AA is increasing their Q4 revenue estimates and expects a 24% jump of RPSM vs Q4 in 2019. Positive financial news from AA

https://www.cnbc.com/amp/2023/01/12/ame ... mates.html

JohanTally wrote:

AA is increasing their Q4 revenue estimates and expects a 24% jump of RPSM vs Q4 in 2019. Positive financial news from AA

https://www.cnbc.com/amp/2023/01/12/ame ... mates.html

FYI, RPSM is not a metric. Every single person in the industry refers to it as RASM. Revenue per Available Seat Mile...

enterusername wrote:

JohanTally wrote:

AA is increasing their Q4 revenue estimates and expects a 24% jump of RPSM vs Q4 in 2019. Positive financial news from AA

https://www.cnbc.com/amp/2023/01/12/ame ... mates.html

FYI, RPSM is not a metric. Every single person in the industry refers to it as RASM. Revenue per Available Seat Mile...

Yes I misspoke but good news nonetheless

JohanTally wrote:

enterusername wrote:

JohanTally wrote:

AA is increasing their Q4 revenue estimates and expects a 24% jump of RPSM vs Q4 in 2019. Positive financial news from AA

https://www.cnbc.com/amp/2023/01/12/ame ... mates.html

FYI, RPSM is not a metric. Every single person in the industry refers to it as RASM. Revenue per Available Seat Mile...

Yes I misspoke but good news nonetheless

I agree. I was just helping you out in case you arent familiar with it. This website is full of a whole lot of people who like aviation mixed in with a few people actually in the business side of the industry. I just figured I'd try to help someone with the right terminology

enterusername wrote:

JohanTally wrote:

enterusername wrote:

FYI, RPSM is not a metric. Every single person in the industry refers to it as RASM. Revenue per Available Seat Mile...

Yes I misspoke but good news nonetheless

I agree. I was just helping you out in case you arent familiar with it. This website is full of a whole lot of people who like aviation mixed in with a few people actually in the business side of the industry. I just figured I'd try to help someone with the right terminology

The amount of AV acronyms is remarkable

Robert Isom was on Squawk Box this morning.
https://www.cnbc.com/video/2023/01/12/a ... ert%20isom

JohanTally wrote:

enterusername wrote:

JohanTally wrote:

Yes I misspoke but good news nonetheless

I agree. I was just helping you out in case you arent familiar with it. This website is full of a whole lot of people who like aviation mixed in with a few people actually in the business side of the industry. I just figured I'd try to help someone with the right terminology

The amount of AV acronyms is remarkable

My favorite is POO. Like if you havent had to do a public presentation or discussion and had to describe Point Of Origin (POO) to a group and then continue to say it in your presentation, you havent lived. It's hilarious watching grown ass people giggle like school children when you are talking about the importance of POO and how the market POOs and understanding where your customers POO is important.

enterusername wrote:

JohanTally wrote:

enterusername wrote:

I agree. I was just helping you out in case you arent familiar with it. This website is full of a whole lot of people who like aviation mixed in with a few people actually in the business side of the industry. I just figured I'd try to help someone with the right terminology

The amount of AV acronyms is remarkable

My favorite is POO. Like if you havent had to do a public presentation or discussion and had to describe Point Of Origin (POO) to a group and then continue to say it in your presentation, you havent lived. It's hilarious watching grown ass people giggle like school children when you are talking about the importance of POO and how the market POOs and understanding where your customers POO is important.

Throw that with Manchester's city code in front or behind it.

UpNAWAy wrote:

Robert Isom was on Squawk Box this morning.
https://www.cnbc.com/video/2023/01/12/a ... ert%20isom

Poor guy. He was trying to be as diplomatic as possible about the FAA but they kept pressing him as if he was going to bad mouth his regulator....

VS11 wrote:

UpNAWAy wrote:

Robert Isom was on Squawk Box this morning.
https://www.cnbc.com/video/2023/01/12/a ... ert%20isom

Poor guy. He was trying to be as diplomatic as possible about the FAA but they kept pressing him as if he was going to bad mouth his regulator....

It's the Airline Business....

Just about the time you think you have seen and experienced everything that can possibly happen, something new comes along and smack you in the head.

enterusername wrote:

JohanTally wrote:

enterusername wrote:

FYI, RPSM is not a metric. Every single person in the industry refers to it as RASM. Revenue per Available Seat Mile...

Yes I misspoke but good news nonetheless

I agree. I was just helping you out in case you arent familiar with it. This website is full of a whole lot of people who like aviation mixed in with a few people actually in the business side of the industry. I just figured I'd try to help someone with the right terminology

That also helps to explain the additional debt prepayment as well. If AA has a much better than expected quarter in terms of revenue they're cycling that cash straight into debt repayment. A smart move.

MohawkWeekend wrote:

Actually the double whammy is revenue falling while their costs are increasing. Right now somewhat falling fuel prices (jet fuel has not fallen like gasoline) are helping . But the rising costs for labor and all other inputs are going to prove fatal for some airlines in the form of Chapter 11 filings.

Happens every 20 years or so in the US. Jet Blue and American are the two weakest carriers. Southwest and Delta are the strongest.

Here's the thing about Americans strategy finance wise, they have leveraged up during a period of ultra low interest rates at pretty much fixed rates so they aren't going to be majorly impacted by rising rates unless they have to re-finance. (Leases, term loans, senior notes etc are all fixed rate instruments in general). So while interest rates are rising that'll impact new financings rather than the old ones. Compare that with United who now has 713 aircraft on order and Delta who has 321 aircraft on order. They'll be financing those at higher interest rates than AA will. That makes United especially much more exposed to the interest rate cycle we are in.

Now yes both UA and DL have, sometimes arguably, better cash generation and profitability than AA. But we are now getting to the flipside of the cycle where AA has finished its large scale fleet investment while DL and UA are still either only part way through or just starting. So we are now at the most fascinating part of the AA finance journey because over the next few years, in this part of the cycle, we get to see if the AA decision was the smart one to make, (ie sacrifice profits for a much quicker fleet investment), or whether the DL / UA one was the better strategy, (ie make profits and cashflow while deferring fleet renewal decisions until recently / now). I think the Jury is very much still out on which was the better strategy but at least we are starting to see the underlying AA performance come through in terms of profits so as the others leverage up comparison becomes more meaningful.

Sydscott wrote:

enterusername wrote:

JohanTally wrote:

Yes I misspoke but good news nonetheless

I agree. I was just helping you out in case you arent familiar with it. This website is full of a whole lot of people who like aviation mixed in with a few people actually in the business side of the industry. I just figured I'd try to help someone with the right terminology

That also helps to explain the additional debt prepayment as well. If AA has a much better than expected quarter in terms of revenue they're cycling that cash straight into debt repayment. A smart move.

MohawkWeekend wrote:

Actually the double whammy is revenue falling while their costs are increasing. Right now somewhat falling fuel prices (jet fuel has not fallen like gasoline) are helping . But the rising costs for labor and all other inputs are going to prove fatal for some airlines in the form of Chapter 11 filings.

Happens every 20 years or so in the US. Jet Blue and American are the two weakest carriers. Southwest and Delta are the strongest.

Here's the thing about Americans strategy finance wise, they have leveraged up during a period of ultra low interest rates at pretty much fixed rates so they aren't going to be majorly impacted by rising rates unless they have to re-finance. (Leases, term loans, senior notes etc are all fixed rate instruments in general). So while interest rates are rising that'll impact new financings rather than the old ones. Compare that with United who now has 713 aircraft on order and Delta who has 321 aircraft on order. They'll be financing those at higher interest rates than AA will. That makes United especially much more exposed to the interest rate cycle we are in.

Now yes both UA and DL have, sometimes arguably, better cash generation and profitability than AA. But we are now getting to the flipside of the cycle where AA has finished its large scale fleet investment while DL and UA are still either only part way through or just starting. So we are now at the most fascinating part of the AA finance journey because over the next few years, in this part of the cycle, we get to see if the AA decision was the smart one to make, (ie sacrifice profits for a much quicker fleet investment), or whether the DL / UA one was the better strategy, (ie make profits and cashflow while deferring fleet renewal decisions until recently / now). I think the Jury is very much still out on which was the better strategy but at least we are starting to see the underlying AA performance come through in terms of profits so as the others leverage up comparison becomes more meaningful.

Indeed. They have higher debt, but they also have better assets.

rising wrote:

Indeed. They have higher debt, but they also have better assets.

What assets are better?

nonrevelite wrote:

rising wrote:

Indeed. They have higher debt, but they also have better assets.

What assets are better?

The youngest fleet of the US3 and no 767s to replace. UA just ordered 100 787s which would imply they are lacking assets. They have 68 A321NEOs vs DL 21 and a total of 286 A321s vs 148 at DL.

JohanTally wrote:

nonrevelite wrote:

rising wrote:

Indeed. They have higher debt, but they also have better assets.

What assets are better?

The youngest fleet of the US3 and no 767s to replace. UA just ordered 100 787s which would imply they are lacking assets. They have 68 A321NEOs vs DL 21 and a total of 286 A321s vs 148 at DL.

Logic is flawed, UA ordering 100 wide-bodies does not imply that; as they already have ~100 more wide-bodies than AA. The 100 firm plus 100 accounts for further expansions of the UA wide-body too. UA will have more TPAC routes from SFO this summer than AA will have system wide. The youngest fleet will be surpassed in due time. The 321 classics are comparable to the 737-900ERs at DL and UA, thought the -900s have a lower CASM. DL and UA have 321 NEOs coming. Aside from aircraft, which airport and other assets are greater?

nonrevelite wrote:

JohanTally wrote:

nonrevelite wrote:

What assets are better?

The youngest fleet of the US3 and no 767s to replace. UA just ordered 100 787s which would imply they are lacking assets. They have 68 A321NEOs vs DL 21 and a total of 286 A321s vs 148 at DL.

Logic is flawed, UA ordering 100 wide-bodies does not imply that; as they already have ~100 more wide-bodies than AA. The 100 firm plus 100 accounts for further expansions of the UA wide-body too. UA will have more TPAC routes from SFO this summer than AA will have system wide. The youngest fleet will be surpassed in due time. The 321 classics are comparable to the 737-900ERs at DL and UA, thought the -900s have a lower CASM. DL and UA have 321 NEOs coming. Aside from aircraft, which airport and other assets are greater?

AA has the younger fleet currently making them more valuable today. Of course once UA takes delivery then they have would have the better assets. Both DL and UA are to receive NEOs but AA has 40 more than DL today which is where the current assets fall into play. The 900s might have a slightly lower trip coat but CASM would likely be lower on AA A321s due to the extra seats crammed in.

Airline fleet replacement is a never ending process. I’m not sure it’s at all determinative which one has the younger fleet right now. They’ll all need new aircraft on an ongoing basis.

More to the point on profitability, it remains to be seen if AA’s recent good news is a one time windfall due to WN’s year end melt down (as some analysts suggested) or a fundamental positive change in its overall business performance. Costs are rising in the industry, and that will hurt all of them. But AA’s operations right now are running relatively well, and that’s good news for those travelers willing to deal with its hubs.

[quote="alasizon"

You could make the same argument that AA has more South America flights from MIA than UA will have systemwide. That logic is just as flawed.

Ultimately it's just to early to tell which fleet replacement strategy was correct and how much UA's expansion plans will really effect AA and DL.[/quote]

I would agree regarding South America as being a key asset for AA.

I disagree with the statement of AA having better assets than DL/UA purely based on the fleet analysis provided.

The statement regarding UA’s TPAC network out of one city compared to AA’s overall TPAC network speaks to my disagreement regarding the clarification that AA has has better overall assets based on a limited fleet comparison. The overall asset comparison excluded factors such routes, slots, holdings, etc…. Rejecting an analysis based only on comparing specific aircraft while ignoring others is valid.

Total Assets

Delta - 72.60B
United - 68.97
AAL - 66.65B

Total Liabilities
Delta - 68.01B
United - 64.07B
AAL - 74.54B

AAplat4life wrote:

Airline fleet replacement is a never ending process. I’m not sure it’s at all determinative which one has the younger fleet right now. They’ll all need new aircraft on an ongoing basis.

More to the point on profitability, it remains to be seen if AA’s recent good news is a one time windfall due to WN’s year end melt down (as some analysts suggested) or a fundamental positive change in its overall business performance. Costs are rising in the industry, and that will hurt all of them. But AA’s operations right now are running relatively well, and that’s good news for those travelers willing to deal with its hubs.

If you watch the Squawk Box video you'll hear Isom say that really wasn't a big driver. It helped a bit, sure but the quarter was largely baked at that point. Add in that they had some disruptions too as that cost them while gaining a few incremental pax due to WNs issues. They definitely deserve some credit for this performance.

bigb wrote:

Total Assets

Delta - 72.60B
United - 68.97
AAL - 66.65B

Total Liabilities
Delta - 68.01B
United - 64.07B
AAL - 74.54B

The liabilities aren't as far apart as some would make you think given the debt load. Yes, of the three, they are the only ones with lower assets but it's not like DL & US are blowing them away. Fixable is what I would say.

TWFlyGuy wrote:

AAplat4life wrote:

Airline fleet replacement is a never ending process. I’m not sure it’s at all determinative which one has the younger fleet right now. They’ll all need new aircraft on an ongoing basis.

More to the point on profitability, it remains to be seen if AA’s recent good news is a one time windfall due to WN’s year end melt down (as some analysts suggested) or a fundamental positive change in its overall business performance. Costs are rising in the industry, and that will hurt all of them. But AA’s operations right now are running relatively well, and that’s good news for those travelers willing to deal with its hubs.

If you watch the Squawk Box video you'll hear Isom say that really wasn't a big driver. It helped a bit, sure but the quarter was largely baked at that point. Add in that they had some disruptions too as that cost them while gaining a few incremental pax due to WNs issues. They definitely deserve some credit for this performance.

I agree that AA deserves some credit. However, I don’t find management video interviews particularly convincing. They have to go out and sell their management performance to the public investors due to their lagging stock price. It hasn’t worked for several years now, and I’ll only be convinced when I see at least 3 more quarters of improved profitability.

bigb wrote:

Total Assets

Delta - 72.60B
United - 68.97
AAL - 66.65B

Total Liabilities
Delta - 68.01B
United - 64.07B
AAL - 74.54B

That’s much closer to what I would expect, thanks.

AAplat4life wrote:

TWFlyGuy wrote:

AAplat4life wrote:

Airline fleet replacement is a never ending process. I’m not sure it’s at all determinative which one has the younger fleet right now. They’ll all need new aircraft on an ongoing basis.

More to the point on profitability, it remains to be seen if AA’s recent good news is a one time windfall due to WN’s year end melt down (as some analysts suggested) or a fundamental positive change in its overall business performance. Costs are rising in the industry, and that will hurt all of them. But AA’s operations right now are running relatively well, and that’s good news for those travelers willing to deal with its hubs.

If you watch the Squawk Box video you'll hear Isom say that really wasn't a big driver. It helped a bit, sure but the quarter was largely baked at that point. Add in that they had some disruptions too as that cost them while gaining a few incremental pax due to WNs issues. They definitely deserve some credit for this performance.

I agree that AA deserves some credit. However, I don’t find management video interviews particularly convincing. They have to go out and sell their management performance to the public investors due to their lagging stock price. It hasn’t worked for several years now, and I’ll only be convinced when I see at least 3 more quarters of improved profitability.

They also can’t lie Willy nilly. He couldn’t be too specific because earnings hadn’t been released.

nonrevelite wrote:

bigb wrote:

Total Assets

Delta - 72.60B
United - 68.97
AAL - 66.65B

Total Liabilities
Delta - 68.01B
United - 64.07B
AAL - 74.54B

That’s much closer to what I would expect, thanks.

Is it that close though?

Value of each company...
Delta +4.6b
United +4.9b
American -7.9b

When these company commonly have profits in the <1b/yr range.

AAL's assets to liabilities may be skewed a bit by the number of owned airplanes dumped/retired during Covid.

Does anyone know what percentage of the AA/AA* fleet is leased versus owned? It used to be about a 50-50 mix...

Sent from my SM-G981U using Tapatalk

Eolesen wrote:

AAL's assets to liabilities may be skewed a bit by the number of owned airplanes dumped/retired during Covid.

Does anyone know what percentage of the AA/AA* fleet is leased versus owned? It used to be about a 50-50 mix...

Sent from my SM-G981U using Tapatalk

As of early 2022 they showed 457 leased and 408 owned mainline aircraft.

Should get an update with the upcoming annual report.

AA plans 5-year $750mil notes offering secured with slots, gates and South America and New Zealand routes.

https://americanairlines.gcs-web.com/node/41151/html

From ATW
https://www.atw-digital.com/airtranspor ... ent=gtxcel

The New American Way
American Airlines executives set out their strategy.

william wrote:

From ATW
https://www.atw-digital.com/airtranspor ... ent=gtxcel

The New American Way
American Airlines executives set out their strategy.

This appears to be paywalled - I'd be curious to read a summary of their strategy going forward.

Nothing specific about strategy really other than high level stuff they have already been saying. This was from interviews in December apparently or the first few weeks of Jan. before the earnings call. But it talks about paying down debt and getting aircraft utilization up and the focus on Domestic/short-haul vs long-haul international. Which will close the Rev/Cost issues they have had compared to the the other legacy carriers.

UpNAWAy wrote:

Nothing specific about strategy really other than high level stuff they have already been saying. This was from interviews in December apparently or the first few weeks of Jan. before the earnings call. But it talks about paying down debt and getting aircraft utilization up and the focus on Domestic/short-haul vs long-haul international. Which will close the Rev/Cost issues they have had compared to the the other legacy carriers.

Thanks. I haven't read all of the notes offering documents (of course), but I think we can assume most of that cash would be used to pay off existing debts.

LAXintl wrote:

AA plans 5-year $750mil notes offering secured with slots, gates and South America and New Zealand routes.

https://americanairlines.gcs-web.com/node/41151/html

At what point do they run out of Assets to Mortgage and have to resort to actual sales (gates, slots, etc.)?

At no point. They are producing plenty of cash flow. They could also issue more stock long before selling assets that make money. But they are paying down debt aggressively (Freeing up more assets), this is just essentially a refi at better terms to extend some particular debt out a few more years. I assume flexibility is the desired goal here, if conditions continue to improve keep paying off more, if they tighten you have bought some time and room. There are also tax implication I believe that could come into play. Airlines will have some credits applied to profits over the next few years due to the COVID loses but this may help soften tax blows a bit longer out.

Saw an analyst note that mention AA is looking to refinance $ 1.8 billion in debt.
In addition to the announced $750mil notes, they have a 2013 $1bil term loan that they will seek to refinance and move debt out to 2028 or later.

DFWGlobeTrotter wrote:

william wrote:

From ATW
https://www.atw-digital.com/airtranspor ... ent=gtxcel

The New American Way
American Airlines executives set out their strategy.

This appears to be paywalled - I'd be curious to read a summary of their strategy going forward.

Sorry did not know it was behind a paywall.

DFWGlobeTrotter wrote:

UpNAWAy wrote:

Nothing specific about strategy really other than high level stuff they have already been saying. This was from interviews in December apparently or the first few weeks of Jan. before the earnings call. But it talks about paying down debt and getting aircraft utilization up and the focus on Domestic/short-haul vs long-haul international. Which will close the Rev/Cost issues they have had compared to the the other legacy carriers.

Thanks. I haven't read all of the notes offering documents (of course), but I think we can assume most of that cash would be used to pay off existing debts.

Based on the 8k filed yesterday, that appears to be correct. https://www.sec.gov/Archives/edgar/data ... dex991.htm

American Airlines wrote:

The Company expects to use the proceeds from the offering of the Notes to repay a portion of the term loans outstanding under the term loan credit facility established under the Amended and Restated Credit and Guaranty Agreement, dated May 21, 2015, among the Company, the Guarantor, the lenders from time to time party thereto and certain other parties thereto (the “2013 Credit Agreement”), and to pay related fees and expenses. The Company expects that any term loans not repaid from the net proceeds of the Notes will be amended to extend the maturity date to February 2028. The final terms and amounts of the Notes are subject to market and other conditions, and may be materially different than expectations.

The new notes are not cheap debt as they have 7.25% in interest rate.

UPlog wrote:

The new notes are not cheap debt as they have 7.25% in interest rate.

I don't think 7.25% is terrible on 5-year notes for B- rated company in this interest rate environment. 5-year Treasury notes are at 3.82%, and the Federal Funds Rate is topping out at 4.75%. They days of sub-5% rates for corporate debt are probably long gone, except maybe for AAA-rated companies.

Companies with better balance sheets and costs less subject to wild fluctuation (who knows where labor and fuel prices will be in 2028) can likely do better, and this rate isn't great, but I don't think it's disastrous for AA.

Smart move, IMO and I've got puts. They are taking liquidity while liquidity is available. I wonder if they are seeing some worrying trends. Every company is announcing cost cutting and layoffs, I can't imagine the corporate travel market is booming right now.

It is hard to draw conclusions from this debt refinancing. Some analysts give this a slight positive but also noted that material debt repayments are due in 2025. This is expensive debt to incur relative to the last 10 plus years, and I did not see the terms of the debt being refinanced to compare interest expense going forward. It signals to me that despite recent improvements to its balance sheet, AA continues to have a need for more debt. Not necessarily a bad thing as long as operations produce sufficient positive cash flow to service the debt.

MKIAZ wrote:

Smart move, IMO and I've got puts. They are taking liquidity while liquidity is available. I wonder if they are seeing some worrying trends. Every company is announcing cost cutting and layoffs, I can't imagine the corporate travel market is booming right now.

I suspect some are starting to realize the current fare environment is not sustainable. The last 3 years have had a very large amount of extra cash in the economy through PPP, Cares Act, college debt delays, Stimulus and expanded Child credit. So many, many middle class and higher were sitting on thousands to tens of thousands of additional cash each year to travel on.

Almost all of those items are gone or will be gone soon. Which means that normal economics will take over sooner than later and the unending thirst for vacations at any price wont last. With fuel up 50% over 2019 and wages skyrocketing, there's going to be a rough road ahead if the fare environment of Q3/Q4 isnt sustainable.

Good article that explains why AA borrowed the $750 million at 7.25% maturing in 2028.

"During the earnings call, Kerr said American had no "meaningful maturity towers" until 2025. According to ratings agency Fitch, American's scheduled principal payments were set to spike to $9.3 billion in 2025. By moving the maturity date of that debt back by three years, American gains additional flexibility."
https://www.bizjournals.com/dallas/news ... ampaign=yh

AA has a lot of debt. So does UA - and to a lesser extent, DL. We can't get excited every time they roll over a $Billion.

MohawkWeekend wrote:

Good article that explains why AA borrowed the $750 million at 7.25% maturing in 2028.

"During the earnings call, Kerr said American had no "meaningful maturity towers" until 2025. According to ratings agency Fitch, American's scheduled principal payments were set to spike to $9.3 billion in 2025. By moving the maturity date of that debt back by three years, American gains additional flexibility."
https://www.bizjournals.com/dallas/news ... ampaign=yh

Another perspective is that a few weeks after talking about reducing its debt load, American borrows $750M at a high rate. I’m sure there were some rational reasons, but the cost of this “additional flexibility” along with other increased costs are worth noting.

AAplat4life wrote:

MohawkWeekend wrote:

Good article that explains why AA borrowed the $750 million at 7.25% maturing in 2028.

"During the earnings call, Kerr said American had no "meaningful maturity towers" until 2025. According to ratings agency Fitch, American's scheduled principal payments were set to spike to $9.3 billion in 2025. By moving the maturity date of that debt back by three years, American gains additional flexibility."
https://www.bizjournals.com/dallas/news ... ampaign=yh

Another perspective is that a few weeks after talking about reducing its debt load, American borrows $750M at a high rate. I’m sure there were some rational reasons, but the cost of this “additional flexibility” along with other increased costs are worth noting.

It's refinancing existing debt to push the maturity out. Same as refinancing your home. You're not taking on additional debt.

TWFlyGuy wrote:

AAplat4life wrote:

MohawkWeekend wrote:

Good article that explains why AA borrowed the $750 million at 7.25% maturing in 2028.

"During the earnings call, Kerr said American had no "meaningful maturity towers" until 2025. According to ratings agency Fitch, American's scheduled principal payments were set to spike to $9.3 billion in 2025. By moving the maturity date of that debt back by three years, American gains additional flexibility."
https://www.bizjournals.com/dallas/news ... ampaign=yh

Another perspective is that a few weeks after talking about reducing its debt load, American borrows $750M at a high rate. I’m sure there were some rational reasons, but the cost of this “additional flexibility” along with other increased costs are worth noting.

It's refinancing existing debt to push the maturity out. Same as refinancing your home. You're not taking on additional debt.

It may not be 'refinancing' in the traditional sense, but most if not all of the new debt is being used to eliminate old debt, so the effect is the same. And again, I'm not sure 7.5% is a 'high' rate in this environment.

New CFO and the plan to pay down $15 billion in debt


https://finance.yahoo.com/news/american ... 21175.html

DFWGlobeTrotter wrote:

TWFlyGuy wrote:

AAplat4life wrote:

Another perspective is that a few weeks after talking about reducing its debt load, American borrows $750M at a high rate. I’m sure there were some rational reasons, but the cost of this “additional flexibility” along with other increased costs are worth noting.

It's refinancing existing debt to push the maturity out. Same as refinancing your home. You're not taking on additional debt.

It may not be 'refinancing' in the traditional sense, but most if not all of the new debt is being used to eliminate old debt, so the effect is the same. And again, I'm not sure 7.5% is a 'high' rate in this environment.

For AA’s rating, it’s great.

“ Cutting leverage will help the company improve its credit rating, which should allow it to pay less to borrow. Generally speaking, companies in the BB rating category effectively pay about 7.2% on average right now to borrow in the US bond market. That compares to about 8.8% for B rated borrowers, like American.” https://www.bloomberg.com/news/articles ... ify%20wall