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tphuang
Posts: 5454
Joined: Tue Mar 14, 2017 2:04 pm

Re: Updated: American Airlines Business & Finance Discussion

Mon Oct 26, 2020 12:06 pm

Midwestindy wrote:
To be fair, ORD, PHX, & DCA have been each been brought back significantly slower than their competitors in the accompanying metros.

ORD is down around the same as LAX, and DCA is down more than LAX.

Not saying NYC/LA won't be smaller, but the current schedule isn't really indicative of very much.


According to what you post on the booking thread, DC booking is down 75% and LA booking is down 55%. Also, they do not have a partner at DCA that's adding flight. So these are not comparing apples to apples.

Since you brought up DCA, do you see AA using 80% of its DCA slots by Q2 if slot constraint goes away and the booking is still down a lot more than rest of the country? I don't.
 
AAplat4life
Posts: 326
Joined: Thu Jun 23, 2011 11:14 am

Re: Updated: American Airlines Business & Finance Discussion

Mon Oct 26, 2020 1:57 pm

I certainly can see the business case for AA prioritizing its two largest hubs. Airlines are complicated operations and management has to decide how best to keep operations in tact. Also some areas of the country are more restrictive in terms of quarantine rules for visitors and addressing the COVID pandemic, and AA appears to be putting less emphasis on those areas. Decisions have to be made and there will not always be full agreement.

That said, there’s no evidence that AA is on a better path than its competitors or is heading towards one. When it brought back capacity at higher levels, the result was a high cash burn rate. Even before COVID, AA was lagging on profitability compared to its piers. When I read some of the rambling and incomplete and sentences from the earnings call, it’s frankly unimpressive. For further analysis, there was a recent Motley’s article online.
 
Miamiairport
Posts: 738
Joined: Tue Apr 10, 2018 8:14 pm

Re: Updated: American Airlines Business & Finance Discussion

Mon Oct 26, 2020 2:39 pm

AAplat4life wrote:
I certainly can see the business case for AA prioritizing its two largest hubs. Airlines are complicated operations and management has to decide how best to keep operations in tact. Also some areas of the country are more restrictive in terms of quarantine rules for visitors and addressing the COVID pandemic, and AA appears to be putting less emphasis on those areas. Decisions have to be made and there will not always be full agreement.

That said, there’s no evidence that AA is on a better path than its competitors or is heading towards one. When it brought back capacity at higher levels, the result was a high cash burn rate. Even before COVID, AA was lagging on profitability compared to its piers. When I read some of the rambling and incomplete and sentences from the earnings call, it’s frankly unimpressive. For further analysis, there was a recent Motley’s article online.


Not to mention if WN and particularly one of the ULCCs think AA is getting a revenue premium from leisure flyers into the market they will come. They too are in survival mode.
 
MrPeanut
Posts: 205
Joined: Fri Nov 23, 2018 8:36 pm

Re: Updated: American Airlines Business & Finance Discussion

Mon Oct 26, 2020 5:44 pm

Midwestindy wrote:
MrPeanut wrote:
usflyer msp wrote:

I think you are making this into more than it is. AA's schedule in those cities is very dependent upon corporate contracts and those companies have basically no travel going on right now. When that business travel starts to resume, AA's schedule will increase.


All airlines have been impacted by covid. What is clear is that AA is adding back capacity at LAX/NYC at a much slower pace than rivals. The slow pace at which they are adding back capacity on the coasts aligns exactly with their comments on the earnings call and long term intent.


To be fair, ORD, PHX, & DCA have been each been brought back significantly slower than their competitors in the accompanying metros.

ORD is down around the same as LAX, and DCA is down more than LAX.

Not saying NYC/LA won't be smaller, but the current schedule isn't really indicative of very much.


Fair point. But what is interesting is after you take out LAX/NYC, PHX and ORD are the two hubs with the lowest AA market share. It will be interesting to see what AA’s plans are in these markets. I could see a lot of things happening.

I think WN is going to trounce on opportunities in PHX, DEN, and ORD since all are airports with no one dominant airline. The interesting thing about PHX is that WN does not have the proper aircraft to properly service the smaller communities so this gives AA some advantage, just don’t know if that advantage is significant enough for AA.

ORD could become a challenge for AA. I think WN (and to a lesser extent NK and DL) could take advantage of the slow ramp up by AA and UA to gain share.

DCA is the interesting outlier, but I think partially explained by the extension of slot exemptions.
 
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janders
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Re: Updated: American Airlines Business & Finance Discussion

Mon Oct 26, 2020 7:32 pm

:old:

As a reminder, this discussion is about AA Business and Finance -- more about dollar and cents and financial state of the carrier.

Broader discussions about routes, aircraft, hubs, and such can likely be better made in the respective fleet and network threads.
"We make war that we may live in peace." -- Aristotle
 
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AAlaxfan
Posts: 702
Joined: Tue Mar 26, 2013 7:08 am

Re: Updated: American Airlines Business & Finance Discussion

Tue Oct 27, 2020 3:21 am

Has AA released their Q3 2020 results yet? Is there a thread for that?
Grumpy. Not a dwarf, not an attitude. It's a lifestyle.
 
AAplat4life
Posts: 326
Joined: Thu Jun 23, 2011 11:14 am

Re: Updated: American Airlines Business & Finance Discussion

Tue Oct 27, 2020 12:07 pm

janders wrote:
:old:

As a reminder, this discussion is about AA Business and Finance -- more about dollar and cents and financial state of the carrier.

Broader discussions about routes, aircraft, hubs, and such can likely be better made in the respective fleet and network threads.


Fair enough, but AA’s financial challenges are a result of its network not producing enough profits to cover its expenses and perhaps debt levels, all of which could result in bankruptcy again. A similar correlation is seen in AA’s cash burn rate per day compared to its competitors, another important factor. Accordingly, a global discussion about AA’s network and hubs is relevant to its financial state.
 
Boof02671
Posts: 2269
Joined: Sun Jul 10, 2016 12:15 am

Re: Updated: American Airlines Business & Finance Discussion

Tue Oct 27, 2020 12:14 pm

AAlaxfan wrote:
Has AA released their Q3 2020 results yet? Is there a thread for that?

Last week it’s in the retirement 330-200 thread.

http://news.aa.com/news/news-details/20 ... fault.aspx
 
MrPeanut
Posts: 205
Joined: Fri Nov 23, 2018 8:36 pm

Re: Updated: American Airlines Business & Finance Discussion

Tue Oct 27, 2020 3:19 pm

AAplat4life wrote:
janders wrote:
:old:

As a reminder, this discussion is about AA Business and Finance -- more about dollar and cents and financial state of the carrier.

Broader discussions about routes, aircraft, hubs, and such can likely be better made in the respective fleet and network threads.


Fair enough, but AA’s financial challenges are a result of its network not producing enough profits to cover its expenses and perhaps debt levels, all of which could result in bankruptcy again. A similar correlation is seen in AA’s cash burn rate per day compared to its competitors, another important factor. Accordingly, a global discussion about AA’s network and hubs is relevant to its financial state.


Agreed. You cannot just talk numbers. There is context that needs to be discussed around the numbers otherwise there is no point of the thread.
 
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AAlaxfan
Posts: 702
Joined: Tue Mar 26, 2013 7:08 am

Re: Updated: American Airlines Business & Finance Discussion

Tue Oct 27, 2020 8:35 pm

Boof02671 wrote:
AAlaxfan wrote:
Has AA released their Q3 2020 results yet? Is there a thread for that?

Last week it’s in the retirement 330-200 thread.

http://news.aa.com/news/news-details/20 ... fault.aspx

Can't find anything about AA's Q3 results in that thread. Why wasn't there a dedicated thread about it like all other airlines have had? Why isn't it being discussed in this thread?
Grumpy. Not a dwarf, not an attitude. It's a lifestyle.
 
Boof02671
Posts: 2269
Joined: Sun Jul 10, 2016 12:15 am

Re: Updated: American Airlines Business & Finance Discussion

Tue Oct 27, 2020 8:36 pm

AAlaxfan wrote:
Boof02671 wrote:
AAlaxfan wrote:
Has AA released their Q3 2020 results yet? Is there a thread for that?

Last week it’s in the retirement 330-200 thread.

http://news.aa.com/news/news-details/20 ... fault.aspx

Can't find anything about AA's Q3 results in that thread. Why wasn't there a dedicated thread about it like all other airlines have had? Why isn't it being discussed in this thread?

The first post has a link.
 
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AAlaxfan
Posts: 702
Joined: Tue Mar 26, 2013 7:08 am

Re: Updated: American Airlines Business & Finance Discussion

Tue Oct 27, 2020 8:39 pm

Boof02671 wrote:
AAlaxfan wrote:
Boof02671 wrote:
Last week it’s in the retirement 330-200 thread.

http://news.aa.com/news/news-details/20 ... fault.aspx

Can't find anything about AA's Q3 results in that thread. Why wasn't there a dedicated thread about it like all other airlines have had? Why isn't it being discussed in this thread?

The first post has a link.

I saw the link. However, there is no discussion about the financial results like there have been for DL and UA.
Grumpy. Not a dwarf, not an attitude. It's a lifestyle.
 
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LAXintl
Topic Author
Posts: 24799
Joined: Wed May 24, 2000 12:12 pm

Re: Updated: American Airlines Business & Finance Discussion

Tue Oct 27, 2020 8:44 pm

Seems no one elected to post a AA Q3 earnings thread. Feel free to start one if you seek to discuss the results.
From the desert to the sea, to all of Southern California
 
Boof02671
Posts: 2269
Joined: Sun Jul 10, 2016 12:15 am

Re: Updated: American Airlines Business & Finance Discussion

Tue Oct 27, 2020 8:48 pm

LAXintl wrote:
Seems no one elected to post a AA Q3 earnings thread. Feel free to start one if you seek to discuss the results.

I posted it and the mods deleted it.
 
MIflyer12
Posts: 8485
Joined: Mon Feb 18, 2013 11:58 pm

Re: Updated: American Airlines Business & Finance Discussion

Tue Nov 10, 2020 3:40 pm

Share sale announced = Equity dilution. This represents a new issue of about 7.5% of currently outstanding shares.

(Reuters) - American Airlines Group Inc AAL.O announced a proposed underwritten public offering of 38.5 million shares of its common stock on Tuesday, as the airline looks to boost its liquidity amid falling sales during the coronavirus crisis.

Sole bookrunner Bank of America has priced the offering at $13 per share, representing a discount of 1.5% to the airline’s closing price on Monday, according to sources.

https://www.reuters.com/article/us-amer ... SKBN27Q1Z8
 
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LAXintl
Topic Author
Posts: 24799
Joined: Wed May 24, 2000 12:12 pm

Re: Updated: American Airlines Business & Finance Discussion

Tue Nov 10, 2020 5:42 pm

Let's see how long the market will have an appetite for these repeated share offerings.
From the desert to the sea, to all of Southern California
 
chonetsao
Posts: 712
Joined: Sun Nov 06, 2005 3:55 pm

Re: Updated: American Airlines Business & Finance Discussion

Tue Nov 10, 2020 6:26 pm

LAXintl wrote:
Let's see how long the market will have an appetite for these repeated share offerings.


AAL is so lucky to have the positive vaccine announcement this round. And its holdings in China Southern becomes more solid as China Southern becomes the first airline to report a profit. I can see AAL goes below $11 briefly following the equity increase, but I would not bet against them in medium term should the vaccine becomes a solid success. Still its future ties to when US will open up and modify its travel ban. So I am cautiously optimistic.
 
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LAXintl
Topic Author
Posts: 24799
Joined: Wed May 24, 2000 12:12 pm

Re: Updated: American Airlines Business & Finance Discussion

Mon Nov 16, 2020 8:44 pm

Analyst Jamie Baker and Mark Streeter see AA having to enter restructuring should cash hit $8bil mark, perhaps 4-6 months away.

In their notes per PlaneBusiness

We revised our estimate of minimum structural liquidity for American from ~$5bn to $8bn to reflect our view that if, not when but still if, American were to restructure, management would need to “go in” with higher liquidity because of the lack of assets available for DIP lenders. The $8bn estimate therefore assumes the unencumbered pantry is mostly bare. In other words, we can argue that the structural minimum liquidity is LOWER than $8bn if American management sits on its hands – and if one thing has become crystal clear over the last few months, American is likely to play this out as long as possible and has no intent to “strategically” file (so basically expect more capital raising attempts). While the American credit curve rallied/steepened last week, month/month the CDS market specifically is more pessimistic. We therefore expect the American CDS curve (and credit curve in general) to steepen further (front end rallying more on lower near-term Chapter 11 odds vs. the back end, in the case of CDS markets the 5yr contracts, remaining "stickier")."

and

Frankly, the biggest elephant in this room is, still, American's debt. It does seem the airline is fairly safe on this front – at least into the first half of 2021, unless some unforeseen event occurs that severely cuts into the passenger levels that we are currently seeing. (Average of 600K pax a day systemwide in the U.S.) And yes, this could happen if the U.S. finds itself moving into an ever-escalating level of COVID-19. But as of today, with current assumptions in hand, the airline should have enough money available that it should not have to confront the necessity of a major restructuring for perhaps another 4-6 months.
From the desert to the sea, to all of Southern California
 
MrPeanut
Posts: 205
Joined: Fri Nov 23, 2018 8:36 pm

Re: Updated: American Airlines Business & Finance Discussion

Mon Nov 16, 2020 9:41 pm

LAXintl wrote:
Analyst Jamie Baker and Mark Streeter see AA having to enter restructuring should cash hit $8bil mark, perhaps 4-6 months away.

In their notes per PlaneBusiness

We revised our estimate of minimum structural liquidity for American from ~$5bn to $8bn to reflect our view that if, not when but still if, American were to restructure, management would need to “go in” with higher liquidity because of the lack of assets available for DIP lenders. The $8bn estimate therefore assumes the unencumbered pantry is mostly bare. In other words, we can argue that the structural minimum liquidity is LOWER than $8bn if American management sits on its hands – and if one thing has become crystal clear over the last few months, American is likely to play this out as long as possible and has no intent to “strategically” file (so basically expect more capital raising attempts). While the American credit curve rallied/steepened last week, month/month the CDS market specifically is more pessimistic. We therefore expect the American CDS curve (and credit curve in general) to steepen further (front end rallying more on lower near-term Chapter 11 odds vs. the back end, in the case of CDS markets the 5yr contracts, remaining "stickier")."

and

Frankly, the biggest elephant in this room is, still, American's debt. It does seem the airline is fairly safe on this front – at least into the first half of 2021, unless some unforeseen event occurs that severely cuts into the passenger levels that we are currently seeing. (Average of 600K pax a day systemwide in the U.S.) And yes, this could happen if the U.S. finds itself moving into an ever-escalating level of COVID-19. But as of today, with current assumptions in hand, the airline should have enough money available that it should not have to confront the necessity of a major restructuring for perhaps another 4-6 months.


Interesting. He estimated $7B a few months ago, but hey what’s an additional billion. Filling BK and restructuring sooner rather than later is the better option for AA. However, given their enormous debt, BK will only be able to take care of that to a certain extent. AA will need to start looking at selling some key assets and come out of BK as a much smaller airline in my opinion.
 
MIflyer12
Posts: 8485
Joined: Mon Feb 18, 2013 11:58 pm

Re: Updated: American Airlines Business & Finance Discussion

Mon Nov 16, 2020 10:19 pm

MrPeanut wrote:
Interesting. He estimated $7B a few months ago, but hey what’s an additional billion.


The key point is that the bottom falls out way before $0. When you see statements like 'AA has 14 months of cash left at current burn rates,' the implication is one can go to zero. And they can't.

MrPeanut wrote:
However, given their enormous debt, BK will only be able to take care of that to a certain extent.


Why are they limited as to how much debt they will shed? IMHO more interesting in restructuring is the assets they will want to keep and how they argue these will produce sustainable shareholder returns.
 
Sooner787
Posts: 2727
Joined: Thu Jul 18, 2013 1:44 am

Re: Updated: American Airlines Business & Finance Discussion

Mon Nov 16, 2020 10:25 pm

I wonder if AA wishes it had a " do over card" on their decision to pour
billions of $$ into their giant new corporate campus that dominates the
skyline at the south entrance to DFW? I've noticed there is a 10-12 story
hotel /dorm building going up near the conference center, construction appears
to have stopped? It's a bare concrete frame right now
 
MrPeanut
Posts: 205
Joined: Fri Nov 23, 2018 8:36 pm

Re: Updated: American Airlines Business & Finance Discussion

Mon Nov 16, 2020 10:27 pm

MIflyer12 wrote:
MrPeanut wrote:
Interesting. He estimated $7B a few months ago, but hey what’s an additional billion.


The key point is that the bottom falls out way before $0. When you see statements like 'AA has 14 months of cash left at current burn rates,' the implication is one can go to zero. And they can't.


Yes I realize this. My point was that it increased by $1B over a short period of time. Makes me assume as if AA and/or the outlook worsened materially over the past couple months.
 
MrPeanut
Posts: 205
Joined: Fri Nov 23, 2018 8:36 pm

Re: Updated: American Airlines Business & Finance Discussion

Mon Nov 16, 2020 10:32 pm

MIflyer12 wrote:
MrPeanut wrote:
Interesting. He estimated $7B a few months ago, but hey what’s an additional billion.


The key point is that the bottom falls out way before $0. When you see statements like 'AA has 14 months of cash left at current burn rates,' the implication is one can go to zero. And they can't.

MrPeanut wrote:
However, given their enormous debt, BK will only be able to take care of that to a certain extent.


Why are they limited as to how much debt they will shed? IMHO more interesting in restructuring is the assets they will want to keep and how they argue these will produce sustainable shareholder returns.


The BK process doesn’t wipe out all debt, however, it does allow for the airline to work with creditors to restructure its obligations (ie. recast timing of payments, revisit rates, make debt holders equity holders in the new offering, etc).

Regardless of how it is ultimately restructured, AA only has $3.3B of unencumbered assets remaining, and more than 10X the amount of debt. I can’t help but think they may have to sell something to make it work. The challenge is that the environment is so bad right now that I don’t think there will be anyone willing to pick up the assets, and if so, it would be at a steep discount. As a result, they may have to hide under BK protection for a few years until the environment is better to sell assets.

We already know what they plan on keeping, so if you use that as an indication, you should be able to see what is at risk of sale.
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