Moderators: richierich, ua900, PanAm_DC10, hOMSaR
FLYFIRSTCLASS wrote:I think one of the big three will liquidate and it will be AA.
FLYFIRSTCLASS wrote:I really do not see AA surviving, they will certainly file for bankruptcy again, and given how leveraged they are in debt ($49 billion) it will be nearly impossible to survive. Now with oil prices skyrocketing they are at a severe disadvantage to their competitors given their debt and sub-par revenue performance. I think one of the big three will liquidate and it will be AA.
MIflyer12 wrote:FLYFIRSTCLASS wrote:I really do not see AA surviving, they will certainly file for bankruptcy again, and given how leveraged they are in debt ($49 billion) it will be nearly impossible to survive. Now with oil prices skyrocketing they are at a severe disadvantage to their competitors given their debt and sub-par revenue performance. I think one of the big three will liquidate and it will be AA.
They have marginally more debt than UA. They have better yields than UA. A bankruptcy filing can wipe away some debt and allow it to terminate any purchase agreements, leases, and rental agreements AA doesn't want going forward. A Chapter 11 filing can wipe out shareholders (but didn't for AA last time); that hurdle gets lower with declines in market capitalization:
AA $9.47 Billion
UA $11.9 Billion
DL $22.1 Billion
WN $24.1 Billion
and, for reference, a carrier 1/4 of AA's size in 2019, AS: $6.19 Billion
jetblastdubai wrote:FLYFIRSTCLASS wrote:I think one of the big three will liquidate and it will be AA.
The Big 3 are too big to individually fail but if it came down to survival, the usual action is to sell assets. The problem with this environment is that no other airline is really in a position to purchase enough assets to make a difference to the carrier that needs to divest. If planes were to be sold, the crews to operate them would need to be part of the transaction. Stapling a list of transferred employees to the bottom can't happen anymore and the union battles of integration would be ugly.
Slots at LHR, HND, LGA, and DCA have value but divesting them would take away some of the biggest money-making tools for the carrier that loses them. No good choices for long-term survival.
FLYFIRSTCLASS wrote:I really do not see AA surviving, they will certainly file for bankruptcy again, and given how leveraged they are in debt ($49 billion) it will be nearly impossible to survive. Now with oil prices skyrocketing they are at a severe disadvantage to their competitors given their debt and sub-par revenue performance. I think one of the big three will liquidate and it will be AA.
VS11 wrote:There are at least two obvious solutions: raise fares and/or reduce frequencies and/or capacity. Frequency reduction will help with crew shortages too.
9w748capt wrote:MIflyer12 wrote:A Chapter 11 filing can wipe out shareholders (but didn't for AA last time); that hurdle gets lower with declines in market capitalization:
AA $9.47 Billion
UA $11.9 Billion
DL $22.1 Billion
WN $24.1 Billion
and, for reference, a carrier 1/4 of AA's size in 2019, AS: $6.19 Billion
Wow, those are truly astonishing numbers. AA really is a garbage airline and the market certainly reflects that. For whatever reason though they seem much more committed to OKC than the other legacies, so I guess I'm stuck with them for now.
MohawkWeekend wrote:And these airlines have already sold a lot of tickets when fuel was $2.25 a gallon. No recovering that now.
A failure of a single US major wouldn't be the end of the world. However if history repeats itself it will trigger a cascade of bankruptcies as the fixed costs of the remaining carriers will be uncompetitive.
JohanTally wrote:IMohawkWeekend wrote:And these airlines have already sold a lot of tickets when fuel was $2.25 a gallon. No recovering that now.
A failure of a single US major wouldn't be the end of the world. However if history repeats itself it will trigger a cascade of bankruptcies as the fixed costs of the remaining carriers will be uncompetitive.
In the past people would typically book flights way in advance but in the Covid world travelers are more inclined to book last minute which might be a saving grace. With the rapid rise of fuel it's actually fortunate that people aren't booking their TATL vacations 10-11 months ahead of traveling. Airlines will need to raise fares or implement fuel surcharges in the near future.
MohawkWeekend wrote:JohanTally wrote:IMohawkWeekend wrote:And these airlines have already sold a lot of tickets when fuel was $2.25 a gallon. No recovering that now.
A failure of a single US major wouldn't be the end of the world. However if history repeats itself it will trigger a cascade of bankruptcies as the fixed costs of the remaining carriers will be uncompetitive.
In the past people would typically book flights way in advance but in the Covid world travelers are more inclined to book last minute which might be a saving grace. With the rapid rise of fuel it's actually fortunate that people aren't booking their TATL vacations 10-11 months ahead of traveling. Airlines will need to raise fares or implement fuel surcharges in the near future.
I thought Midwestindy's charts showed that booking for travel in the summer was already up a lot. He and Jayunited seemed to have the best data.
TWFlyGuy wrote:pre-COVID DL & UA had much more international exposure in Asia & Europe meaning that they will now be even slower to recover. AA can continue to rely on partners and still capture what they were before more rapidly.
MohawkWeekend wrote:Fuel prices won't crush the entire industry. Southwest and Delta are going to be just fine along with several of the ULCC's
But fuel prices will hurt companies with high debt payments. There just won't be enough cash to pay all the bills.
jetblastdubai wrote:TWFlyGuy wrote:pre-COVID DL & UA had much more international exposure in Asia & Europe meaning that they will now be even slower to recover. AA can continue to rely on partners and still capture what they were before more rapidly.
On the other hand, if Int'l continues to lag, nothing stopping DL and UA from putting those widebodies into their domestic system. United alone has 50 or so PW 777s about to be airworthy once again and that's potentially a boatload of domestic lift. In theory AA could park some of their 777s but then they have the issue of what to do with the crews. You can't furlough from the top down so there'd be the whole expensive problem of downgrading a lot of pilots to smaller planes and furloughing from the bottom. Training costs would eat up a lot of the cost benefits of parking high seniority fleets.
JohanTally wrote:VS11 wrote:There are at least two obvious solutions: raise fares and/or reduce frequencies and/or capacity. Frequency reduction will help with crew shortages too.
AA is actively doing that and in April they reduce flights significantly more. If oil stays above $120 for a long period of time the smallest RJs may have to be grounded all together.
FlapOperator wrote:One significant issue for AA is that much of their domestic lift is regional, which isn't terribly fuel efficient.
NLINK wrote:FLYFIRSTCLASS wrote:It would allow UA to takes parts of CLT over along with some LLC's, allow Delta to move back into DFW to fill that void
alasizon wrote:FlapOperator wrote:AA, DL & UA make the bulk of their money on the Regional operation, not the Mainline one.One significant issue for AA is that much of their domestic lift is regional, which isn't terribly fuel efficient.
MIflyer12 wrote:MohawkWeekend wrote:Fuel prices won't crush the entire industry. Southwest and Delta are going to be just fine along with several of the ULCC's
But fuel prices will hurt companies with high debt payments. There just won't be enough cash to pay all the bills.
Delta had net interest payments of $265 million in 4Q21. UA paid $429 million; AA, $468, on total operating revenues of $9.4 Billion. AA's wage bill was $3.2 Billion. See respective carrier earnings releases.
You need to spend abundant, regular time on carrier income statements rather than perseverating about fuel costs.
jetblastdubai wrote:FLYFIRSTCLASS wrote:I think one of the big three will liquidate and it will be AA.
The Big 3 are too big to individually fail but if it came down to survival, the usual action is to sell assets. The problem with this environment is that no other airline is really in a position to purchase enough assets to make a difference to the carrier that needs to divest. If planes were to be sold, the crews to operate them would need to be part of the transaction. Stapling a list of transferred employees to the bottom can't happen anymore and the union battles of integration would be ugly.
Slots at LHR, HND, LGA, and DCA have value but divesting them would take away some of the biggest money-making tools for the carrier that loses them. No good choices for long-term survival.
Scarebus34 wrote:Airlines will try to pass on the costs to passengers - if it works, great. If not, they'll end up reducing capacity and finding other ways to cut costs. I don't suspect oil to be this high for a extended period of time - if Saudi Arabia starts pumping more and the Iran oil comes to the table that will help put downward pressure on the price. The US only imports 8% of its oil from Russia - the majority coming from Canada, Saudi Arabia, and Mexico.
If the US can remove that volatility via Iran, Saudi Arabia, or domestic production - prices will ease.
NLINK wrote:AA has always (last 20 years) been at the bottom financially.
planecane wrote:If AAL was nearing bankruptcy, I don't think the stock would still be holding where it is. Percentage wise it is a little closer to the pre-pandemic price than UAL and only a little lower than DAL.
No doubt, it's the weakest US major financially and I wouldn't touch the stock with a 777-9 fuselage but I don't think there is imminent danger of a collapse.
MohawkWeekend wrote:planecane wrote:If AAL was nearing bankruptcy, I don't think the stock would still be holding where it is. Percentage wise it is a little closer to the pre-pandemic price than UAL and only a little lower than DAL.
No doubt, it's the weakest US major financially and I wouldn't touch the stock with a 777-9 fuselage but I don't think there is imminent danger of a collapse.
I wouldn't say the stock is holding, it's down around 25% this year alone. And around 80% since 2019. UA is about as bad. More like a controlled power out glide.
I think the market may be pricing in a "Government Put" . A major employer filing Ch 11 would be a win for Putin.
FLYFIRSTCLASS wrote:I really do not see AA surviving, they will certainly file for bankruptcy again, and given how leveraged they are in debt ($49 billion) it will be nearly impossible to survive. Now with oil prices skyrocketing they are at a severe disadvantage to their competitors given their debt and sub-par revenue performance. I think one of the big three will liquidate and it will be AA.
Scarebus34 wrote:Airlines will try to pass on the costs to passengers - if it works, great. If not, they'll end up reducing capacity and finding other ways to cut costs. I don't suspect oil to be this high for a extended period of time - if Saudi Arabia starts pumping more and the Iran oil comes to the table that will help put downward pressure on the price. The US only imports 8% of its oil from Russia - the majority coming from Canada, Saudi Arabia, and Mexico.
If the US can remove that volatility via Iran, Saudi Arabia, or domestic production - prices will ease.
Airbuser wrote:Morale is pretty low amongst employees. Pilots were just asked (not forced yet) to cancel summer vacations for cash. After 23 years I finally have a summer vacation. This summer will be exhausting for employees. I am thinking a bankruptcy may be inevitable. If it sheds management then I am all for it. Isom is not our answer. We continue to perform worse than most our competition. We moved from 9th out of 9 to 6th out of 9 and Isom gets his salary doubled. They pat themselves on the back constantly. The only reason we moved up was because a couple got worse.
Airbuser wrote:Morale is pretty low amongst employees. Pilots were just asked (not forced yet) to cancel summer vacations for cash. After 23 years I finally have a summer vacation. This summer will be exhausting for employees. I am thinking a bankruptcy may be inevitable. If it sheds management then I am all for it. Isom is not our answer. We continue to perform worse than most our competition. We moved from 9th out of 9 to 6th out of 9 and Isom gets his salary doubled. They pat themselves on the back constantly. The only reason we moved up was because a couple got worse.
planecane wrote:MohawkWeekend wrote:planecane wrote:If AAL was nearing bankruptcy, I don't think the stock would still be holding where it is. Percentage wise it is a little closer to the pre-pandemic price than UAL and only a little lower than DAL.
No doubt, it's the weakest US major financially and I wouldn't touch the stock with a 777-9 fuselage but I don't think there is imminent danger of a collapse.
I wouldn't say the stock is holding, it's down around 25% this year alone. And around 80% since 2019. UA is about as bad. More like a controlled power out glide.
I think the market may be pricing in a "Government Put" . A major employer filing Ch 11 would be a win for Putin.
Not just a major employer but it would severely reduce competition if a major had to go Ch 7. I don't think the current administration would like the labor cost reset that Ch 11 would allow either.
If I was a debtholder, I wouldn't be excited because I think they will likely use the threat of bankruptcy to renegotiate terms. AA can't really do much to improve fuel economy. They retired all the "gas guzzlers." Most of the A319CEO and A321CEO fleet is way too new to replace with NEOs. A significant portion of the 737-800 fleet is also in the same boat with respect to the MAX.
To cut costs they would have to reduce ASMs. Of course, that also removes revenue. I can't think of many businesses that successfully shrunk to profitability.
SEAorPWM wrote:planecane wrote:MohawkWeekend wrote:
I wouldn't say the stock is holding, it's down around 25% this year alone. And around 80% since 2019. UA is about as bad. More like a controlled power out glide.
I think the market may be pricing in a "Government Put" . A major employer filing Ch 11 would be a win for Putin.
Not just a major employer but it would severely reduce competition if a major had to go Ch 7. I don't think the current administration would like the labor cost reset that Ch 11 would allow either.
If I was a debtholder, I wouldn't be excited because I think they will likely use the threat of bankruptcy to renegotiate terms. AA can't really do much to improve fuel economy. They retired all the "gas guzzlers." Most of the A319CEO and A321CEO fleet is way too new to replace with NEOs. A significant portion of the 737-800 fleet is also in the same boat with respect to the MAX.
To cut costs they would have to reduce ASMs. Of course, that also removes revenue. I can't think of many businesses that successfully shrunk to profitability.
The 777-200's are certainly gas guzzlers by today's standards, but with the A330's and 763's gone they may need the WB lift (787's are still delayed). They're around 20 year old as well.
MohawkWeekend wrote:Jet Fuel will easily be over $4 per gallon.
American burns 3 billion gallons per year.
They estimated fuel at $2.50 in 2022.
So $4.5 billion more in fuel over plan.
LAXintl wrote:Parker appeared at JP Morgan conference today and had a few comments
○ Domestic leisure demand is higher than its ever been. Had two days last week when revenues 15% above norms
○ International and domestic biz is where it falls off a cliff. Constraint not just Covid, but people not being in offices
○ Q1 capacity down 10-12% previous 8-10 due fuel cost.
○ Can make money on $100/bbl oil, just need revenues (fares) to keep up. (as reference DL said each ticket it sold would need to rise $15-20 each-way in Q2 to cover higher fuel)
○ The regional pilot shortage caused $61mil lost revenue opportunity in Q4 as flying had to be trimmed
○ Don't see pilot shortage as long-term issue for the industry.
○ Feels airline stocks are undervalued compared to future cash low. Jokingly even recommended people go out by United stock.
Airbuser wrote:Morale is pretty low amongst employees. Pilots were just asked (not forced yet) to cancel summer vacations for cash. After 23 years I finally have a summer vacation. This summer will be exhausting for employees. I am thinking a bankruptcy may be inevitable. If it sheds management then I am all for it. Isom is not our answer. We continue to perform worse than most our competition. We moved from 9th out of 9 to 6th out of 9 and Isom gets his salary doubled. They pat themselves on the back constantly. The only reason we moved up was because a couple got worse.