm

Midwestindy wrote:
dfwking wrote:
Midwestindy wrote:
If you are so sure of imminent bankruptcy for the airlines, then explain to me why credit agencies, industry analysts, investors, and so on are estimating a return to positive EBITA by 2021. Even AA, which I would say is in the worst financial position, S&P estimates having an EBITA of at least 4 Billion in 2021.

https://finance.yahoo.com/news/p-cuts-a ... 27434.html


I don't know to what extent the S&P estimates are realistic. The article states:
The credit rating agency expects the U.S. airline to generate adjusted negative EBITDA of at least $2 billion in 2020


Looking at Q1 alone, they posted a net loss of $2.2 Bn ($0.5 Bn depreciation, $0.3 Bn interest expense). So we are looking at a negative EBITDA of $1.4 Bn in Q1 alone.

Q1 Financials:
https://americanairlines.gcs-web.com/static-files/aa139a6e-987e-405c-912c-655b3662a641

I think it is safe to assume that they do not have positive EBITDA in Q2 or the rest of the year. So, the S&P estimate of negative $2 Bn EBITDA in 2020 is too rosy and probably should be taken with a grain of salt.

p.s. AA could recognize the $4.1 Bn in CARES act grant as income. Even with that I don't think a negative $2 Bn EBITDA can be achieved.


-681M in EBITA for Q1
https://www.wsj.com/market-data/quotes/ ... -statement

I have yet to see any industry analyst or credit agency arguing for a high likelihood of bankruptcies in early 2021 since April (and no I'm not including seeking alpha articles). Maybe there have been analysts who are saying multiple bankruptcies are likely, but that's definitely not the consensus.

With how much cash most of these airlines have, things would need to get worse demand wise & even if that happened airlines would make massive cost reductions. Kirby mentioned in an analyst call that UA could break even on a cash basis with 20% of yoy revenue, but that it wouldn't be pretty.

It's highly unlikely that UA could burn through $17B (make it $14B to build in a buffer) in less than 8 months by that point in the recovery.


UA is not at risk anymore.

AA is problematic. Let's see how much cash it can raise at this point. It's market cap is 6.77 B right now and it wants to issue shares to generate $1.5 billion off that? Not impossible, but a little ambitious. And given that UA abandonned on its high yield bond ventures, let's see whether AA can stomach what the market is willing to price its bond offering at.

I anticipate them to burn around $6 billion for rest of the year and another $2 billion in Q1 unless they do massive cuts to staffing that UA is doing. Depending on how airline industry looks in April, it could very well be the time to file chapter 11.
 
User avatar
LAXintl
Topic Author
Posts: 24506
Joined: Wed May 24, 2000 12:12 pm

Re: FT: Investors bet AA will file for BK

Mon Jun 22, 2020 4:44 pm

Here are the prospectus

$750mil notes due 2025
https://americanairlines.gcs-web.com/st ... 0a41ac8fa7

$750mil common stock issuance
https://americanairlines.gcs-web.com/st ... e828791eb9

Lets see how the market reacts and prices the offering
From the desert to the sea, to all of Southern California
 
TropicalSky
Posts: 450
Joined: Fri May 05, 2017 1:37 pm

Re: FT: Investors bet AA will file for BK

Mon Jun 22, 2020 5:35 pm

How will the $8bil for 53 planes over the next 2 yrs affect things
https://simpleflying.com/american-airli ... lane-cost/
 
Miamiairport
Posts: 579
Joined: Tue Apr 10, 2018 8:14 pm

Re: FT: Investors bet AA will file for BK

Mon Jun 22, 2020 5:49 pm

TropicalSky wrote:
How will the $8bil for 53 planes over the next 2 yrs affect things
https://simpleflying.com/american-airli ... lane-cost/


If particularly International doesn't come back by year end I think we will see deferments of a/c delivery or selling of the a/c orders to another airline (like what AA did with QF and the 738s in 2001). Right now there's no data that gives a roadmap as to what demand will be like in 6 months, one year, 2 years so for now I would think orders of 789s and 321NEOs will remain on the books for now. A real and long term falloff of International I suppose could force retirement of the older 772s.
 
User avatar
Midwestindy
Posts: 5119
Joined: Sun Mar 12, 2017 3:56 am

Re: FT: Investors bet AA will file for BK

Mon Jun 22, 2020 6:01 pm

tphuang wrote:
Midwestindy wrote:
dfwking wrote:

I don't know to what extent the S&P estimates are realistic. The article states:


Looking at Q1 alone, they posted a net loss of $2.2 Bn ($0.5 Bn depreciation, $0.3 Bn interest expense). So we are looking at a negative EBITDA of $1.4 Bn in Q1 alone.

Q1 Financials:
https://americanairlines.gcs-web.com/static-files/aa139a6e-987e-405c-912c-655b3662a641

I think it is safe to assume that they do not have positive EBITDA in Q2 or the rest of the year. So, the S&P estimate of negative $2 Bn EBITDA in 2020 is too rosy and probably should be taken with a grain of salt.

p.s. AA could recognize the $4.1 Bn in CARES act grant as income. Even with that I don't think a negative $2 Bn EBITDA can be achieved.


-681M in EBITA for Q1
https://www.wsj.com/market-data/quotes/ ... -statement

I have yet to see any industry analyst or credit agency arguing for a high likelihood of bankruptcies in early 2021 since April (and no I'm not including seeking alpha articles). Maybe there have been analysts who are saying multiple bankruptcies are likely, but that's definitely not the consensus.

With how much cash most of these airlines have, things would need to get worse demand wise & even if that happened airlines would make massive cost reductions. Kirby mentioned in an analyst call that UA could break even on a cash basis with 20% of yoy revenue, but that it wouldn't be pretty.

It's highly unlikely that UA could burn through $17B (make it $14B to build in a buffer) in less than 8 months by that point in the recovery.


UA is not at risk anymore.

AA is problematic. Let's see how much cash it can raise at this point. It's market cap is 6.77 B right now and it wants to issue shares to generate $1.5 billion off that? Not impossible, but a little ambitious. And given that UA abandonned on its high yield bond ventures, let's see whether AA can stomach what the market is willing to price its bond offering at.

I anticipate them to burn around $6 billion for rest of the year and another $2 billion in Q1 unless they do massive cuts to staffing that UA is doing. Depending on how airline industry looks in April, it could very well be the time to file chapter 11.


The poster I was responding to mentioned multiple bankruptcies by early 2021, not just AA. AA hasn't updated its liquidity estimates for Q3, so I'll hold off on any judgement until I see that.

AA says their goal/hope/expectation (whatever their terminology is), is for zero cash burn by YE. I'll believe it when I see it.....but if they can get close by YE ($10-20M/day), the risk of bankruptcy will be way down. Especially since unlike other carriers, they don't have any upcoming major maturities
Status for 2019/2020: AAdvantage Platinum, Delta Gold, Southwest A-List
 
User avatar
adv40624
Posts: 17
Joined: Wed Oct 17, 2018 4:18 pm

American Airlines adds $3.5B in Liquidity to Survive COVID19

Mon Jun 22, 2020 6:35 pm

American Airlines Group Inc. (NASDAQ: AAL) announced over the weekend that it plans to raise additional cash through a secondary offering of stock and convertible notes valued at $1.5 billion, a privately placed $1.5 billion offering of senior secured notes due in 2025, and a new $500 million term loan due in 2024.

http://www.msn.com/en-us/money/companie ... r-BB15PzV2
 
tphuang
Posts: 5061
Joined: Tue Mar 14, 2017 2:04 pm

Re: FT: Investors bet AA will file for BK

Mon Jun 22, 2020 6:45 pm

Midwestindy wrote:
tphuang wrote:
Midwestindy wrote:

-681M in EBITA for Q1
https://www.wsj.com/market-data/quotes/ ... -statement

I have yet to see any industry analyst or credit agency arguing for a high likelihood of bankruptcies in early 2021 since April (and no I'm not including seeking alpha articles). Maybe there have been analysts who are saying multiple bankruptcies are likely, but that's definitely not the consensus.

With how much cash most of these airlines have, things would need to get worse demand wise & even if that happened airlines would make massive cost reductions. Kirby mentioned in an analyst call that UA could break even on a cash basis with 20% of yoy revenue, but that it wouldn't be pretty.

It's highly unlikely that UA could burn through $17B (make it $14B to build in a buffer) in less than 8 months by that point in the recovery.


UA is not at risk anymore.

AA is problematic. Let's see how much cash it can raise at this point. It's market cap is 6.77 B right now and it wants to issue shares to generate $1.5 billion off that? Not impossible, but a little ambitious. And given that UA abandonned on its high yield bond ventures, let's see whether AA can stomach what the market is willing to price its bond offering at.

I anticipate them to burn around $6 billion for rest of the year and another $2 billion in Q1 unless they do massive cuts to staffing that UA is doing. Depending on how airline industry looks in April, it could very well be the time to file chapter 11.


The poster I was responding to mentioned multiple bankruptcies by early 2021, not just AA. AA hasn't updated its liquidity estimates for Q3, so I'll hold off on any judgement until I see that.

AA says their goal/hope/expectation (whatever their terminology is), is for zero cash burn by YE. I'll believe it when I see it.....but if they can get close by YE ($10-20M/day), the risk of bankruptcy will be way down. Especially since unlike other carriers, they don't have any upcoming major maturities


fair enough. I think outside of AA, no one else is at risk at the moment. And I also disagree with the sentiment that if AA files, everyone else will file. I don't think anyone else will file.

AA's strategy has basically been to try to come out of this by growing DFW/CLT. And due to DL/UA cuts, they've picked up some ff that got pissed at DL/UA. We will see if that help them. Once summer rolls around, they will have to run a much fuller schedule, so I don't see their burn rate dropping much before October. Once October rolls around, UA is going to furlough a lot of people to get their cost down. AA hasn't made the same displacement. I just don't see how they can get their cost and burn rate further down without UA type of massive layoffs. Corporate demand on coastal states are still minimal at the moment. Without that and international revenue coming around, leisure revenue isn't going to get the burn rate down.
 
User avatar
LAXintl
Topic Author
Posts: 24506
Joined: Wed May 24, 2000 12:12 pm

Re: FT: Investors bet AA will file for BK

Tue Jun 23, 2020 10:23 pm

8-K for proposed additional $2bil equity and bond offering. Notes pay 6.5% with 2025 maturity,

https://americanairlines.gcs-web.com/node/38426/html
From the desert to the sea, to all of Southern California
 
User avatar
LAXintl
Topic Author
Posts: 24506
Joined: Wed May 24, 2000 12:12 pm

Re: FT: Investors bet AA will file for BK

Thu Jun 25, 2020 2:34 pm

Had to substantially increase the interest rate. Big time junk territory - as comparison average 2020 U.S. corp bond issue was in 3% range per Moody


American Airlines, Inc. (NASDAQ: AAL) (the “Company”) announced that it priced $2.5 billion aggregate principal amount of its 11.75% senior secured notes due 2025 (the “Notes”). The Notes will have an interest rate of 11.75% per annum and are being issued at a price equal to 99% of their face value. The size of the offering of the Notes was increased from the previously announced $1.5 billion. The Notes will be guaranteed on a senior unsecured basis by American Airlines Group Inc. (the “Guarantor”). The Company also announced that it decided not to proceed with its previously announced $500 million term loan facility. The offering of the Notes is expected to close on June 30, 2020, subject to customary closing conditions.
From the desert to the sea, to all of Southern California
 
MIflyer12
Posts: 7744
Joined: Mon Feb 18, 2013 11:58 pm

AA 5-yr secured notes $2.5 Billion yield 12.03%

Thu Jun 25, 2020 4:25 pm

AA's 8-K filing 6/25/20

https://americanairlines.gcs-web.com/st ... 740053d29b

Coupon yield of 11.75% sold at 99% provides a 5-yr yield to maturity of 12.028%. A question posed by Clint Eastwood in Dirty Harry: You've got to ask yourself one question: 'Do I feel lucky?

FORT WORTH, Texas — American Airlines, Inc. (NASDAQ: AAL) (the “Company”) today announced that it priced $2.5 billion aggregate principal
amount of its 11.75% senior secured notes due 2025 (the “Notes”). The Notes will have an interest rate of 11.75% per annum and are being issued at a
price equal to 99% of their face value.

The Notes will be secured (i) on a first lien basis by a diverse pool of certain slots, gates and routes collateral that the Company uses to provide non-stop
scheduled air carrier services between certain airports in the United States and certain airports in Australia, Canada, the Caribbean, Central America,
China, Hong Kong, Japan, Mexico, South Korea, and Switzerland, and (ii) on a second lien basis by a pool of certain slots, gates and routes collateral
the Company uses to provide non-stop scheduled air carrier services between certain airports in the United States and certain airports in the European
Union and United Kingdom.


A ~month ago UA declined to proceed with an offering that was rumored to return 11%. On 6/12/20, DL raised $1.25 Billion in 6-yr notes at 7.375%, unsecured. In early June, WN raised $1.8 Billion in 3 and 7-yr notes at 4.75% and 5.125%, respectively.
 
Miamiairport
Posts: 579
Joined: Tue Apr 10, 2018 8:14 pm

Re: AA 5-yr secured notes $2.5 Billion yield 12.03%

Thu Jun 25, 2020 5:16 pm

No surprise when you look at the financials of these airlines. When you consider where base interest rates, double digit interest rate tells you the level of perceived risk.
 
Bricktop
Posts: 1476
Joined: Fri Jan 22, 2016 11:04 am

Re: AA 5-yr secured notes $2.5 Billion yield 12.03%

Thu Jun 25, 2020 5:24 pm

Junk yields.
 
Exeiowa
Posts: 326
Joined: Fri Jul 06, 2018 4:49 pm

Re: AA 5-yr secured notes $2.5 Billion yield 12.03%

Thu Jun 25, 2020 6:16 pm

Interesting to note how different parts of the financial markets are pricing the current situation. Seems people are operating from very different assumptions.
 
slcdeltarumd11
Posts: 4696
Joined: Fri Jan 09, 2004 7:30 am

Re: AA 5-yr secured notes $2.5 Billion yield 12.03%

Thu Jun 25, 2020 6:28 pm

That's a crazy interest rate, but clearly shows the risk here. High risk, high reward situation.

Of all the airlines I think AA is in the worst position to be honest. Major layoffs coming in October for AA ,sad reality in any situation
 
ScottB
Posts: 6918
Joined: Fri Jul 28, 2000 1:25 am

Re: AA 5-yr secured notes $2.5 Billion yield 12.03%

Thu Jun 25, 2020 6:35 pm

MIflyer12 wrote:
Coupon yield of 11.75% sold at 99% provides a 5-yr yield to maturity of 12.028%. A question posed by Clint Eastwood in Dirty Harry: You've got to ask yourself one question: 'Do I feel lucky?

[i]FORT WORTH, Texas — American Airlines, Inc. (NASDAQ: AAL) (the “Company”) today announced that it priced $2.5 billion aggregate principal
amount of its 11.75% senior secured notes due 2025 (the “Notes”). The Notes will have an interest rate of 11.75% per annum and are being issued at a
price equal to 99% of their face value.


Yep. Even though the notes are secured by slots, gates, and routes, it's pretty obvious from the yield that there's a significant risk of impairment. The airline could lose its rights to those assets if it fails to utilize them sufficiently, and the imputed value of those assets could take a serious hit if international travel remains depressed for an extended period.

Exeiowa wrote:
Interesting to note how different parts of the financial markets are pricing the current situation. Seems people are operating from very different assumptions.


There's a fair bit of irrationality right now in the stock market -- lots of inexperienced day traders being manipulated by postings on message boards and not understanding that Chapter 11 typically means common shareholders get completely wiped out. People are chasing yield because the U.S. government (Congress and Federal Reserve) is trying to outdo Venezuela in printing money so cash is likely to lose much of its value.
 
UpNAWAy
Posts: 678
Joined: Thu Aug 11, 2016 12:42 pm

Re: AA 5-yr secured notes $2.5 Billion yield 12.03%

Thu Jun 25, 2020 6:42 pm

DP did say today that once all the capital rounds and loans are in they will been in a better relative cash position than either DAL or UAL. He scoffed at the notion of BK but did add if this goes on for years we all (all airlines) would of course be in BK and having a billion or two more than someone else will not matter at all.
 
RemoFlyer
Posts: 175
Joined: Wed Apr 01, 2015 10:12 pm

Re: AA 5-yr secured notes $2.5 Billion yield 12.03%

Thu Jun 25, 2020 6:51 pm

ScottB wrote:
MIflyer12 wrote:
Coupon yield of 11.75% sold at 99% provides a 5-yr yield to maturity of 12.028%. A question posed by Clint Eastwood in Dirty Harry: You've got to ask yourself one question: 'Do I feel lucky?

[i]FORT WORTH, Texas — American Airlines, Inc. (NASDAQ: AAL) (the “Company”) today announced that it priced $2.5 billion aggregate principal
amount of its 11.75% senior secured notes due 2025 (the “Notes”). The Notes will have an interest rate of 11.75% per annum and are being issued at a
price equal to 99% of their face value.


Yep. Even though the notes are secured by slots, gates, and routes, it's pretty obvious from the yield that there's a significant risk of impairment. The airline could lose its rights to those assets if it fails to utilize them sufficiently, and the imputed value of those assets could take a serious hit if international travel remains depressed for an extended period.

Exeiowa wrote:
Interesting to note how different parts of the financial markets are pricing the current situation. Seems people are operating from very different assumptions.


There's a fair bit of irrationality right now in the stock market -- lots of inexperienced day traders being manipulated by postings on message boards and not understanding that Chapter 11 typically means common shareholders get completely wiped out. People are chasing yield because the U.S. government (Congress and Federal Reserve) is trying to outdo Venezuela in printing money so cash is likely to lose much of its value.


This argument (about the Fed printing money) was made in 2009 just as it is made today, and both times it is completely wrong. If it was correct we would have seen double digit inflation. The Fed can easily reverse the credit to the banks if it sees inflationary pressures increasing, just like it unwound QE 1 and 2 earlier this decade.

Also stimulus and other government expenditure programs legislated by Congress and signed by the Executive branch is implemented by the treasury: not by printing notes but by issuing US treasury debt. As long as the US remains the numero uno in world financial markets, and there is no reason to suggest any other country is doing better, there should be no issues financing US debt at low yields.
 
tphuang
Posts: 5061
Joined: Tue Mar 14, 2017 2:04 pm

Re: AA 5-yr secured notes $2.5 Billion yield 12.03%

Thu Jun 25, 2020 6:53 pm

DP said they will be in a better relative cash position than DAL and UAL? Lol, this guy needs to go because he is not in tune with reality at all.

With this much interest payment, this little international traffic and this little high yielding business traffic, AA is not going to be cash positive next year let alone this year unless they do massive layoffs. AA needs a 35 to 40% contraction if it wants to avoid chapter 11.

Frankly, it got lucky with the recent equity sales and loans, because the cost of these moves would be even higher had they wait another 2 weeks. The surge in sunbelt states is getting noticed now and that's really bad news for AA's cash situation.
 
Exeiowa
Posts: 326
Joined: Fri Jul 06, 2018 4:49 pm

Re: AA 5-yr secured notes $2.5 Billion yield 12.03%

Thu Jun 25, 2020 7:05 pm

RemoFlyer wrote:
ScottB wrote:
MIflyer12 wrote:
Coupon yield of 11.75% sold at 99% provides a 5-yr yield to maturity of 12.028%. A question posed by Clint Eastwood in Dirty Harry: You've got to ask yourself one question: 'Do I feel lucky?

[i]FORT WORTH, Texas — American Airlines, Inc. (NASDAQ: AAL) (the “Company”) today announced that it priced $2.5 billion aggregate principal
amount of its 11.75% senior secured notes due 2025 (the “Notes”). The Notes will have an interest rate of 11.75% per annum and are being issued at a
price equal to 99% of their face value.


Yep. Even though the notes are secured by slots, gates, and routes, it's pretty obvious from the yield that there's a significant risk of impairment. The airline could lose its rights to those assets if it fails to utilize them sufficiently, and the imputed value of those assets could take a serious hit if international travel remains depressed for an extended period.

Exeiowa wrote:
Interesting to note how different parts of the financial markets are pricing the current situation. Seems people are operating from very different assumptions.


There's a fair bit of irrationality right now in the stock market -- lots of inexperienced day traders being manipulated by postings on message boards and not understanding that Chapter 11 typically means common shareholders get completely wiped out. People are chasing yield because the U.S. government (Congress and Federal Reserve) is trying to outdo Venezuela in printing money so cash is likely to lose much of its value.


This argument (about the Fed printing money) was made in 2009 just as it is made today, and both times it is completely wrong. If it was correct we would have seen double digit inflation. The Fed can easily reverse the credit to the banks if it sees inflationary pressures increasing, just like it unwound QE 1 and 2 earlier this decade.

Also stimulus and other government expenditure programs legislated by Congress and signed by the Executive branch is implemented by the treasury: not by printing notes but by issuing US treasury debt. As long as the US remains the numero uno in world financial markets, and there is no reason to suggest any other country is doing better, there should be no issues financing US debt at low yields.


Most of the money injected by the feds went into financial markets not peoples pockets hence it did not lead to an increase of purchasing items causing inflation but rather causing asset price inflation. The fact that the US can borrow all this money without trouble is an interesting point, and not available to other parts of the world. If the US dollar stops being the de facto reserve currency that will no longer be possible.
 
RemoFlyer
Posts: 175
Joined: Wed Apr 01, 2015 10:12 pm

Re: AA 5-yr secured notes $2.5 Billion yield 12.03%

Thu Jun 25, 2020 7:13 pm

Exeiowa wrote:
RemoFlyer wrote:
ScottB wrote:

Yep. Even though the notes are secured by slots, gates, and routes, it's pretty obvious from the yield that there's a significant risk of impairment. The airline could lose its rights to those assets if it fails to utilize them sufficiently, and the imputed value of those assets could take a serious hit if international travel remains depressed for an extended period.



There's a fair bit of irrationality right now in the stock market -- lots of inexperienced day traders being manipulated by postings on message boards and not understanding that Chapter 11 typically means common shareholders get completely wiped out. People are chasing yield because the U.S. government (Congress and Federal Reserve) is trying to outdo Venezuela in printing money so cash is likely to lose much of its value.


This argument (about the Fed printing money) was made in 2009 just as it is made today, and both times it is completely wrong. If it was correct we would have seen double digit inflation. The Fed can easily reverse the credit to the banks if it sees inflationary pressures increasing, just like it unwound QE 1 and 2 earlier this decade.

Also stimulus and other government expenditure programs legislated by Congress and signed by the Executive branch is implemented by the treasury: not by printing notes but by issuing US treasury debt. As long as the US remains the numero uno in world financial markets, and there is no reason to suggest any other country is doing better, there should be no issues financing US debt at low yields.


Most of the money injected by the feds went into financial markets not peoples pockets hence it did not lead to an increase of purchasing items causing inflation but rather causing asset price inflation. The fact that the US can borrow all this money without trouble is an interesting point, and not available to other parts of the world. If the US dollar stops being the de facto reserve currency that will no longer be possible.


Indeed at this point of time, there are no credible alternatives to the US dollar as de facto reserve currency. However, things can change in the future. Thats a different day and a different discussion!

You are correct about the asset price inflation with money being used for investments rather than the money being lent to an average individual. There is no reason to believe that it would be different this time around, so I dont see big time inflation creeping up.
 
LJ
Posts: 5289
Joined: Wed Nov 17, 1999 8:28 pm

Re: AA 5-yr secured notes $2.5 Billion yield 12.03%

Thu Jun 25, 2020 8:02 pm

MIflyer12 wrote:
AA's 8-K filing 6/25/20

https://americanairlines.gcs-web.com/st ... 740053d29b

Coupon yield of 11.75% sold at 99% provides a 5-yr yield to maturity of 12.028%. A question posed by Clint Eastwood in Dirty Harry: You've got to ask yourself one question: 'Do I feel lucky?

FORT WORTH, Texas — American Airlines, Inc. (NASDAQ: AAL) (the “Company”) today announced that it priced $2.5 billion aggregate principal
amount of its 11.75% senior secured notes due 2025 (the “Notes”). The Notes will have an interest rate of 11.75% per annum and are being issued at a
price equal to 99% of their face value.

The Notes will be secured (i) on a first lien basis by a diverse pool of certain slots, gates and routes collateral that the Company uses to provide non-stop
scheduled air carrier services between certain airports in the United States and certain airports in Australia, Canada, the Caribbean, Central America,
China, Hong Kong, Japan, Mexico, South Korea, and Switzerland, and (ii) on a second lien basis by a pool of certain slots, gates and routes collateral
the Company uses to provide non-stop scheduled air carrier services between certain airports in the United States and certain airports in the European
Union and United Kingdom.


A ~month ago UA declined to proceed with an offering that was rumored to return 11%. On 6/12/20, DL raised $1.25 Billion in 6-yr notes at 7.375%, unsecured. In early June, WN raised $1.8 Billion in 3 and 7-yr notes at 4.75% and 5.125%, respectively.


Does anyone know how the value of the collateral is calculated and how the secured bond holders would get the money out of the assets (in case of default)? It seems to me these assets are worthless unless you're an US major and thus in case of default by American, the value of the assets are low due to the limited number of potential buyers. Moreover, doesn't the current crisis depress the value of the slots and gates? I recall that bondholders weren't interested when UAL tried to get a secure loan with underlying a portfolio of aircraft (which at least have scrap value).
 
User avatar
STT757
Posts: 14103
Joined: Tue Mar 28, 2000 1:14 am

Re: FT: Investors bet AA will file for BK

Thu Jun 25, 2020 8:18 pm

If the crisis continues into mid to late 2021 I can see a bailout like the auto industry got in 2009, and perhaps the Government taking stakes in the airlines like they did with GM.
Eastern Air lines flt # 701, EWR-MCO Boeing 757
 
ScottB
Posts: 6918
Joined: Fri Jul 28, 2000 1:25 am

Re: AA 5-yr secured notes $2.5 Billion yield 12.03%

Thu Jun 25, 2020 8:40 pm

RemoFlyer wrote:
This argument (about the Fed printing money) was made in 2009 just as it is made today, and both times it is completely wrong. If it was correct we would have seen double digit inflation. The Fed can easily reverse the credit to the banks if it sees inflationary pressures increasing, just like it unwound QE 1 and 2 earlier this decade.

Also stimulus and other government expenditure programs legislated by Congress and signed by the Executive branch is implemented by the treasury: not by printing notes but by issuing US treasury debt. As long as the US remains the numero uno in world financial markets, and there is no reason to suggest any other country is doing better, there should be no issues financing US debt at low yields.


The amount of money being printed in 2009 was chump change compared to the past three months, and we have seen significant inflation in certain parts of the economy -- like real estate. Why do you think that $15/hour had become the minimum livable wage in many urban areas?

And who exactly do you think is buying all that U.S. Treasury debt? The Fed's balance sheet has $2 trillion more in Treasuries now than it did a year ago. The government is borrowing from the Fed; in essence, the Fed is simply printing money for the federal government because there is little chance of that debt ever being repaid. (And note that I did say that both the Fed and the Congress were printing money.)

In reality, you are correct that U.S. debt can continue to be financed at low yields because the Federal Reserve will continue to purchase as much as necessary to support the government's spending. This will not be a problem until the day it becomes a problem -- and then it will be a doozy.
 
RemoFlyer
Posts: 175
Joined: Wed Apr 01, 2015 10:12 pm

Re: AA 5-yr secured notes $2.5 Billion yield 12.03%

Thu Jun 25, 2020 8:58 pm

ScottB wrote:
RemoFlyer wrote:
This argument (about the Fed printing money) was made in 2009 just as it is made today, and both times it is completely wrong. If it was correct we would have seen double digit inflation. The Fed can easily reverse the credit to the banks if it sees inflationary pressures increasing, just like it unwound QE 1 and 2 earlier this decade.

Also stimulus and other government expenditure programs legislated by Congress and signed by the Executive branch is implemented by the treasury: not by printing notes but by issuing US treasury debt. As long as the US remains the numero uno in world financial markets, and there is no reason to suggest any other country is doing better, there should be no issues financing US debt at low yields.


The amount of money being printed in 2009 was chump change compared to the past three months, and we have seen significant inflation in certain parts of the economy -- like real estate. Why do you think that $15/hour had become the minimum livable wage in many urban areas?

And who exactly do you think is buying all that U.S. Treasury debt? The Fed's balance sheet has $2 trillion more in Treasuries now than it did a year ago. The government is borrowing from the Fed; in essence, the Fed is simply printing money for the federal government because there is little chance of that debt ever being repaid. (And note that I did say that both the Fed and the Congress were printing money.)

In reality, you are correct that U.S. debt can continue to be financed at low yields because the Federal Reserve will continue to purchase as much as necessary to support the government's spending. This will not be a problem until the day it becomes a problem -- and then it will be a doozy.


The Fed has more US Treasury debt in its balance sheet compared to last year because it has been quickly reducing the federal funds rate (the interest rate drops you have been hearing in the news over the last year or so) using Open market operations: buying treasury debt off of financial institutions for credit in their Fed accounts thus increasing money supply and reducing interest rates.
 
ScottB
Posts: 6918
Joined: Fri Jul 28, 2000 1:25 am

Re: AA 5-yr secured notes $2.5 Billion yield 12.03%

Thu Jun 25, 2020 9:31 pm

RemoFlyer wrote:
The Fed has more US Treasury debt in its balance sheet compared to last year because it has been quickly reducing the federal funds rate (the interest rate drops you have been hearing in the news over the last year or so) using Open market operations: buying treasury debt off of financial institutions for credit in their Fed accounts thus increasing money supply and reducing interest rates.


The Treasury's general account at the Fed is up by $1.2 trillion in the most recent report vs 2020/03/05. And whether or not the Fed purchases Treasuries directly from the government or through Open Market operations, the net effect is still the same: They print money to finance the spending authorized by Congress and they will purchase whatever they must in order to maintain rates at the desired level.
 
AA747123
Posts: 287
Joined: Wed Dec 14, 2016 5:15 pm

Re: FT: Investors bet AA will file for BK

Thu Jun 25, 2020 9:34 pm

STT757 wrote:
If the crisis continues into mid to late 2021 I can see a bailout like the auto industry got in 2009, and perhaps the Government taking stakes in the airlines like they did with GM.



I highly doubt the taxpayers will go for it
 
n797mx
Posts: 434
Joined: Tue Mar 24, 2009 11:40 pm

Re: FT: Investors bet AA will file for BK

Thu Jun 25, 2020 10:06 pm

AA747123 wrote:
STT757 wrote:
If the crisis continues into mid to late 2021 I can see a bailout like the auto industry got in 2009, and perhaps the Government taking stakes in the airlines like they did with GM.



I highly doubt the taxpayers will go for it



Welcome to America. It's not the taxpayer's decision. :duck:

I could see it happening need be. Airlines are an important part of too many businesses to let them fail. Want to go to Disney... airlines. Want to go to see grandma... airlines. Want to ship time sensitive mail and goods... airlines.

Plus if airlines fail, it's doubly bad for the government because there would be a ripple effect of job loss in industries that rely on airlines.
Clear skies and strong tail winds.
 
Miamiairport
Posts: 579
Joined: Tue Apr 10, 2018 8:14 pm

Re: FT: Investors bet AA will file for BK

Thu Jun 25, 2020 10:18 pm

n797mx wrote:
AA747123 wrote:
STT757 wrote:
If the crisis continues into mid to late 2021 I can see a bailout like the auto industry got in 2009, and perhaps the Government taking stakes in the airlines like they did with GM.



I highly doubt the taxpayers will go for it



Welcome to America. It's not the taxpayer's decision. :duck:

I could see it happening need be. Airlines are an important part of too many businesses to let them fail. Want to go to Disney... airlines. Want to go to see grandma... airlines. Want to ship time sensitive mail and goods... airlines.

Plus if airlines fail, it's doubly bad for the government because there would be a ripple effect of job loss in industries that rely on airlines.


Well just like the latest smash and grab the government will throw a measly $1K at the peasants and they will gleefully go out and spend it on crap they do not need. Face it the Fed is not going to let any major bank or company fail, particularly the ones that give generously do PACs.
 
United1
Posts: 4153
Joined: Wed Oct 08, 2003 9:21 am

Re: AA 5-yr secured notes $2.5 Billion yield 12.03%

Thu Jun 25, 2020 10:26 pm

MIflyer12 wrote:
AA's 8-K filing 6/25/20

https://americanairlines.gcs-web.com/st ... 740053d29b

Coupon yield of 11.75% sold at 99% provides a 5-yr yield to maturity of 12.028%. A question posed by Clint Eastwood in Dirty Harry: You've got to ask yourself one question: 'Do I feel lucky?

FORT WORTH, Texas — American Airlines, Inc. (NASDAQ: AAL) (the “Company”) today announced that it priced $2.5 billion aggregate principal
amount of its 11.75% senior secured notes due 2025 (the “Notes”). The Notes will have an interest rate of 11.75% per annum and are being issued at a
price equal to 99% of their face value.

The Notes will be secured (i) on a first lien basis by a diverse pool of certain slots, gates and routes collateral that the Company uses to provide non-stop
scheduled air carrier services between certain airports in the United States and certain airports in Australia, Canada, the Caribbean, Central America,
China, Hong Kong, Japan, Mexico, South Korea, and Switzerland, and (ii) on a second lien basis by a pool of certain slots, gates and routes collateral
the Company uses to provide non-stop scheduled air carrier services between certain airports in the United States and certain airports in the European
Union and United Kingdom.


A ~month ago UA declined to proceed with an offering that was rumored to return 11%. On 6/12/20, DL raised $1.25 Billion in 6-yr notes at 7.375%, unsecured. In early June, WN raised $1.8 Billion in 3 and 7-yr notes at 4.75% and 5.125%, respectively.


Sounds like UA got 7-7.25% with their latest offering. AAs numbers are really bad...
I know the voices in my head aren't real but sometimes their ideas are just awesome!!!
 
User avatar
Midwestindy
Posts: 5119
Joined: Sun Mar 12, 2017 3:56 am

Re: FT: Investors bet AA will file for BK

Thu Jun 25, 2020 10:29 pm

AA747123 wrote:
STT757 wrote:
If the crisis continues into mid to late 2021 I can see a bailout like the auto industry got in 2009, and perhaps the Government taking stakes in the airlines like they did with GM.



I highly doubt the taxpayers will go for it


Unions are asking Congress for an extension of the PSP through March 2021, that would smooth over at least a sizable amount of US airline issues

https://twitter.com/davidshepardson/sta ... 13379?s=20
Status for 2019/2020: AAdvantage Platinum, Delta Gold, Southwest A-List
 
User avatar
Midwestindy
Posts: 5119
Joined: Sun Mar 12, 2017 3:56 am

Re: FT: Investors bet AA will file for BK

Thu Jun 25, 2020 11:10 pm

"DP expects 20-30% less FAs needed in Oct, 10-20% less needed for next summer. Also admitted to "No furloughs" goal being much more difficult to achieve than he originally hoped"

https://twitter.com/xJonNYC/status/1276 ... 92928?s=20
Status for 2019/2020: AAdvantage Platinum, Delta Gold, Southwest A-List
 
tphuang
Posts: 5061
Joined: Tue Mar 14, 2017 2:04 pm

Re: FT: Investors bet AA will file for BK

Fri Jun 26, 2020 12:23 am

I don't even know whee to start with that one. Not sure if that includes people that have already taken packages. But if they are looking to run a 70% schedule for October, that is absolute insanity with the recent surges we've seen and the likely extended EU travel ban. Both DL and UA have basically settled at running about a 40 to 45% schedule for later this year.

DP is really looking forward to burning cash at $40 million a day for rest of the year.
 
VS11
Posts: 1653
Joined: Mon Jul 02, 2001 6:34 am

Re: FT: Investors bet AA will file for BK

Fri Jun 26, 2020 1:51 am

The implication of all this debt raised by the airline industry is that air travel will be much more expensive once the medical situation is under control. You can get a preview by trying to book TATL travel in August. One-way LHR-ORD on AA goes for $2k for economy.
 
JAMBOJET
Posts: 280
Joined: Tue Dec 11, 2018 6:23 pm

Re: FT: Investors bet AA will file for BK

Fri Jun 26, 2020 3:01 am

AA747123 wrote:
STT757 wrote:
If the crisis continues into mid to late 2021 I can see a bailout like the auto industry got in 2009, and perhaps the Government taking stakes in the airlines like they did with GM.



I highly doubt the taxpayers will go for it


I sort of agree... but the airlines do have an impressive lobbying organization: well-organized politically active national unions that, weirdly this year, Republicans and Democrats are courting to some degree, hubs in very important & powerful states (generally due to size or due to battleground status a month before the election) like: GA, NC, CA, TX, IL, FL, PA, NY, MI, AZ, CO, etc. To say nothing of heavily unionized Southwest and their large presence in nearly every mid-sized non-hub market.

Does any politician from those states want furloughs announced right before an election?

It's almost entertaining to think about the political dynamics of very powerful unions and swing states together asking for favors for their respective local carriers right before the election. Lucky already gave an idea what the political "win" is for the politicians: Open middle seats for everyone https://onemileatatime.com/american-air ... dle-seats/
Perhaps it's political cynicism, but the political power of swing states, politically-active large unions, and free middle seats seems pretty powerful this election year...
 
Miamiairport
Posts: 579
Joined: Tue Apr 10, 2018 8:14 pm

Re: FT: Investors bet AA will file for BK

Fri Jun 26, 2020 11:22 am

As per usual there was no exit planning in the CARES act other than the vague idea that the virus might go away if the economy locked down and then everyone would go back to work. Instead we have millions and millions losing jobs, and many of these morons blowing all the money they get on things like going to Florida, and the virus re-surging in numerous states albeit I question some of the data behind it. Add in the hysteria factor and we are in one real fecal matter show. And it's going to get far worse.

Is Congress going to bail out industry after industry, keep paying people in some cases $1,000 or more a week on Unemployment and dole out money to large companies such as the airlines to keep workers in a paycheck? Probably not. Just look back in 2010/2011 when the "99 weekers" were cut off by supposedly a "progressive" President. We are soaring towards a 21st century version of the 1930s. Airlines will soon find themselves with empty planes again because I don't see business travel returning anytime soon and all the free dough is going to soon run out and not be replaced, while unemployment will continue to rise. Even as the government will release total bogus and outlandish numbers each month showing a growth in jobs.

For AA this will probably mean Chapter 11 but not liquidation. There will be either a reorganization plan where everyone will share lots of pain or there will be a shotgun marriage arranged by the Court, blessed by the DOJ/FAA and probably financed by free money from the Fed.
 
User avatar
LAXintl
Topic Author
Posts: 24506
Joined: Wed May 24, 2000 12:12 pm

Re: FT: Investors bet AA will file for BK

Thu Jul 02, 2020 9:33 pm

8-K confirming agreement on term sheet with the U.S. Treasury for a $4.75 billion loan under the CARES Act. Loan expected to finalize in Q3.

https://americanairlines.gcs-web.com/node/38461/html

The company also announced it has reduced $14.5bil op and CapEx cost for 2020.

Cash burn rate down $35mil/day at end of June.

Will need approx 20,000 fewer employees on payroll come October.
From the desert to the sea, to all of Southern California
  • 1
  • 4
  • 5
  • 6
  • 7
  • 8

Popular Searches On Airliners.net

Top Photos of Last:   24 Hours  •  48 Hours  •  7 Days  •  30 Days  •  180 Days  •  365 Days  •  All Time

Military Aircraft Every type from fighters to helicopters from air forces around the globe

Classic Airliners Props and jets from the good old days

Flight Decks Views from inside the cockpit

Aircraft Cabins Passenger cabin shots showing seat arrangements as well as cargo aircraft interior

Cargo Aircraft Pictures of great freighter aircraft

Government Aircraft Aircraft flying government officials

Helicopters Our large helicopter section. Both military and civil versions

Blimps / Airships Everything from the Goodyear blimp to the Zeppelin

Night Photos Beautiful shots taken while the sun is below the horizon

Accidents Accident, incident and crash related photos

Air to Air Photos taken by airborne photographers of airborne aircraft

Special Paint Schemes Aircraft painted in beautiful and original liveries

Airport Overviews Airport overviews from the air or ground

Tails and Winglets Tail and Winglet closeups with beautiful airline logos