Motley Fool June 2018 Article Paints Unflattering Picture of AAL
 

You should always consider the source. This was published today by a writer for Motley Fool.

"It can't be fun to be American Airlines (NASDAQ: AAL) CEO Doug Parker right now. His company has experienced massive non fuel cost increases over the past few years. Now that the carrier is finally reining in controllable costs, fuel prices have surged, creating a new headache. Meanwhile, American has the weakest balance sheet of any major U.S. airline."

https://finance.yahoo.com/news/ameri...154000372.html

Income statements and balance sheets are objective facts. There are theses that authors reach that can be subjective - and not always persuasively argued.

In investing, Motley Fool is the last source for opinion. If you think the armchair CEOs on Flyertalk and A.net are bad, the armchair investors in Motley Fool takes opinionated invest tips to another level.

But that being said, no doubt AAL has some debt issue to deal with. I firmly believe Doug knows what he was doing (yet I dislike his vision on operations as a flyer). Most of AAL's debt is due to aircraft financing deals made with Airbus and Boeing and the bankruptcy legacy issues (from my understanding). Thus these are controllable if you believe both Airbus and Boeing value one of their biggest customer to survive. Boeing especially have vested interests to see AAL going healthy and strong, when you see how big the order book is and the potential order book to replace the big fleet of B738 in 1 decade of time. So is Airbus, it will only hope AAL to keep ordering A321 when this a/c type approaches retirement age.

Then, on the fuel cost side. AAL came out top by not hedging after all. AAL will continue to benefit when fuel price going up as its young fleet and fuel saving aircraft will start to show payoffs once some of the S80, B757 and B767 are gone for good. The medium term outlook is certainly good. AAL will benefit the most if fuel price continue to rise.

As long as AAL's debts are signed into a fixed rate, I would not worry at all. In fact, that would only be AAL's winning point if that is the case. I think we need to consider the context before side with Motley Fool. For me, the article is just another personal opinion, which had been written several times during last 3 years. The same opinion just came out every quarter attacking AAL's debt issue without quoting what the debt issue is and why it is. No need to panic yet, at least no one in AAL and its investors are slightly concerned at all.

The Motley Fool is only slightly more reliable than The Onion.

I wouldn't be surprised if The Onion actually has had more predictive power over its history :)

Wasn't Motley Fool the one that insisted that United close its Dulles hub.?

Emphasis on fool from that website...

Which is why I prefaced the article with

Hey, I like The Onion, and it's much funnier than the Motley Fool.

When I read the article, the author seemed to be a PR spokesperson for United Airlines. While he was slamming AA for not being able to reduce capacity-- and raise fares-- because of UA's planned 5% annual growth for the next three years. And that in the next recession such a situation would be financially straining for AA. He failed to grasp that UA having much more capacity in the market when that same recession hits, would be even more damaging to UA.

To be fair though, it doesn't take a genius or someone with a business degree to tell that Doug Parker is a poor CEO. He could learn a thing or two from Ed Bastian/Gary Kelly.

I'm also all for bringing Tom Horton back. Heck I'll take Gerard Arpey back.

The ultimate FlyerTalk conundrum, defend Doug Parker because you like American or agree with someone who attacks the both of them.

yech. No Arpey.

I dislike Parker, but I think he has much more business acumen than Scott Kirby or Smisek or Arpey.

I also though Horton did a decent job. He seemed to have a brain and started the fleet renewal and product overhaul. Arpey was responsible for NGBC. A product that was out of date when it was installed.

I'll definitely take Parker over Kirby or Smisek LOL.

And yet the author of this article was praising Kirby's aggressive growth strategy at United. :D