[Speculation] AS Market Cap and AA / OW
 

I don't think you can read a ton into this - but was looking at airline market cap values and AA and AS are very close now. AA is at $4.1B and AS at $3.8B. Back in October the difference was AA $13.1B and AS $8.5B.

The international carriers have been hardest hit by COVID19, so that not a surprise. The Legacy carriers all have dropped 60-70% since October. Domestics and discount have been in the 44% to 55% range (except Spirit who is at 65% drop.)

I don't know if this factors into the partnership at all between AS and AA. Is a more stable domestic network something AA needs more or is it a liability when that is all thats left for AA? Or is this just investors assuming anyone with international exposure is looking at a much harder recovery compared to the domestic market? Does it have an impact on OW? Anyway... a post about flying when I can't fly....

Does this mean AS is that much closer to just buying AA outright? :)

It’s not like AA is going to be in great shape to go push in the Pacific NW and the Bay Area against AS now that’s COVID has tanked airlines, so I am not sure what the point of AA deciding it’s war with AS.

When you can't afford to wage war, you make peace.

AS did pay $4B for VX, so..... (j/k)

Market cap just reflects the current stock price, right? All this means is that AA has proportionately dropped more than AS. But, this says nothing about the eventual rebound -- AA could outpace AS on the rebound, for all we know. The market cap ratio in 2021 could look more like the 2018/2019 ratio.

Yes, if there is no rebound, then we have bigger problems to worry about...

The AA assets could be even cheaper in a bankruptcy auction and they wouldn't have to waste two years on a Most East and West Coast ad campaign while their expected customers walk away...

Or AS could outpace AA if international doesn't rebound in step with domestic, which is very likely.

James

Yes - you are right on market cap. On the no rebound - the question is if AA can rebound at the same rate as UA or DL. DL is faring better than other big three.

AA’s stock is discounted because they have a boatload of debt. Would you pay $4 billion with a nice bonus of $24 billion in debt which comes with the purchase in the midst of a global pandemic?

Furthermore, their mileage program has an appraised value of $18-30 billion. So if you get rid of that, then you’ve taken on a ton of debt and thrown away the assets. And if you don’t get rid of it, then welcome to the new Alaska AAdvantage Program...

Regarding the effect on the partnership, it seems to me that weaker airlines need partners more. As airlines retreat, they can’t be all things to everybody anymore. In AA’s case, their network would be increasingly focused on their strongest hubs, especially DFW, CLT, and DCA, which means less overlap with AS’s network. So I’d think that makes the partnership more important to AA.

Actually, wouldn't it become the Alaska AAdvantage U.S.A. program since they're putting their mileage program down as collateral for the second loan of 4.5B thru the CARES loans?