elmothehobo
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AA Reports 1Q16 Results

Fri Apr 22, 2016 12:00 pm

American Airlines reports Q1 2016 income of $700 Million on revenues of $9.44 billion, (barely) beating analyst estimates of $9.43 Billion.

http://cnb.cx/1SVh1Ua
 
bourbon
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RE: AA Reports 1Q16 Results

Fri Apr 22, 2016 12:48 pm

Pre Tax profit of $1.2 Billion. Net income of $765 million.
 
winginit
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RE: AA Reports 1Q16 Results

Fri Apr 22, 2016 2:00 pm

Better than United, but if we've learned anything these past few days it's that DL truly is head and shoulders above the competition in how they're running their business (granted, having merged years prior to that same competition)
 
Prost
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RE: AA Reports 1Q16 Results

Fri Apr 22, 2016 3:36 pm

If DL is head and shoulders above UA and AA, then WN, AS, NK, and G4 have climbed the ladder and gone to a different floor. There are benefits to being a massive global airline, but getting the highest return on invested capital doesn't appear to be one of them.
 
Flighty
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RE: AA Reports 1Q16 Results

Fri Apr 22, 2016 4:35 pm

AA is doing well for their current situation. So is DL. So is WN, which really impresses me. So is Alaska.

Quoting Prost (Reply 3):
There are benefits to being a massive global airline, but getting the highest return on invested capital doesn't appear to be one of them.


That's fine. Maximum ROIC is not the goal, exactly.
 
HPRamper
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RE: AA Reports 1Q16 Results

Fri Apr 22, 2016 4:46 pm

Quoting winginit (Reply 2):

Wow, took two whole replies before DL was fawned over in a thread unrelated to DL.
 
alasizon
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RE: AA Reports 1Q16 Results

Fri Apr 22, 2016 4:53 pm

I would imagine that there is also a great number of deferred costs from PSS cutover in Q4 and on-going merger related expenses that are included in this quarter's results (notably the replacement of ramp services uniforms for AA, MQ and EN). I would guess and say that was another $120 million or so.

In the linked article, it was mentioned that AA was going to be cutting expansion plans. Obviously international will be cut but I more so suspect you'll see domestic expansion at the four hubs that can more easily support it (LAX, PHX, DFW, MIA) rather than CLT, PHL, NYC and ORD. DCA can be a toss up depending on what the plans are.
Airport (noun) - A construction site which airplanes tend to frequent
 
ken4556
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RE: AA Reports 1Q16 Results

Fri Apr 22, 2016 5:32 pm

I do not understand, with the up and down of the airline industry, that AA is doing a $2 billion share repurchase program instead of using that money to reduce debt. Yes, interest rates are low at the moment. But like oil, interest rates can change in the future and the time to pay down debt is when you are making money.

That is the big advantage Delta has over AA and UAL in having lower debt. Yes, Delta has a higher pension obligation, but that is something that you can delay when you hit a bad stretch. Debt you owe, whether making money or not.
 
AAplat4life
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RE: AA Reports 1Q16 Results

Fri Apr 22, 2016 5:35 pm

Quoting Prost (Reply 3):
There are benefits to being a massive global airline, but getting the highest return on invested capital doesn't appear to be one of them.

Management has a lot of shares and so they will be incentivized to alter the course to address the market (and the stock price). Despite good results, the stock market is not satisfied and hasn't been for some time now.

Quoting Alasizon (Reply 6):
Obviously international will be cut but I more so suspect you'll see domestic expansion at the four hubs that can more easily support it (LAX, PHX, DFW, MIA) rather than CLT, PHL, NYC and ORD. DCA can be a toss up depending on what the plans are

Out of LAX, PHX, DFW and MIA, I only see DFW has being able to support more domestic expansion in terms of both demand and facilities. The problem is that the DFW market is still very competitive and AA is not seeing the returns there because it will do what it has to do to maintain market share. Management has stated this several times. Using larger planes and maintain frequencies is necessary in part because DFW is such a larger connecting hub, but it is not getting the job done in terms of returns or doing something about declined PRASM.

CLT apparently is a gold mine for AA, but eventually it will be open up to more competition. AA has some room for expansion at ORD (its building a few more Eagle gates), but I don't see a big push there.

Quoting winginit (Reply 2):
Better than United, but if we've learned anything these past few days it's that DL truly is head and shoulders above the competition in how they're running their business (granted, having merged years prior to that same competition)

Delta may soon take over AA in terms of revenue. Its plans to move to T2 and T3 at LAX is a good one. It will make it much more competitive there, and give it the advantage of being closer to the entrance of LAX. One can spend a lot of time waiting at LAX just to get to T4 and T5.
 
tortugamon
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RE: AA Reports 1Q16 Results

Fri Apr 22, 2016 5:37 pm

Quoting Prost (Reply 3):
If DL is head and shoulders above UA and AA, then WN, AS, NK, and G4 have climbed the ladder and gone to a different floor.

Not sure why you suggest that. This isn't just about margin percentage. AS, NK, and G4 are tiny airlines in comparison.

tortugamon
 
Prost
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RE: AA Reports 1Q16 Results

Fri Apr 22, 2016 5:49 pm

Just that by most metrics, those carriers perform much better than the large network carriers.
 
tortugamon
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RE: AA Reports 1Q16 Results

Fri Apr 22, 2016 6:00 pm

Quoting ken4556 (Reply 7):
I do not understand, with the up and down of the airline industry, that AA is doing a $2 billion share repurchase program instead of using that money to reduce debt.

The CEO is paid almost entirely in stock. Reduced debt doesn't really influence that. They borrow at extremely low rates anyway; not a ton of motivation to pay that down especially quick.

Quoting Prost (Reply 10):
Just that by most metrics, those carriers perform much better than the large network carriers.

They are less 1% of the market. If DL carved their network down to 5% of the US comprising the most profitably routes they would have extremely high metrics as well.

Lets not forget Profit $s as a pretty good metric as well.

tortugamon
 
LAXtoATL
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RE: AA Reports 1Q16 Results

Fri Apr 22, 2016 6:11 pm

Quoting ken4556 (Reply 7):
do not understand, with the up and down of the airline industry, that AA is doing a $2 billion share repurchase program instead of using that money to reduce debt. Yes, interest rates are low at the moment. But like oil, interest rates can change in the future and the time to pay down debt is when you are making money.

It makes sense if you consider AA must appease the shareholders. With DL repurchasing shares and paying a dividend, AA was almost forced to in order to maintain a reasonable attractiveness with its competitors in the sector. People sometimes think of shareholders as a passive participant in the business, but the Board of Directors is elected by and represent the shareholders. The CEO is responsible to the BoD, so every decision must consider how this affects the shareholders. Could there have been a better long-term use of those funds as opposed to buying back shares? I think unequivocally yes, but in the short-term it would have damaged the shareholders. There are always several competiting interests when dealing with public entities (even sometimes in private as well if you have more than one owner).

Quoting AAplat4life (Reply 8):
One can spend a lot of time waiting at LAX just to get to T4 and T5.

There really isn't much of advantage accessing T2/T3 vs T5. Versus T4 absolutely.
The cutover at T2 allows you to bypass the congestion at T3, TBIT, and T4 to get to T5. And when exiting it is easier getting out of T5 than T2/T3.
But in general, I agree DL relocating to T2/T3 will be advantage over their existing location at T5. Mainly because of access to more gates. Also, I think they will have much less aircraft movement congestion on the north side with just them and WN over there.
 
aa1818
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RE: AA Reports 1Q16 Results

Fri Apr 22, 2016 7:19 pm

Hi all,

Does anyone have the total debt figures for AA, DL and UA for comparison now that all 3 have reported Q1 results?
Also anyone have the operating margins for the three?

Cheers,
AA1818
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RE: AA Reports 1Q16 Results

Fri Apr 22, 2016 7:53 pm

Quoting tortugamon (Reply 11):
Quoting Prost (Reply 10):Just that by most metrics, those carriers perform much better than the large network carriers.

They are less 1% of the market.

Huh? AS is about 5.5% of the US market...
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commavia
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RE: AA Reports 1Q16 Results

Fri Apr 22, 2016 7:58 pm

Quoting ken4556 (Reply 7):
I do not understand, with the up and down of the airline industry, that AA is doing a $2 billion share repurchase program instead of using that money to reduce debt. Yes, interest rates are low at the moment. But like oil, interest rates can change in the future and the time to pay down debt is when you are making money.

AA's executives have repeatedly explained on virtually every earnings call - including again today - the capital structure strategy.

If interest rates went up, AA would obviously stop issuing so much debt, but with money so cheap (AA issued EETCs in Q1 at a blended rate below 4%), AA management believes it would be an irresponsible use of shareholder resources [i]not[/] to take advantage of such low borrowing cost to finance capex - and get all the immediate second order benefits including lower maintenance cost, higher revenue generating potential, and a "natural" indirect hedge against fuel prices rising again. That said, AA has also always acknowledged that due to the higher leverage, it will maintain a higher cash balance to reduce risk - and indeed it has, and does. And finally, on today's call AA's CFO reaffirmed the guidance that AA expects its leverage metrics (relative to earnings, etc.) to peak this year and then steadily fall from 2017 onward.

As to the buybacks, AA executives seem to view them as being as much about shareholder return as signaling. Parker said again on today's call and even more forcefully in January that Wall St simply undervalues AA and as such the easiest and fastest way to put the company's proverbial "money where it's mouth is" is to buy stock and boost the share price (and thus also EPS).

Whether any of us agree with AA management on either the debt or buybacks, only time will tell if they're right or wrong.
 
tortugamon
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RE: AA Reports 1Q16 Results

Fri Apr 22, 2016 8:59 pm

Quoting EA CO AS (Reply 14):
Huh? AS is about 5.5% of the US market...

Agreed. Was referring to the NK, F9, Allegiant's etc.

tortugamon
 
AAplat4life
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RE: AA Reports 1Q16 Results

Fri Apr 22, 2016 9:28 pm

Quoting LAXtoATL (Reply 12):
There really isn't much of advantage accessing T2/T3 vs T5. Versus T4 absolutely.
The cutover at T2 allows you to bypass the congestion at T3, TBIT, and T4 to get to T5. And when exiting it is easier getting out of T5 than T2/T3.

The cutover at T2 doesn't help for shuttle buses. It's a lot harder to get to T4 than it is to exist T2. Just my experience, but I think we agree that DL will have what it takes to be a strong competitor at LAX.

Quoting commavia (Reply 15):
If interest rates went up, AA would obviously stop issuing so much debt, but with money so cheap (AA issued EETCs in Q1 at a blended rate below 4%), AA management believes it would be an irresponsible use of shareholder resources [i]not[/] to take advantage of such low borrowing cost to finance capex - and get all the immediate second order benefits including lower maintenance cost, higher revenue generating potential, and a "natural" indirect hedge against fuel prices rising again.

These are all plausible rationalizations, but the market is not satisfied. The market prefers the Delta approach to paying down debt and securing an investment grade credit rating.

Quoting commavia (Reply 15):
As to the buybacks, AA executives seem to view them as being as much about shareholder return as signaling. Parker said again on today's call and even more forcefully in January that Wall St simply undervalues AA and as such the easiest and fastest way to put the company's proverbial "money where it's mouth is" is to buy stock and boost the share price (and thus also EPS).

Imagine the pressure AA's stock would be under without the buybacks. Wall Street doesn't care if Parker puts his money with his mouth is, because he has not yet been able to convince Wall Street. In one breath he notes that DFW has shown excellent results year to year, but in the next talks about competitive pressures there and low fares and yields. This keeps going on quarter after quarter. Frankly, it is a bit unfair given the good results. Some AA routes appear to be struggling (LAX-SYD is reported to be pretty wide open at times), but they are investments and need to be given a chance to perform. (My own personal view is that AA still has a lot of in-flight service issues that undermines its chances. More than Delta, and that gives Delta an advantage with business travelers in competitive markets.) If the stock price continues to struggle, the chances of some shake-up in the board or management increase.
 
commavia
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RE: AA Reports 1Q16 Results

Fri Apr 22, 2016 10:04 pm

Quoting AAplat4life (Reply 17):

  

I think it's way too early to be drawing conclusions about what Wall St is, isn't, will or won't be satisfied with, let alone board or management shakeups.

As many have been saying repeatedly, AA is still years behind its peers in terms of merger integration, network and cost optimization, etc. Indeed, when compared to where competitors were at this point in their merger, it seems that the mere fact AA is even being held to Delta's standard talks to how well - overall - AA is performing, particularly compared to United. What the misleadingly monolithic "the market" and "Wall St" ultimately come to conclude about AA's competitiveness and viability is far more important than comparisons in a given quarter.

As Parker himself said, management's job is to maximize shareholder value long-term, not the stock price. Given that AA is producing billions upon billions in profits, I'm fairly confident that the "chances of some shake-up" are near zero.

[Edited 2016-04-22 15:22:51]
 
ldvaviation
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RE: AA Reports 1Q16 Results

Fri Apr 22, 2016 10:14 pm

Quoting AAplat4life (Reply 17):
The cutover at T2 doesn't help for shuttle buses. It's a lot harder to get to T4 than it is to exist T2. Just my experience, but I think we agree that DL will have what it takes to be a strong competitor at LAX.

This is not a turn key move. Delta will not get started on construction for at least a couple of years. The new T3 will be completed long after AA and everyone else absorbs Delta's former gates in T5. In the meantime, Delta's airport experience won't be very competitive with all the bussing, temporary facilities, and chaos.

It is becoming clear why this was a good deal for LAWA. We will have to wait 5 to 7 years to see if it was a good deal for Delta. That's as long as the construction project is supposed to take. (For all we know, this could be Boston all over again.)
 
MIflyer12
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RE: AA Reports 1Q16 Results

Fri Apr 22, 2016 11:14 pm

Quoting aa1818 (Reply 13):
Does anyone have the total debt figures for AA, DL and UA for comparison now that all 3 have reported Q1 results?
Also anyone have the operating margins for the three?

They are all publicly traded U.S. firms. See the mandatory SEC filings. 10-Q will have all the data you seek. Here's a link to Delta's SEC filings:

http://ir.delta.com/stock-and-financial/sec-filings/default.aspx
 
AAplat4life
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RE: AA Reports 1Q16 Results

Sat Apr 23, 2016 1:54 pm

Quoting ldvaviation (Reply 19):
This is not a turn key move. Delta will not get started on construction for at least a couple of years. The new T3 will be completed long after AA and everyone else absorbs Delta's former gates in T5. In the meantime, Delta's airport experience won't be very competitive with all the bussing, temporary facilities, and chaos.

Sort of sounds like AA's current situation at LAX. It will not happen immediately, but Delta will probably end up with a better experience at LAX. And if its in-service levels improve while others deteriorate (or remain constant), it will do to AA at LAX what it did to it at JFK. This is not about the status of the AA merger integration, but the fact that AA service levels have declined by imposing standards (or lack of) from the US side.

Quoting commavia (Reply 18):
What the misleadingly monolithic "the market" and "Wall St" ultimately come to conclude about AA's competitiveness and viability is far more important than comparisons in a given quarter.

No one is questioning AA's competitiveness and viability. However, the publicly traded market is considered to be the most efficient way of assessing stock value. The market's concerns are not based on just this last quarter. This has been going on now for over a year. The "market" and "Wall Street" is primarily comprised of sophisticated investors such as mutual funds and private equity funds. It must be frustrating for Mr. Parker to produce such stellar results and be told repeatedly he has to do better. The market wants to see a plan to increase revenue, and AA has not been able to do this. Delta is doing better, in part because ATL has only one airport and, therefore, is not feeling the competitive pressures that we see in Dallas and Chicago (although right now competitive fares at Chicago are largely due to carriers at ORD as opposed to MDW).

Quoting commavia (Reply 18):
As Parker himself said, management's job is to maximize shareholder value long-term, not the stock price. Given that AA is producing billions upon billions in profits, I'm fairly confident that the "chances of some shake-up" are near zero.

If Parker's top priority was maximizing shareholder value long-term, he would not be spending billions to buy back stock which has done little to increase the stock's value. The additional debt being incurred, while somewhat rationale in this interest rate environment, reduces "enterprise value" to get to "equity value" unless the corresponding equipment (i.e., new aircraft) depreciates at a rate consistent with the debt repayment. (If the equipment is acquired through an operating lease, then the lease is treated as debt.) Therefore, less shares outstanding will increase value if the market determines that AA all of a sudden deserves a higher valuation multiple. However, there is no indication that the market believes that this will happen soon.

Despite excellent profits, a lower stock price is a risk for management. It makes it easier for a hedge fund, for example, to acquire a significant block of stock, and really start to ask hard questions that management can so easily evade in an earnings conference call.
 
ldvaviation
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RE: AA Reports 1Q16 Results

Sat Apr 23, 2016 3:57 pm

Quoting AAplat4life (Reply 21):
Sort of sounds like AA's current situation at LAX. It will not happen immediately, but Delta will probably end up with a better experience at LAX. And if its in-service levels improve while others deteriorate (or remain constant), it will do to AA at LAX what it did to it at JFK. This is not about the status of the AA merger integration, but the fact that AA service levels have declined by imposing standards (or lack of) from the US side.

On the contrary, their roles are reversed at LAX.

At JFK, AA built an expensive terminal first and then tried to add flights. DL added flights and found a less expensive solution to its gate problem later. DL clearly won there.

Just as it was for AA at JKF, it remains to be seen what use DL is going to make of its expensive new terminal at LAX. Delta should be able to maintain their current schedule during construction, but there will be little opportunity to expand. Even after construction, one has to wonder if a new facility will make much of a difference in markets where Delta today does not compete with AA from LAX, such as DCA/IAD and ORD.

As to AA's situation at LAX, it will swap its four gates at T6 for four gates at T5 as soon as Delta vacates. That should help them to consolidate around T4. And, while the situation at the Eagle facility remains uncertain, it is probably something that can be resolved before Delta builds a connector to TBIT and gets permanent use of any gates there.

As to the service levels, I think it is becoming increasingly clear that those are going to vary based on the price of your ticket and AA's internal rankings of the value of each customer. If you are not providing the revenue to justify the status, being an EP or Lifetime Platinum just doesn't cut it anymore. The complainers on FT and elsewhere are not AA's best customers. AA's best customers would tell you that they have special numbers to call when something goes wrong, that they still get 8+ SWU's because they are earning them, and that service levels in the international premium cabins are improving.
 
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coronado
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RE: AA Reports 1Q16 Results

Sat Apr 23, 2016 6:02 pm

Quoting aa1818 (Reply 13):
Does anyone have the total debt figures for AA, DL and UA for comparison now that all 3 have reported Q1 results?

Here are debt numbers for the Legacy 3 carriers derived from the March 31, 2016 10Q's
Debt and Capital Leases (includes amounts maturing with one year).
ALL FIGURES ARE in US$billions
American: 21.7
Delta: 8.4
United 11.6

Other liabilities that IMHO should also be taken into account (Derived from current 10Q, as well as year end 2015 10-K's:
1) Aircraft Purchase Commitments (what they have contractually obligated themselves for future payments for aircraft purchase agreements)
American: 21.1
Delta: 13.1
United: 23.2
2) Operating Lease Obligations (this includes aircraft on operational leases, but also equipment and facilities--note: starting in 2018, financial reporting rules will require operating leases to be included within the balance sheet, instead of as how they are currently listed, which is only in footnotes:
American: 13.3
Delta: 12.8
United: 10.4
3) Another category of long term liabilities that IMHO should be included in the balance sheet instead of as they are currently, which is only in footnotes, are Capacity Purchase Agreements, meaning what they are contractually supposed to pay to their regional partners in coming years:
American: 8.4
Delta: 12.3
United: 12.6
I suspect the numbers in this later category will change quite a bit in the next few months due to the effects of the Republic bankruptcy.
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tortugamon
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RE: AA Reports 1Q16 Results

Sat Apr 23, 2016 6:41 pm

Quoting AAplat4life (Reply 21):
If Parker's top priority was maximizing shareholder value long-term, he would not be spending billions to buy back stock which has done little to increase the stock's value.

"“Going forward, I have asked our Board to restructure my compensation such that I will no longer receive a base salary or an annual bonus. Instead, all of my primary compensation will be paid in AAL stock. This stock will have to be earned over time, and will also have to be earned by performance. I believe this is the right way for my compensation to be set – at risk, based entirely on the results achieved, and in the same currency that our shareholders receive,” Parker wrote."
http://aviationblog.dallasnews.com/2...-parker-12-3-million-in-2014.html/

Stock buybacks do increase the value of the stock. Plus when they issue dividends those payments are reduced by the number of shares that are no longer in circulation which improves performance as well. This CEO is very motivated by stock value.

tortugamon
 
LAXtoATL
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RE: AA Reports 1Q16 Results

Sat Apr 23, 2016 6:48 pm

Quoting tortugamon (Reply 24):
Stock buybacks do increase the value of the stock. Plus when they issue dividends those payments are reduced by the number of shares that are no longer in circulation which improves performance as well. This CEO is very motivated by stock value.

Very true.
I think some people just look at stock price and ignore or don't understand how the market works.
Buying back shares always increases the value. However, there are always dozens of factors at play pushing and pulling a stock's price. While AA stock price has not increased, I actually think it has fallen during the course of the buyback, without the buyback it would have suffered even more downward pressure on the stock price. Nobody says that a buyback has to increase the share price but certainly adds to the value of the remaining outstanding shares.
 
tortugamon
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RE: AA Reports 1Q16 Results

Sat Apr 23, 2016 6:54 pm

Quoting LAXtoATL (Reply 25):
While AA stock price has not increased, I actually think it has fallen during the course of the buyback, without the buyback it would have suffered even more downward pressure on the stock price. Nobody says that a buyback has to increase the share price but certainly adds to the value of the remaining outstanding shares.

Well said. Certainly its not a great strategy to just buy back shares and AA should and has reduced debt and issued dividends as well as bought shares while investing in the product. They have to do it all but buying share is indeed a value booster.

tortugamon
 
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RE: AA Reports 1Q16 Results

Sat Apr 23, 2016 11:01 pm

Quoting HPRamper (Reply 5):

Wow, took two whole replies before DL was fawned over in a thread unrelated to DL.

Considering AA, DL, and UA are very close competitors, it seems logical - and informative - to compare their situations. Just seeing numbers for one doesn't give a very good picture of actual performance.
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lightsaber
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RE: AA Reports 1Q16 Results

Sun Apr 24, 2016 1:00 am

First, congrats to AA. Not a bad profit.


It will be interesting to compare with AS and B6 as they incorporate the MAX and NEO (longer range opens more routes).

Quoting Prost (Reply 3):
f DL is head and shoulders above UA and AA, then WN, AS, NK, and G4 have climbed the ladder and gone to a different floor. There are benefits to being a massive global airline, but getting the highest return on invested capital doesn't appear to be one of them.

You have a point that the small guys have good margins and good growth. Well, WN, AS, and B6 aren't so small. I'm curious as to Jetblue's results....

I would watch for NK too. I'm not sure of their CEO retirement schedule, but with more aircraft on order (CEO and NEO) than they have in their fleet... They'll be worth watching.

Quoting Coronado (Reply 23):
Aircraft Purchase Commitments (what they have contractually obligated themselves for future payments for aircraft purchase agreements)
Quoting Coronado (Reply 23):
Another category of long term liabilities that IMHO should be included in the balance sheet instead of as they are currently, which is only in footnotes, are Capacity Purchase Agreements, meaning what they are contractually supposed to pay to their regional partners in coming years:

First, thanks for the detailed analysis. But these two future expenses have cancellation clauses. Without knowing the details of those contracts, I would discount those obligations. All the US3 could reduce the payouts far below the values listed. For aircraft "firm purchase agreements" are not nearly as fixed as they once were.

Do you have their assets (e.g., value of owned fleet and equipment?)

I am worried about AA's debt. They went into bankruptcy debt heavy with an old fleet.

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deltal1011man
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RE: AA Reports 1Q16 Results

Sun Apr 24, 2016 2:38 am

Congrats to all the AA employees. Did profit sharing start in Q1?
 
AAplat4life
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RE: AA Reports 1Q16 Results

Sun Apr 24, 2016 2:18 pm

Quoting ldvaviation (Reply 22):
Just as it was for AA at JKF, it remains to be seen what use DL is going to make of its expensive new terminal at LAX. Delta should be able to maintain their current schedule during construction, but there will be little opportunity to expand. Even after construction, one has to wonder if a new facility will make much of a difference in markets where Delta today does not compete with AA from LAX, such as DCA/IAD and ORD.

DL does not need to compete against AA in all LAX markets. Particularly since LAX is such a strong O&D market, that will be the main focus on competition. I think that DL has a better product in the air, and the AA product is something that AA crews have complained about management ignoring. I have seen no evidence that this is getting better. In fact, it is something that will probably stay the same or deteriorate further with AA's revenue decline issues since things like on-board catering are operating expenses and not capital ones.

Quoting ldvaviation (Reply 22):
AA's best customers would tell you that they have special numbers to call when something goes wrong, that they still get 8+ SWU's because they are earning them, and that service levels in the international premium cabins are improving.

I could not disagree more. I think that AA has a tendency to alienate its best customers. I have 8 SWUs in my account. The only international routes that I can book in advance are to upgrade from Biz to First. On my last two flights in coach, the FA apologized for having to mark down my free snack and drinks (if I were going to take them), because they had to monitor of much EXPs were taking now and they get into big trouble if they do not comply with the new restrictions. As a practical matter, it makes little difference to me personally, but it shows how AA is devaluing its best customers. Even in international premium cabins, the food as reached new lows (but the snack bars are decent).

Quoting tortugamon (Reply 24):
"“Going forward, I have asked our Board to restructure my compensation such that I will no longer receive a base salary or an annual bonus. Instead, all of my primary compensation will be paid in AAL stock. This stock will have to be earned over time, and will also have to be earned by performance. I believe this is the right way for my compensation to be set – at risk, based entirely on the results achieved, and in the same currency that our shareholders receive,” Parker wrote."

This is not a good compensation policy. Some stock ownership by management is desirable, but there should be limits. Compensating management entirely in stock incentivizes them to take risks to artificially increase the stock's value when the market is not giving the stock the valuation multiples management wants. I'm not suggesting that Mr. Parker is anything but an honorable man, but this is simply human nature and we've seen it with many companies.



Quoting tortugamon (Reply 24):
Stock buybacks do increase the value of the stock. Plus when they issue dividends those payments are reduced by the number of shares that are no longer in circulation which improves performance as well. This CEO is very motivated by stock value.

Stock buybacks can increase the value of the remain shares, but not always. If the stock is redeemed at an average of $42 per share and the valuation metrics increase, there is a bigger return for the remaining shares. If the stock value decreases, however, then management has spent $2B (based on the latest buyback announcement) to repurchase stock that is worth less. The company is now without the $2B, and the equity value has decreased by more than $2B. In any event, one can look at this two ways with AA: either the stock buybacks have done little good and has only depleted cash from the company (which could have been used to reduce debt, as that is something that definitely increases value) or the stock would even be lower in value were it not for the buybacks. If you subscribe to the latter, then the market is really telling AA's management that it has some big issues with its approach. Who knows for sure if the current AA stock sell-off isover. The 52 week low of about $34 per share has not yet been reached. If the number is breached, then the board may tell management that things have to change (most likely in terms of approach as opposed to changes in management at least initially).

Quoting alfa164 (Reply 27):
onsidering AA, DL, and UA are very close competitors, it seems logical - and informative - to compare their situations. Just seeing numbers for one doesn't give a very good picture of actual performance.

Another important comparison point is market capitalization (shown below by stock symbols):

AAL: $23.04B
DAL: $34.34B
UAL: $18.24B.

With AA and DL being relatively close in term of earnings and their valuations differing by more than $11B, it is important to look at the reasons. I think that it shows that the DL strategy of paying down debt has benefited shareholders and that the market thinks that AA's management is off course.
 
User avatar
coronado
Posts: 1274
Joined: Sat Jun 26, 1999 9:42 am

RE: AA Reports 1Q16 Results

Sun Apr 24, 2016 10:19 pm

Quoting lightsaber (Reply 28):
Do you have their assets (e.g., value of owned fleet and equipment?)

Assets at 3/31/2016 in US$BN
American
Cash & Equiv 6.9
Accounts Rec 1.4
Fuel Parts & Supplies 0.9
Property & Equipment (Net of Depr): 28.6

Delta
Cash & Equiv 3.9
Accounts Rec 2.2
Fuel Parts & Supplies 0.7
Property & Equipment (Net of Depr) 23.4

United
Cash & Equiv 4.0
Accounts Rec: 1.5
Fuel Parts & Supplies 0.8
Property & Equipment (Net of Depr) 22
The Original Coronado: First CV jet flights RG CV 990 July 1965; DL CV 880 July 1965; Spantax CV990 Feb 1973
 
winginit
Posts: 2627
Joined: Sat Feb 23, 2013 9:23 pm

RE: AA Reports 1Q16 Results

Sun Apr 24, 2016 10:34 pm

Quoting deltal1011man (Reply 29):

Congrats to all the AA employees. Did profit sharing start in Q1?

Yes - 5% of pre-tax profits to be distributed to all employees with the exception 'upper management' (corporate 'Managers' and above)
 
aa1818
Posts: 1554
Joined: Sat Feb 04, 2006 2:03 am

RE: AA Reports 1Q16 Results

Mon Apr 25, 2016 2:19 pm

Quoting MIflyer12 (Reply 20):
They are all publicly traded U.S. firms. See the mandatory SEC filings. 10-Q will have all the data you seek. Here's a link to Delta's SEC filings:

Thanks for that reply however, having only my mobile phone and while being off-island with terrible internet, it was quite difficult and cumbersome to look it up. Knowing that there are other very knowledgeable members who track that same information, I figured I'd ask it as I was interested in knowing.

Quoting Coronado (Reply 23):

Thank you for so kindly sharing the information!

AA1818
“The moment you doubt whether you can fly, you cease for ever to be able to do it.” J.M. Barrie (Peter Pan)
 
Sydscott
Posts: 3488
Joined: Thu Oct 30, 2003 11:50 am

RE: AA Reports 1Q16 Results

Mon Apr 25, 2016 11:59 pm

Quoting AAplat4life (Reply 30):
Even in international premium cabins, the food as reached new lows (but the snack bars are decent).

Has anyone flown to SYD with AA and tried their Qantas style dining service?

http://viewfromthewing.boardingarea....rvice-sydney-flights-even-economy/
 
ldvaviation
Posts: 1252
Joined: Sun Dec 21, 2008 7:21 pm

RE: AA Reports 1Q16 Results

Tue Apr 26, 2016 12:41 am

Quoting AAplat4life (Reply 30):
I could not disagree more. I think that AA has a tendency to alienate its best customers. I have 8 SWUs in my account. The only international routes that I can book in advance are to upgrade from Biz to First. On my last two flights in coach, the FA apologized for having to mark down my free snack and drinks (if I were going to take them), because they had to monitor of much EXPs were taking now and they get into big trouble if they do not comply with the new restrictions. As a practical matter, it makes little difference to me personally, but it shows how AA is devaluing its best customers. Even in international premium cabins, the food as reached new lows (but the snack bars are decent).

Just 8 SWU's and you think you are one of AA's best customers? Would it surprise you to learn that there are EP's who earned 32+ SWU's last year? Heck, I know of at least one EP who is already at 200,000 EQM this year and has earned 8 SWU's through May.

(Also, I think it should go without saying that AA's best customers are not looking to upgrade in advance from international coach to J and would be quite happy with the opportunity to upgrade from international Biz to First.)

...How is AA devaluing EP's by having the FA account for the free BOB food they give to EP's. The free food is still available.

...As to the premium cabin experience, it is one person's opinion. There are others. My partner has flown Cathay on LAX-HKG enough times to come to the conclusion that AA's food in International J Class is actually better than Cathay's.
 
commavia
Posts: 11489
Joined: Mon Apr 25, 2005 2:30 am

RE: AA Reports 1Q16 Results

Tue Apr 26, 2016 1:07 am

Quoting ldvaviation (Reply 35):
As to the premium cabin experience, it is one person's opinion. There are others.

  

I just flew two flights in longhaul J on AA last week and found the service (cabin crews) and food on both segments excellent. One was on the 77W and honestly, even with mediocre food that hard product is so awesome that it would at least partially make up for it. But, as said, to each their own. Some people aren't satisfied, and some people just don't like AA. Anyone can fly any airline they choose. Given the billions upon billions of dollars that AA is likely going to generate this year, apparently more than a few are choosing AA.

The entirely predictable doom and gloom from certain unsurprising quarters aside, AA (along with Delta, Southwest, Alaska, etc. and even United) is/are clearly doing at least some things right, and I don't think it's really debatable that AA is generally moving in an overall positive direction.
 
RemoFlyer
Posts: 167
Joined: Wed Apr 01, 2015 10:12 pm

RE: AA Reports 1Q16 Results

Tue Apr 26, 2016 4:28 am

Quoting Sydscott (Reply 34):
Has anyone flown to SYD with AA and tried their Qantas style dining service?

http://viewfromthewing.boardingarea....nomy/

Yes - the food is marginally better than AA's normal J food - which is not saying much, the J cabin is consistently unfilled and the FAs are as inconsistent as any other AA long haul route.

Whatever AA is selling on this route is obviously not working - I would not be surprised to see a downguage to 789 when they come aboard.
 
Sydscott
Posts: 3488
Joined: Thu Oct 30, 2003 11:50 am

RE: AA Reports 1Q16 Results

Tue Apr 26, 2016 7:26 am

Quoting RemoFlyer (Reply 37):
Yes - the food is marginally better than AA's normal J food - which is not saying much, the J cabin is consistently unfilled and the FAs are as inconsistent as any other AA long haul route.

Cool thanks!
 
commavia
Posts: 11489
Joined: Mon Apr 25, 2005 2:30 am

RE: AA Reports 1Q16 Results

Tue Apr 26, 2016 9:39 am

Quoting RemoFlyer (Reply 37):
which is not saying much, the J cabin is consistently unfilled
Quoting RemoFlyer (Reply 37):
Whatever AA is selling on this route is obviously not working

Interesting. That's pretty much the exact opposite of what I've seen and heard.
 
winginit
Posts: 2627
Joined: Sat Feb 23, 2013 9:23 pm

RE: AA Reports 1Q16 Results

Tue Apr 26, 2016 12:52 pm

Quoting RemoFlyer (Reply 37):
the J cabin is consistently unfilled

This is very much not the case. The first few weeks of operation yes, but since then - absolutely not.
 
RemoFlyer
Posts: 167
Joined: Wed Apr 01, 2015 10:12 pm

RE: AA Reports 1Q16 Results

Tue Apr 26, 2016 1:06 pm

Quoting commavia (Reply 39):
Interesting. That's pretty much the exact opposite of what I've seen and heard.
Quoting commavia (Reply 39):
This is very much not the case. The first few weeks of operation yes, but since then - absolutely not.

Huh ? Anyone that requests an upgrade usually gets it (not just Exec Plats - ANYONE) - and the J cabin is consistently undersold by 10+ AFTER all upgrades have been processed - this is irrespective of day of the week - midweek usually 20+ are unsold.

You can always get an Expertflyer subscription and check if you are interested - you will immediately see C7 for the next 3 days - always.

This has been consistently happening post mid January, although it was a lot more empty in all cabins in Feb and March, lately its been a little bit fuller.
 
winginit
Posts: 2627
Joined: Sat Feb 23, 2013 9:23 pm

RE: AA Reports 1Q16 Results

Tue Apr 26, 2016 1:55 pm

Quoting RemoFlyer (Reply 41):

Look I make no secret of the fact that I work for AA, and while for obvious reasons I can't share specifics given I'm quite keen on my job, I can sit here with flown load factors broken down by cabin through March right in front of me for LAXSYD. The J cabin flown load factors are high, and while yes a significant portion of that load may well be redemptions or upgrades, your claim that the J cabin is consistently undersold by 10+ and even 20+ after upgrades are accounted for (which would imply a flown J load factor of between 62% and 77%) is wrong, and those implied load factors are quite a bit lower than the flown J load factors January through March. No Expertflyer subscription needed.
 
User avatar
jfklganyc
Posts: 5611
Joined: Mon Jan 05, 2004 2:31 pm

RE: AA Reports 1Q16 Results

Tue Apr 26, 2016 2:06 pm

Not that it means anything...LAX-SYD on AA


Today: F3 P3 A1 J7 R7 D7 I7 Y7 B7 H7 K7 L7 M7 V7 N7 S7 Q7 O7 G7
Tomorrow: F6 P6 A4 J7 R7 D7 I7 Y7 B7 H7 K7 L7 M7 V7 N7 S7 Q7 O7 G7
Thursday: F3 P2 A0 J7 R7 D7 I7 Y7 B7 H7 L7 K7 V7 M7 N7 S7 Q7 O7 G7
 
RemoFlyer
Posts: 167
Joined: Wed Apr 01, 2015 10:12 pm

RE: AA Reports 1Q16 Results

Tue Apr 26, 2016 3:59 pm

Quoting jfklganyc (Reply 43):

Nothing surprising there - the aircraft is too large for the route.

Quoting winginit (Reply 42):

Only on airliners.net do people make the argument that a load factor of above 80% built primarily on upgrades redemptions and non-revs implies profitability

Unless something drastically changes on this route AA will almost certainly downguage it to a 789.
 
alfa164
Posts: 3181
Joined: Sat Oct 06, 2012 2:47 am

RE: AA Reports 1Q16 Results

Tue Apr 26, 2016 4:07 pm

Quoting jfklganyc (Reply 43):
Not that it means anything...LAX-SYD on AAToday: F3 P3 A1 J7 R7 D7 I7 Y7 B7 H7 K7 L7 M7 V7 N7 S7 Q7 O7 G7 Tomorrow: F6 P6 A4 J7 R7 D7 I7 Y7 B7 H7 K7 L7 M7 V7 N7 S7 Q7 O7 G7 Thursday: F3 P2 A0 J7 R7 D7 I7 Y7 B7 H7 L7 K7 V7 M7 N7 S7 Q7 O7 G7

...and "7" is the largest number that will show is GDS; there can be anywhere from 7 seats to the entire cabin available for sale.
I'm going to have a smokin' hot body again!
I have decided to be cremated....
 
winginit
Posts: 2627
Joined: Sat Feb 23, 2013 9:23 pm

RE: AA Reports 1Q16 Results

Tue Apr 26, 2016 4:15 pm

Quoting RemoFlyer (Reply 44):
Only on airliners.net do people make the argument that a load factor of above 80% built primarily on upgrades redemptions and non-revs implies profitability

Remind me who implied profitability?

Quoting RemoFlyer (Reply 44):
Unless something drastically changes on this route AA will almost certainly downguage it to a 789.

You're aware the flight is a component of a (soon to be) anti-trust immunized joint venture with Qantas yes?
 
RemoFlyer
Posts: 167
Joined: Wed Apr 01, 2015 10:12 pm

RE: AA Reports 1Q16 Results

Tue Apr 26, 2016 5:26 pm

Quoting winginit (Reply 46):

Remind me who implied profitability?

What is the point of high load factors if it doesnt translate to profitability i.e. if AA is giving away half the J cabin for free or close to free what is the point of having 52 J seats ?

And we havent even discussed the relative costs of a 77W versus 789 yet.

Quoting winginit (Reply 46):
You're aware the flight is a component of a (soon to be) anti-trust immunized joint venture with Qantas yes?

I'm sure Qantas is thrilled with AA bleeding money on this route and taking away from overall profitability of the joint venture, not to mention losing market share to UA and DL/VA
 
SonomaFlyer
Posts: 2216
Joined: Tue Apr 20, 2010 2:47 pm

RE: AA Reports 1Q16 Results

Tue Apr 26, 2016 5:52 pm

We'd also need to see the cargo numbers along with overall yield numbers to determine profitability. Since AA is unlikely to provide that level of detail, we are all just speculating.

AA has 22 789s on order, none delivered and six on the final assembly schedule at Boeing. They are a ways out from being able to switch to that a/c even if they so desired. That would leave the 788 or 772ER as downgauge options.

I think AA and Qantas looked at this route and were deliberate in their a/c selection. My suspicion is cargo helps quite a bit.
 
User avatar
Boeing778X
Posts: 3268
Joined: Sun Nov 17, 2013 7:55 pm

RE: AA Reports 1Q16 Results

Tue Apr 26, 2016 6:01 pm

Quoting winginit (Reply 2):
Better than United

Indeed   Which airline isn't?

Quoting commavia (Reply 18):
As many have been saying repeatedly, AA is still years behind its peers in terms of merger integration, network and cost optimization, etc.

Sure, but the merger has gone far better than some, notably CO/UA. No one can deny that.
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