American Airlines Business & Finance Discussion

FLYFIRSTCLASS · Tue Jun 28, 2022 3:43 pm

Just looking at AA's financial performance, I don't see how they can survive in their current form. AA currently has nearly 50 billion in debt, more than 2x their closest competitor. Even before covid AA's financial performance was poor compared that of its peers and ONLY made a small profit by selling credit card miles. With the onset of a major recession coming on, credit cards will be harder to sell, and a major drop in travel will also likely follow AA will struggle to make its debt payments let alone a profit. I really don't see how AA could avoid another trip to bankruptcy court. Since AA is leveraged to the hilt they will likely have to sell valuable assets like LHR slots to pay debt. Could AA be the next PanAm?

airlinepeanuts · Tue Jun 28, 2022 3:50 pm

I feel like they would’ve done it during Covid and use the pandemic ad an excuse. You’re not wrong though their books look terrible.

FLYFIRSTCLASS · Tue Jun 28, 2022 3:59 pm

I think part of AA's problem is the America West mentality. They don't seem to care about getting a revenue premium. They would rather get the once a year $49 leisure traveler than the weekly business traveler. Rip out the seat back TV's (DL and UA have them-UA is adding them back realizing it was a mistake). My niece just flew them the other day First Class PAID SJC PHX BNA. Her PHX BNA was delayed 5 hours due to no pilots, no meal voucher in PHX, and the PHXBNA flight was just a cold sandwich that looks like it came from a high school cafeteria. She had her daughter and with no PTV at the seat try and keep her entertained for 4 hours.

UA and DL seem to do better at commanding a revenue premium.

AviationLuver · Tue Jun 28, 2022 4:06 pm

FLYFIRSTCLASS wrote:
Just looking at AA's financial performance, I don't see how they can survive in their current form. AA currently has nearly 50 billion in debt, more than 2x their closest competitor. Even before covid AA's financial performance was poor compared that of its peers and ONLY made a small profit by selling credit card miles. With the onset of a major recession coming on, credit cards will be harder to sell, and a major drop in travel will also likely follow AA will struggle to make its debt payments let alone a profit. I really don't see how AA could avoid another trip to bankruptcy court. Since AA is leveraged to the hilt they will likely have to sell valuable assets like LHR slots to pay debt. Could AA be the next PanAm?

Are they close to a bankruptcy? Probably not at this time. However, they are arguably the weakest financially and most likely to file first amongst the US Carriers.

Also, your assessment of a 'Major Recession' is purely a guess, not a fact. A recession will happen. No one knows when or how severe it will be. Could be next month, could be four years from now, might be nothing but a small blip for a few months or it might last for two years.

I do wish they'd go after slightly better clientele though as another poster mentioned. The 'Good News' is that they are too big to fail at this point and won't go away. I wish that wasn't the case, but it's reality.

miami123 · Tue Jun 28, 2022 4:38 pm

My belief is that if any major airline and even one the ULCCs threaten bankruptcy the government will be there with a stymie. Just like with COVID. The airline will huff and puff, claim they will fire thousands and promise to do better and of course will be handed a no stings attached check. They won't have to pay millions anymore to bankruptcy lawyers to "grease" them through the Chapter 11 process.

Why does AA not care about premium flyers/fares? Because in actuality their real business model is being a credit card mill. The $59 Spirit flyer is the perfect person to pitch to.

JohanTally · Tue Jun 28, 2022 5:13 pm

FLYFIRSTCLASS wrote:
Just looking at AA's financial performance, I don't see how they can survive in their current form. AA currently has nearly 50 billion in debt, more than 2x their closest competitor. Even before covid AA's financial performance was poor compared that of its peers and ONLY made a small profit by selling credit card miles. With the onset of a major recession coming on, credit cards will be harder to sell, and a major drop in travel will also likely follow AA will struggle to make its debt payments let alone a profit. I really don't see how AA could avoid another trip to bankruptcy court. Since AA is leveraged to the hilt they will likely have to sell valuable assets like LHR slots to pay debt. Could AA be the next PanAm?

Will you show us a link where it shows their recent debt load near 50 billion?

Brickell305 · Tue Jun 28, 2022 5:43 pm

miami123 wrote:
My belief is that if any major airline and even one the ULCCs threaten bankruptcy the government will be there with a stymie. Just like with COVID. The airline will huff and puff, claim they will fire thousands and promise to do better and of course will be handed a no stings attached check. They won't have to pay millions anymore to bankruptcy lawyers to "grease" them through the Chapter 11 process.

Why does AA not care about premium flyers/fares? Because in actuality their real business model is being a credit card mill. The $59 Spirit flyer is the perfect person to pitch to.

I disagree on the not caring about premium pax. If they are a credit card mill, they want wealthy passengers who would spend a lot on the cards they are hawking. If Citi or Barclays determine that AAdvantage cardholders are low income/low spend, why would they want to continue with them as partners? That's part of the reason why NYC is such as important market for the airlines. It has a lot of high end passengers who would spend a lot on premium cards.

NLINK · Tue Jun 28, 2022 5:59 pm

JohanTally wrote:
FLYFIRSTCLASS wrote:
Just looking at AA's financial performance, I don't see how they can survive in their current form. AA currently has nearly 50 billion in debt, more than 2x their closest competitor. Even before covid AA's financial performance was poor compared that of its peers and ONLY made a small profit by selling credit card miles. With the onset of a major recession coming on, credit cards will be harder to sell, and a major drop in travel will also likely follow AA will struggle to make its debt payments let alone a profit. I really don't see how AA could avoid another trip to bankruptcy court. Since AA is leveraged to the hilt they will likely have to sell valuable assets like LHR slots to pay debt. Could AA be the next PanAm?

Will you show us a link where it shows their recent debt load near 50 billion?

I think it is closer to 37-38 billion in debt. (not the best source as I'm not a fan but was quick to find). They also have leases that are not included in this number. I think close to 4 billion is short term debt. American has some debt coming due also of 1.8 billion this year, a little over 4 billion in 2023, I think a little over 3 billion in 2024 and 9.3 billion in 2025. They had around 12 billion in the bank earlier this year I believe. I'm guessing they will be able to pay some of the debts down and refinance in but if a recession hits who knows.

https://seekingalpha.com/article/451702 ... ll-bad-bet

LAXintl · Tue Jun 28, 2022 6:04 pm

From latest 10Q

https://ibb.co/PFC3qL9

tlecam · Tue Jun 28, 2022 6:07 pm

JohanTally wrote:
FLYFIRSTCLASS wrote:
Just looking at AA's financial performance, I don't see how they can survive in their current form. AA currently has nearly 50 billion in debt, more than 2x their closest competitor. Even before covid AA's financial performance was poor compared that of its peers and ONLY made a small profit by selling credit card miles. With the onset of a major recession coming on, credit cards will be harder to sell, and a major drop in travel will also likely follow AA will struggle to make its debt payments let alone a profit. I really don't see how AA could avoid another trip to bankruptcy court. Since AA is leveraged to the hilt they will likely have to sell valuable assets like LHR slots to pay debt. Could AA be the next PanAm?

Will you show us a link where it shows their recent debt load near 50 billion?

https://www.macrotrends.net/stocks/char ... uity-ratio

You will also note that AAL has a negative debt/equity ratio because it has negative equity. It’s not a completely unmanageable situation, and bankruptcy isn’t a foregone conclusion, but it’s going to require discipline, operational excellence and prudent, pragmatic leadership to dig out.

IFLYUA767 · Tue Jun 28, 2022 7:01 pm

FLYFIRSTCLASS wrote:
Just looking at AA's financial performance, I don't see how they can survive in their current form. AA currently has nearly 50 billion in debt, more than 2x their closest competitor. Even before covid AA's financial performance was poor compared that of its peers and ONLY made a small profit by selling credit card miles. With the onset of a major recession coming on, credit cards will be harder to sell, and a major drop in travel will also likely follow AA will struggle to make its debt payments let alone a profit. I really don't see how AA could avoid another trip to bankruptcy court. Since AA is leveraged to the hilt they will likely have to sell valuable assets like LHR slots to pay debt. Could AA be the next PanAm?

While AA has a high debt load most of it is long term debt. I’m not a finance expert but that’s just what I have read. A second bankruptcy may be possible but who knows.

Selling their LHR slots would be like chopping off their right arm. Those slots are probably one of their most valuable assets. It would do more harm than good.

AA has a lot of potential and I think they can get out of this mess. They have valuable assets such as the MIA hub, CLT hub, LHR slots and probably one of the strongest domestic networks. Their leadership needs to drop the AWA/US mentality and realize that they are supposed to be running a global carrier.

One more thing I will add is that by the end of Pan Am in 1991 they had no valuable assets left. They had sold all of them off to UA and DL. It had pretty much been reduced to a carcass.

tlecam · Tue Jun 28, 2022 7:44 pm

IFLYUA767 wrote:
FLYFIRSTCLASS wrote:
Just looking at AA's financial performance, I don't see how they can survive in their current form. AA currently has nearly 50 billion in debt, more than 2x their closest competitor. Even before covid AA's financial performance was poor compared that of its peers and ONLY made a small profit by selling credit card miles. With the onset of a major recession coming on, credit cards will be harder to sell, and a major drop in travel will also likely follow AA will struggle to make its debt payments let alone a profit. I really don't see how AA could avoid another trip to bankruptcy court. Since AA is leveraged to the hilt they will likely have to sell valuable assets like LHR slots to pay debt. Could AA be the next PanAm?

While AA has a high debt load most of it is long term debt. I’m not a finance expert but that’s just what I have read. A second bankruptcy may be possible but who knows.

Selling their LHR slots would be like chopping off their right arm. Those slots are probably one of their most valuable assets. It would do more harm than good.

AA has a lot of potential and I think they can get out of this mess. They have valuable assets such as the MIA hub, CLT hub, LHR slots and probably one of the strongest domestic networks. Their leadership needs to drop the AWA/US mentality and realize that they are supposed to be running a global carrier.

One more thing I will add is that by the end of Pan Am in 1991 they had no valuable assets left. They had sold all of them off to UA and DL. It had pretty much been reduced to a carcass.

Long term debt is about $35B. Total liabilities are $76B.

IFLYUA767 · Tue Jun 28, 2022 8:05 pm

tlecam wrote:
IFLYUA767 wrote:
FLYFIRSTCLASS wrote:
Just looking at AA's financial performance, I don't see how they can survive in their current form. AA currently has nearly 50 billion in debt, more than 2x their closest competitor. Even before covid AA's financial performance was poor compared that of its peers and ONLY made a small profit by selling credit card miles. With the onset of a major recession coming on, credit cards will be harder to sell, and a major drop in travel will also likely follow AA will struggle to make its debt payments let alone a profit. I really don't see how AA could avoid another trip to bankruptcy court. Since AA is leveraged to the hilt they will likely have to sell valuable assets like LHR slots to pay debt. Could AA be the next PanAm?

While AA has a high debt load most of it is long term debt. I’m not a finance expert but that’s just what I have read. A second bankruptcy may be possible but who knows.

Selling their LHR slots would be like chopping off their right arm. Those slots are probably one of their most valuable assets. It would do more harm than good.

AA has a lot of potential and I think they can get out of this mess. They have valuable assets such as the MIA hub, CLT hub, LHR slots and probably one of the strongest domestic networks. Their leadership needs to drop the AWA/US mentality and realize that they are supposed to be running a global carrier.

One more thing I will add is that by the end of Pan Am in 1991 they had no valuable assets left. They had sold all of them off to UA and DL. It had pretty much been reduced to a carcass.

Long term debt is about $35B. Total liabilities are $76B.

Thank you. In your opinion would you say that is alarming or no?

texl1649 · Tue Jun 28, 2022 8:13 pm

I'd be pretty surprised if AA filed in the next 12 months, barring a further global meltdown/additional pandemic etc. As everyone has stated long term debt is a problem, but it's not really that unmanageable. Cash flow they are able to sustain, and while stock price at $13 (under $10 billion in capitalization) is pretty terrible vs. a 5 year high price of $54, it also could portend a leveraged buyout (though it's in the middle of the 52 week range right now).

They're still only around 60 percent of 2019 revenues, back when they were cash flow/earnings positive. TOTAL debt has gone from 24 to 40 billion in that timeframe, but actual lease costs have dropped.

https://finance.yahoo.com/quote/AAL/balance-sheet?p=AAL

Frankly, I'd guess they could scale back further from regional flying and save some cost there. They have some older A319's and 777's, not sure how quickly those are slated to be replaced/what interest costs etc.

Etheereal · Tue Jun 28, 2022 8:20 pm

Didnt Dougie say that AA would never lose money again? That was pre covid, yes.

tlecam · Tue Jun 28, 2022 8:22 pm

IFLYUA767 wrote:
tlecam wrote:
IFLYUA767 wrote:

While AA has a high debt load most of it is long term debt. I’m not a finance expert but that’s just what I have read. A second bankruptcy may be possible but who knows.

Selling their LHR slots would be like chopping off their right arm. Those slots are probably one of their most valuable assets. It would do more harm than good.

AA has a lot of potential and I think they can get out of this mess. They have valuable assets such as the MIA hub, CLT hub, LHR slots and probably one of the strongest domestic networks. Their leadership needs to drop the AWA/US mentality and realize that they are supposed to be running a global carrier.

One more thing I will add is that by the end of Pan Am in 1991 they had no valuable assets left. They had sold all of them off to UA and DL. It had pretty much been reduced to a carcass.

Long term debt is about $35B. Total liabilities are $76B.

Thank you. In your opinion would you say that is alarming or no?

I think it’s on the “watch” list. I have no inside info, but I highly doubt that AAL is at risk of near term chapter 7 or 11. I do think that they have to get debt down and equity up (stating the obvious), and they’ll need to be very disciplined and operationally sound to do so. The debt will probably limit some flexibility and it will impact their creditworthiness, which in turn impacts the rates that they’ll get for credit / loans.

I’m not sure if this link will work, but it shows the stock performance of AAL, DAL, UAL and LUV. What is most concerning to me is the period before COVID when AAL’s stock was clearly declining in value in a way that the other three were not. This signals that the long term outlook of AAL during “normal” (e.g. non-pandemic) times was not attractive to investors in a way that was different from the sector at large. That tells me that there’s trouble that needs to be addressed, but not that imminent failure is upon us.

https://finance.yahoo.com/chart/DAL#eyJ ... pudWxsfQ--

TYWoolman · Tue Jun 28, 2022 8:37 pm

No wonder AA is on crutches:

Alaska under one arm and B6 under the other.

TYWoolman · Tue Jun 28, 2022 8:50 pm

In the long run I do think there is room for only two large legacies. United will be one of them. The fight to be had is between AA and DL. It has commenced pre-covid.

IMO.

onwFan · Tue Jun 28, 2022 9:01 pm

TYWoolman wrote:
No wonder AA is on crutches:

Alaska under one arm and B6 under the other.

Nothing but pure weird imagination.

TYWoolman · Tue Jun 28, 2022 9:13 pm

onwFan wrote:
TYWoolman wrote:
No wonder AA is on crutches:

Alaska under one arm and B6 under the other.

Nothing but pure weird imagination.

There you are! Gotta keep it interesting!

MLIAA · Tue Jun 28, 2022 9:16 pm

TYWoolman wrote:
In the long run I do think there is room for only two large legacies. United will be one of them. The fight to be had is between AA and DL. It has commenced pre-covid.

IMO.

China has 3. The EU has 3, along with 3 ULCCs. I like to hope that 3 can work as it has worked well in the last decade. Any more consolidation would be terrible for the consumer.

SESGDL · Tue Jun 28, 2022 9:17 pm

TYWoolman wrote:
In the long run I do think there is room for only two large legacies. United will be one of them. The fight to be had is between AA and DL. It has commenced pre-covid.

IMO.

Huh? Why United? DL has been the healthier carrier for more than a decade. Operational meltdowns and DL’s still making twice the earnings that UA is.

Jeremy

TYWoolman · Tue Jun 28, 2022 9:26 pm

SESGDL wrote:
TYWoolman wrote:
In the long run I do think there is room for only two large legacies. United will be one of them. The fight to be had is between AA and DL. It has commenced pre-covid.

IMO.

Huh? Why United? DL has been the healthier carrier for more than a decade. Operational meltdowns and DL’s still making twice the earnings that UA is.

Jeremy

United is one. Delta the other. But United I think has the sought-after hubs in place...Untapped route structure potential, great hub airports for business and leisure with sustainable reach internationally in all directions. Getting their priorities in line a bit.

MLIAA · Tue Jun 28, 2022 9:54 pm

TYWoolman wrote:
SESGDL wrote:
TYWoolman wrote:
In the long run I do think there is room for only two large legacies. United will be one of them. The fight to be had is between AA and DL. It has commenced pre-covid.

IMO.

Huh? Why United? DL has been the healthier carrier for more than a decade. Operational meltdowns and DL’s still making twice the earnings that UA is.

Jeremy

United is one. Delta the other. But United I think has the sought-after hubs in place...Untapped route structure potential, great hub airports for business and leisure with sustainable reach internationally in all directions. Getting their priorities in line a bit.

Miami and Dallas/Fort Worth would beg to differ.

IrishAyes · Tue Jun 28, 2022 10:03 pm

AA is going to be turbulent under its current leadership regime. The fish stinks from the head. As long as the sentiment towards Isom remains where it is, then the airline is going to continually underperform.

Personally, for an airline that has had so many opportunities to learn from its past mistakes, the carrier continues to fall prey to the same behavior while expecting a different outcome every time.

Midwestindy · Tue Jun 28, 2022 10:33 pm

texl1649 wrote:
I'd be pretty surprised if AA filed in the next 12 months, barring a further global meltdown/additional pandemic etc. As everyone has stated long term debt is a problem, but it's not really that unmanageable. Cash flow they are able to sustain, and while stock price at $13 (under $10 billion in capitalization) is pretty terrible vs. a 5 year high price of $54, it also could portend a leveraged buyout (though it's in the middle of the 52 week range right now).

They're still only around 60 percent of 2019 revenues, back when they were cash flow/earnings positive. TOTAL debt has gone from 24 to 40 billion in that timeframe, but actual lease costs have dropped.

https://finance.yahoo.com/quote/AAL/balance-sheet?p=AAL

Frankly, I'd guess they could scale back further from regional flying and save some cost there. They have some older A319's and 777's, not sure how quickly those are slated to be replaced/what interest costs etc.

As you say, it is manageable.

I'd imagine they will even try to get ahead of their debt repayment targets this year, given their expected profits in Q2 & Q3 are well ahead of expectations compared to when they set out in their guide.

SESGDL wrote:
TYWoolman wrote:
In the long run I do think there is room for only two large legacies. United will be one of them. The fight to be had is between AA and DL. It has commenced pre-covid.

IMO.

Huh? Why United? DL has been the healthier carrier for more than a decade. Operational meltdowns and DL’s still making twice the earnings that UA is.

Jeremy

Q2 DL's projected margin is 13.5%, UA's is 11%. Sheer profit doesn't mean anything without looking at the margin.
https://d18rn0p25nwr6d.cloudfront.net/C ... 5c3200.pdf

SESGDL · Tue Jun 28, 2022 11:03 pm

Midwestindy wrote:
texl1649 wrote:
I'd be pretty surprised if AA filed in the next 12 months, barring a further global meltdown/additional pandemic etc. As everyone has stated long term debt is a problem, but it's not really that unmanageable. Cash flow they are able to sustain, and while stock price at $13 (under $10 billion in capitalization) is pretty terrible vs. a 5 year high price of $54, it also could portend a leveraged buyout (though it's in the middle of the 52 week range right now).

They're still only around 60 percent of 2019 revenues, back when they were cash flow/earnings positive. TOTAL debt has gone from 24 to 40 billion in that timeframe, but actual lease costs have dropped.

https://finance.yahoo.com/quote/AAL/balance-sheet?p=AAL

Frankly, I'd guess they could scale back further from regional flying and save some cost there. They have some older A319's and 777's, not sure how quickly those are slated to be replaced/what interest costs etc.

As you say, it is manageable.

I'd imagine they will even try to get ahead of their debt repayment targets this year, given their expected profits in Q2 & Q3 are well ahead of expectations compared to when they set out in their guide.

SESGDL wrote:
TYWoolman wrote:
In the long run I do think there is room for only two large legacies. United will be one of them. The fight to be had is between AA and DL. It has commenced pre-covid.

IMO.

Huh? Why United? DL has been the healthier carrier for more than a decade. Operational meltdowns and DL’s still making twice the earnings that UA is.

Jeremy

Q2 DL's projected margin is 13.5%, UA's is 11%. Sheer profit doesn't mean anything without looking at the margin.
https://d18rn0p25nwr6d.cloudfront.net/C ... 5c3200.pdf

My statement was correct. I never said margins. And DL’s is still projected to be higher than UA’s so I’m not understanding your point. DL has consistently outperformed UA and AA; and using your numbers, still is.

Jeremy

Midwestindy · Tue Jun 28, 2022 11:10 pm

SESGDL wrote:
Midwestindy wrote:
texl1649 wrote:
I'd be pretty surprised if AA filed in the next 12 months, barring a further global meltdown/additional pandemic etc. As everyone has stated long term debt is a problem, but it's not really that unmanageable. Cash flow they are able to sustain, and while stock price at $13 (under $10 billion in capitalization) is pretty terrible vs. a 5 year high price of $54, it also could portend a leveraged buyout (though it's in the middle of the 52 week range right now).

They're still only around 60 percent of 2019 revenues, back when they were cash flow/earnings positive. TOTAL debt has gone from 24 to 40 billion in that timeframe, but actual lease costs have dropped.

https://finance.yahoo.com/quote/AAL/balance-sheet?p=AAL

Frankly, I'd guess they could scale back further from regional flying and save some cost there. They have some older A319's and 777's, not sure how quickly those are slated to be replaced/what interest costs etc.

As you say, it is manageable.

I'd imagine they will even try to get ahead of their debt repayment targets this year, given their expected profits in Q2 & Q3 are well ahead of expectations compared to when they set out in their guide.

SESGDL wrote:

Huh? Why United? DL has been the healthier carrier for more than a decade. Operational meltdowns and DL’s still making twice the earnings that UA is.

Jeremy

Q2 DL's projected margin is 13.5%, UA's is 11%. Sheer profit doesn't mean anything without looking at the margin.
https://d18rn0p25nwr6d.cloudfront.net/C ... 5c3200.pdf

My statement was correct. I never said margins. And DL’s is still projected to be higher than UA’s so I’m not understanding your point. DL has consistently outperformed UA and AA; and using your numbers, still is.

Jeremy

You said "twice the earnings"..... DL is not 2x, it's that simple.

HunterATL · Tue Jun 28, 2022 11:13 pm

Midwestindy wrote:
SESGDL wrote:
Midwestindy wrote:

As you say, it is manageable.

I'd imagine they will even try to get ahead of their debt repayment targets this year, given their expected profits in Q2 & Q3 are well ahead of expectations compared to when they set out in their guide.

Q2 DL's projected margin is 13.5%, UA's is 11%. Sheer profit doesn't mean anything without looking at the margin.
https://d18rn0p25nwr6d.cloudfront.net/C ... 5c3200.pdf

My statement was correct. I never said margins. And DL’s is still projected to be higher than UA’s so I’m not understanding your point. DL has consistently outperformed UA and AA; and using your numbers, still is.

Jeremy

You said "twice the earnings"..... DL is not 2x, it's that simple.

The consensus is that DL's earnings with be about equal to UA's and AA's combined and close to twice each.

Midwestindy · Tue Jun 28, 2022 11:22 pm

HunterATL wrote:
Midwestindy wrote:
SESGDL wrote:

My statement was correct. I never said margins. And DL’s is still projected to be higher than UA’s so I’m not understanding your point. DL has consistently outperformed UA and AA; and using your numbers, still is.

Jeremy

You said "twice the earnings"..... DL is not 2x, it's that simple.

The consensus is that DL's earnings with be about equal to UA's and AA's combined and close to twice each.

As I just said earnings are based on margin or EPS.

DL is not 2x UA in either.

The $ amount of profit doesn't mean anything without context. Ex: Company A makes $100M profit per year, but only has a margin of 1%. Is not the same as company B making 100M profit, at a margin of 50%.

HunterATL · Tue Jun 28, 2022 11:24 pm

Midwestindy wrote:
HunterATL wrote:
Midwestindy wrote:

You said "twice the earnings"..... DL is not 2x, it's that simple.

The consensus is that DL's earnings with be about equal to UA's and AA's combined and close to twice each.

As I just said earnings are based on margin or EPS.

DL is not 2x UA in either.

Earnings are not based on margin. Margin is based on earnings.

These are the present analysts' estimates for Q2 earnings:

AA - $435.2m
AS - $219.5m
DL - $1,064m
G4 - $43.1m
UA - $601.0m

capejet · Tue Jun 28, 2022 11:32 pm

One thing I find amazing is how bad AA's baggage handling is compare to DL/UA/WN. It seems they do not even try to improve it. How much money do they spend every year delivering bags that do not arrive on the correct flight, and replacing bags that are never found?

Midwestindy · Tue Jun 28, 2022 11:44 pm

HunterATL wrote:
Midwestindy wrote:
HunterATL wrote:

The consensus is that DL's earnings with be about equal to UA's and AA's combined and close to twice each.

As I just said earnings are based on margin or EPS.

DL is not 2x UA in either.

Earnings are not based on margin. Margin is based on earnings.

These are the present analysts' estimates for Q2 earnings:

AA - $435.2m
AS - $219.5m
DL - $1,064m
G4 - $43.1m
UA - $601.0m

You are proving my point, these numbers don't mean much without context.

Looking at these numbers you would think G4 & AS are the least profitable. That's not the case, in fact AS is guiding double digit margin in Q2.
https://investor.alaskaair.com/static-f ... 75431318c7

Let's just go straight to the basics:

"However, absolute numbers—like $X million worth of gross sales, $Y thousand business expenses, or $Z earnings—fail to provide a clear and realistic picture of a business’ profitability and performance. Several different quantitative measures are used to compute the gains (or losses) a business generates, which makes it easier to assess the performance of a business over different time periods or compare it against competitors. These measures are called profit margin."

https://www.investopedia.com/terms/p/profitmargin.asp

HunterATL · Tue Jun 28, 2022 11:49 pm

Midwestindy wrote:
HunterATL wrote:
Midwestindy wrote:

As I just said earnings are based on margin or EPS.

DL is not 2x UA in either.

Earnings are not based on margin. Margin is based on earnings.

These are the present analysts' estimates for Q2 earnings:

AA - $435.2m
AS - $219.5m
DL - $1,064m
G4 - $43.1m
UA - $601.0m

You are proving my point, these numbers don't mean much without context.

Looking at these numbers you would think G4 & AS are the least profitable. That's not the case, in fact AS is guiding double digit margin in Q2.
https://investor.alaskaair.com/static-f ... 75431318c7

Let's just go straight to the basics:

"However, absolute numbers—like $X million worth of gross sales, $Y thousand business expenses, or $Z earnings—fail to provide a clear and realistic picture of a business’ profitability and performance. Several different quantitative measures are used to compute the gains (or losses) a business generates, which makes it easier to assess the performance of a business over different time periods or compare it against competitors. These measures are called profit margin."

https://www.investopedia.com/terms/p/profitmargin.asp

I have done no such thing. You have simply failed to look up the analysts estimates of revenues and then calculated estimated margin, if you care so much about margin. And you have repeatedly misstated how margin is calculated. The US3 are going to be close on the revenue side but very different on the earnings side.

Midwestindy · Wed Jun 29, 2022 12:20 am

HunterATL wrote:
Midwestindy wrote:
HunterATL wrote:

Earnings are not based on margin. Margin is based on earnings.

These are the present analysts' estimates for Q2 earnings:

AA - $435.2m
AS - $219.5m
DL - $1,064m
G4 - $43.1m
UA - $601.0m

You are proving my point, these numbers don't mean much without context.

Looking at these numbers you would think G4 & AS are the least profitable. That's not the case, in fact AS is guiding double digit margin in Q2.
https://investor.alaskaair.com/static-f ... 75431318c7

Let's just go straight to the basics:

"However, absolute numbers—like $X million worth of gross sales, $Y thousand business expenses, or $Z earnings—fail to provide a clear and realistic picture of a business’ profitability and performance. Several different quantitative measures are used to compute the gains (or losses) a business generates, which makes it easier to assess the performance of a business over different time periods or compare it against competitors. These measures are called profit margin."

https://www.investopedia.com/terms/p/profitmargin.asp

I have done no such thing. You have simply failed to look up the analysts estimates of revenues and then calculated estimated margin, if you care so much about margin. And you have repeatedly misstated how margin is calculated. The US3 are going to be close on the revenue side but very different on the earnings side.

I'm not going to keep going back and forth on this. Margin is how you evaluate earnings, not sheer the $ amount. I even posted a link above if you don't understand how earnings should be evaluated.

I have looked at margin, and posted many of the margins by airline in this thread, but I'll do it again.

Q2:
DAL - 13-14%
ALGT - 12% (guidance higher now, since guidance given in early May)
AS - "Double digit"
UAL - 10%
AAL - 4-6%

https://americanairlines.gcs-web.com/st ... b7590e4ea5
https://d18rn0p25nwr6d.cloudfront.net/C ... 5c3200.pdf
https://investor.alaskaair.com/static-f ... 75431318c7
https://ir.united.com/static-files/84b6 ... 14c0d331b6
https://www.marketscreener.com/quote/st ... -40275351/

SESGDL · Wed Jun 29, 2022 1:13 am

HunterATL wrote:
Midwestindy wrote:
HunterATL wrote:

The consensus is that DL's earnings with be about equal to UA's and AA's combined and close to twice each.

As I just said earnings are based on margin or EPS.

DL is not 2x UA in either.

Earnings are not based on margin. Margin is based on earnings.

These are the present analysts' estimates for Q2 earnings:

AA - $435.2m
AS - $219.5m
DL - $1,064m
G4 - $43.1m
UA - $601.0m

Thank you. He’s grasping at straws.

Jeremy

SESGDL · Wed Jun 29, 2022 1:18 am

Midwestindy wrote:
HunterATL wrote:
Midwestindy wrote:

You are proving my point, these numbers don't mean much without context.

Looking at these numbers you would think G4 & AS are the least profitable. That's not the case, in fact AS is guiding double digit margin in Q2.
https://investor.alaskaair.com/static-f ... 75431318c7

Let's just go straight to the basics:

"However, absolute numbers—like $X million worth of gross sales, $Y thousand business expenses, or $Z earnings—fail to provide a clear and realistic picture of a business’ profitability and performance. Several different quantitative measures are used to compute the gains (or losses) a business generates, which makes it easier to assess the performance of a business over different time periods or compare it against competitors. These measures are called profit margin."

https://www.investopedia.com/terms/p/profitmargin.asp

I have done no such thing. You have simply failed to look up the analysts estimates of revenues and then calculated estimated margin, if you care so much about margin. And you have repeatedly misstated how margin is calculated. The US3 are going to be close on the revenue side but very different on the earnings side.

I'm not going to keep going back and forth on this. Margin is how you evaluate earnings, not sheer the $ amount. I even posted a link above if you don't understand how earnings should be evaluated.

I have looked at margin, and posted many of the margins by airline in this thread, but I'll do it again.

Q2:
DAL - 13-14%
ALGT - 12% (guidance higher now, since guidance given in early May)
AS - "Double digit"
UAL - 10%
AAL - 4-6%

https://americanairlines.gcs-web.com/st ... b7590e4ea5
https://d18rn0p25nwr6d.cloudfront.net/C ... 5c3200.pdf
https://investor.alaskaair.com/static-f ... 75431318c7
https://ir.united.com/static-files/84b6 ... 14c0d331b6
https://www.marketscreener.com/quote/st ... -40275351/

Margin is not the only way that earnings are evaluated. Please show us where this is explicitly stated, especially as it relates to a debate on airliners.net. This is quite the reach. DL will literally earn almost twice as much as UA and AA, that’s a factual statement that their combined earnings will be about equal with DL’s. But that apparently doesn’t matter, right? Only margin? Okay. Reaching… It’s sad when favoritism for one airline or another clouds judgment.

Jeremy

jsnww81 · Wed Jun 29, 2022 1:18 am

capejet wrote:
One thing I find amazing is how bad AA's baggage handling is compare to DL/UA/WN. It seems they do not even try to improve it. How much money do they spend every year delivering bags that do not arrive on the correct flight, and replacing bags that are never found?

AA has been terrible with baggage forever. It's not so bad at outstations, but if you're ending your flight in a hub city it is almost always a MINIMUM of an hour's wait. Usually longer in Miami and Chicago.

They've never even bothered offering a baggage guarantee like Alaska or Delta because they'd go bankrupt paying everyone, which means they *know* how awful they are.

I've been an Exec Plat for a decade and I complain about this every single time I'm sent a survey or contacted by the loyalty team. I was optimistic that the merger might bring in some better practices, but it appears to be the one aspect of LAA that Team Tempe decided to retain.

jfk777 · Wed Jun 29, 2022 3:04 pm

Why would AA even entertain selling their LHR slots ? Then who is going to buy them, in 1991 there were many US airlines now there are 5. United will not since they purchased Pan Am's slots and they have a boatload already. Delta might, but why pay for something they get with their Virgin Atlantic JV and 49% ownership. Southwest has the means but they don't fly to Europe. JB would love to buy AA slots but could they pay such a price ?

Heathrow is also now open to all airlines which is different then in TWA and PA days when they had a duopoly. Any airline can buy a slots at LHR. What airline has sold off an entire ocean or continent and lived or thrived from it? None in the USA.

Polot · Wed Jun 29, 2022 3:07 pm

jfk777 wrote:
Why would AA even entertain selling their LHR slots ? Then who is going to buy them, in 1991 there were many US airlines now there are 5. United will not since they purchased Pan Am's slots and they have a boatload already. Delta might, but why pay for something they get with their Virgin Atlantic JV and 49% ownership. Southwest has the means but they don't fly to Europe. JB would love to buy AA slots but could they pay such a price ?

Heathrow is also now open to all airlines which is different then in TWA and PA days when they had a duopoly. Any airline can buy a slots at LHR. What airline has sold off an entire ocean or continent and lived or thrived from it? None in the USA.

While I don’t think AA will sell any LHR slots if they were to do so AA are by no means required to sell to a US or UK airline…

jfk777 · Wed Jun 29, 2022 3:49 pm

Polot wrote:
jfk777 wrote:
Why would AA even entertain selling their LHR slots ? Then who is going to buy them, in 1991 there were many US airlines now there are 5. United will not since they purchased Pan Am's slots and they have a boatload already. Delta might, but why pay for something they get with their Virgin Atlantic JV and 49% ownership. Southwest has the means but they don't fly to Europe. JB would love to buy AA slots but could they pay such a price ?

Heathrow is also now open to all airlines which is different then in TWA and PA days when they had a duopoly. Any airline can buy a slots at LHR. What airline has sold off an entire ocean or continent and lived or thrived from it? None in the USA.

While I don’t think AA will sell any LHR slots if they were to do so AA are by no means required to sell to a US or UK airline…

Part of what AA purchased from TWA were the "landing rights" and slots. Landing Rights are given by the US Government so it would be hard to separate the two. AA could sell a "surplus" single slot in a "one-off" transaction.

Etheereal · Wed Jun 29, 2022 4:36 pm

IrishAyes wrote:
AA is going to be turbulent under its current leadership regime. The fish stinks from the head. As long as the sentiment towards Isom remains where it is, then the airline is going to continually underperform.

Personally, for an airline that has had so many opportunities to learn from its past mistakes, the carrier continues to fall prey to the same behavior while expecting a different outcome every time.

That's where you (or them) are wrong. They dont consider those as mistakes but as their strengths™, so they continue to dig themselves deeper and deeper.

DP may not be the CEO anymore, but the beancounters and other people in charge continue going for his greAAtness vision.

Polot · Wed Jun 29, 2022 4:38 pm

jfk777 wrote:
Polot wrote:
jfk777 wrote:
Why would AA even entertain selling their LHR slots ? Then who is going to buy them, in 1991 there were many US airlines now there are 5. United will not since they purchased Pan Am's slots and they have a boatload already. Delta might, but why pay for something they get with their Virgin Atlantic JV and 49% ownership. Southwest has the means but they don't fly to Europe. JB would love to buy AA slots but could they pay such a price ?

Heathrow is also now open to all airlines which is different then in TWA and PA days when they had a duopoly. Any airline can buy a slots at LHR. What airline has sold off an entire ocean or continent and lived or thrived from it? None in the USA.

While I don’t think AA will sell any LHR slots if they were to do so AA are by no means required to sell to a US or UK airline…

Part of what AA purchased from TWA were the "landing rights" and slots. Landing Rights are given by the US Government so it would be hard to separate the two. AA could sell a "surplus" single slot in a "one-off" transaction.

The US and UK have an open skies agreement now, unlike in the early 90s. Those “landing rights” are now valueless and can easily be separated from slots. Any US (or UK airline) can fly to LHR from any US city no matter how many other airlines are also flying the route.

That’s why when UA sold JFK-London rights to DL in 2006 for $21m the deal was structured so DL only paid $13m upfront and then $2m annually for the four years after as long as there was no new air agreement opening up London-JFK to new entrants: https://www.travelweekly.com/Travel-New ... s-to-Delta

Because with an open skies landing rights gets handed out like candy as long as you ask for it.

UPlog · Fri Jul 22, 2022 3:33 pm

Story on how flying planes, and selling tickets, doesn’t generate profit for American Airlines. Instead, the AAdvantage loyalty program is responsible for all of American’s profits.

https://viewfromthewing.com/american-ai ... ing-miles/

American generated $1 billion in cash from selling miles for the second quarter alone and recognized $740 million as immediate revenue, CEO Robert Isom noted cobrand card revenues are growing at a greater rate than ever before.

Obviously, a loyalty program is nothing without the airline, but pretty amazing how the program has become the cash cow for airlines, while the airline operation itself becomes big expense line item.

BA744PHX · Fri Jul 22, 2022 4:22 pm

Etheereal wrote:
Didnt Dougie say that AA would never lose money again? That was pre covid, yes.

Yes PRE COVID, what’s your point?

LAXintl · Fri Jul 22, 2022 5:13 pm

UPlog wrote:
Story on how flying planes, and selling tickets, doesn’t generate profit for American Airlines. Instead, the AAdvantage loyalty program is responsible for all of American’s profits.

https://viewfromthewing.com/american-ai ... ing-miles/

American generated $1 billion in cash from selling miles for the second quarter alone and recognized $740 million as immediate revenue, CEO Robert Isom noted cobrand card revenues are growing at a greater rate than ever before.

Obviously, a loyalty program is nothing without the airline, but pretty amazing how the program has become the cash cow for airlines, while the airline operation itself becomes big expense line item.

With the changes to AAdvantage this year, the credit card spend component has become even more important and likely a good part of that revenue increase Isom is referring to.

The way things are headed these airlines will become loyalty enterprises with a sideline transportation business.

MohawkWeekend · Fri Jul 22, 2022 5:29 pm

Unless someone has evidence to the contrary, none of the airlines (with the exception of perhaps SW and the ULCC's) would be profitable without the revenue from the loyalty programs. Delta will gets $5 billion this year from AMEX - they certainly won't have $5 billion in profits.

What would happen if the tax law was changed to make awards taxable? It was a popular discussion in the 90's.

tlecam · Fri Jul 22, 2022 6:15 pm

UPlog wrote:
Story on how flying planes, and selling tickets, doesn’t generate profit for American Airlines. Instead, the AAdvantage loyalty program is responsible for all of American’s profits.

https://viewfromthewing.com/american-ai ... ing-miles/

American generated $1 billion in cash from selling miles for the second quarter alone and recognized $740 million as immediate revenue, CEO Robert Isom noted cobrand card revenues are growing at a greater rate than ever before.

Obviously, a loyalty program is nothing without the airline, but pretty amazing how the program has become the cash cow for airlines, while the airline operation itself becomes big expense line item.

Interesting article, although it is a dynamic that isn't unique to airlines. For example, many insurance companies lose money on their underwriting and claims performance, but are profitable from other revenue streams like investment returns. The author's analysis seems a bit naive to me in that context.

MohawkWeekend · Sat Jul 23, 2022 1:21 pm

Like insurance companies have the risk of investment downturns, airlines run the risk that the use of credit cards tied to airline loyalty programs fall off. Say if airlines make using points even harder then it is now.

Everybody needs insurance so demand is relatively inelastic. Insurance companies are able to raise rates and cancel unprofitable underwriting if they are losing money on investments.
Airlines are capital and labor intensive. And air travel is mostly discretionary. IMO It's ability to cut costs quickly outside of bankruptcy is limited.

And that might be why Wall Street continues to crush airline stocks.

IFLYUA767 · Mon Aug 08, 2022 4:39 pm

CFO Derek Kerr talked about AA’s balance sheet in an interview today. Looks like they are going to be holding on to their liquidity for a little while longer.

https://sports.yahoo.com/american-airli ... 50955.html

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