Speculation: AA Survival? Headed for Bankruptcy Reorganization (Ch.11)?
Mar 4, 2020, 3:41 am
#31
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Mar 4, 2020, 3:48 am
#32
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Mar 4, 2020, 5:54 am
#33
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If travel demand and/or the economy crashes sure given how little AA makes from actual flying. A depressed economy would also depress credit card activity. But as noted AA isn't the only airline but may be most vulnerable. Maybe it will crash the ULCCs when Grandma, Grandpa and the little chickens decide not to buy a $59 fare to fly to Orlando.
After all is said and done Parker can go rebuild an ULCC is which he can gleefully spend his days gleefully coming up with new ways to make air travel even more torturous.
After all is said and done Parker can go rebuild an ULCC is which he can gleefully spend his days gleefully coming up with new ways to make air travel even more torturous.
Mar 4, 2020, 6:04 am
#34
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One thing Chairman Parker has to his advantage is his huge gamble not to hedge fuel costs. As fuel is the number two expense at AA, a slowdown in the economy may equate to deep recession of oil prices. A big win for Chairman Parker's casino play on oil (a play he has won for almost two decades- fascinating).
A 25 percent reduction in jet fuel costs is a huge win for AA's balance sheet, P&L.
BTW- I think a major upward move in oil prices more of a risk to AA going bankrupt than corona virus. If oil goes large during this decade for a few continuous years, I suspect without conservative oil hedging, AA will have a major exposure to bankruptcy.
A 25 percent reduction in jet fuel costs is a huge win for AA's balance sheet, P&L.
BTW- I think a major upward move in oil prices more of a risk to AA going bankrupt than corona virus. If oil goes large during this decade for a few continuous years, I suspect without conservative oil hedging, AA will have a major exposure to bankruptcy.
Mar 4, 2020, 6:34 am
#35
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With the way AA's share price (ticker: AAL) is crashing, you would think that Wall Street is predicting AA bankruptcy (Ch. 11). The stock price is down a whopping 70% since the highs set in early 2018.
I assume the latest plunge is mostly due to the Coronavirus Pandemic, but before that the shares were already weak.
Anyone disagrees and thinks it will all be fine and dandy when the Coronavirus Pandemic is over, or do you see gloom and doom ahead for AA?
And yes, AS, DL, UA, and WN are also down. But not to the extend AA is.
I assume the latest plunge is mostly due to the Coronavirus Pandemic, but before that the shares were already weak.
Anyone disagrees and thinks it will all be fine and dandy when the Coronavirus Pandemic is over, or do you see gloom and doom ahead for AA?
And yes, AS, DL, UA, and WN are also down. But not to the extend AA is.
I wanted to discuss the probability of AA having to "reorganize" and cut salaries and benefits to weather the storm. Not necessarily go out of business.
Mar 4, 2020, 6:51 am
#36
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I'd be more concerned that the travel industry was booming in 2019 and AA's margin was still very low. During their last earnings call Dougie was asked about this and rambled on for a while saying they'd try to chip away at the margin gap that United and Delta have on them without providing any sort of plan or road map.
One thing in particular that will harm them that no one is mentioning is casual flyers. AA collected $1.2B in bag fees in 2018, most of which is likely margin. If bag fees collections were to drop in half that'd be a 10% hit to their EBITDA, holding everything else the same.
Mar 4, 2020, 7:04 am
#37
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25% is a possibility but seems unlikely, even with a recession, fuel prices are already so low.
I'd be more concerned that the travel industry was booming in 2019 and AA's margin was still very low. During their last earnings call Dougie was asked about this and rambled on for a while saying they'd try to chip away at the margin gap that United and Delta have on them without providing any sort of plan or road map.
One thing in particular that will harm them that no one is mentioning is casual flyers. AA collected $1.2B in bag fees in 2018, most of which is likely margin. If bag fees collections were to drop in half that'd be a 10% hit to their EBITDA, holding everything else the same.
I'd be more concerned that the travel industry was booming in 2019 and AA's margin was still very low. During their last earnings call Dougie was asked about this and rambled on for a while saying they'd try to chip away at the margin gap that United and Delta have on them without providing any sort of plan or road map.
One thing in particular that will harm them that no one is mentioning is casual flyers. AA collected $1.2B in bag fees in 2018, most of which is likely margin. If bag fees collections were to drop in half that'd be a 10% hit to their EBITDA, holding everything else the same.
Very good points. And to add, AA forgo a large quantity of GSA City pairs for FY2020, likely preferring to fill those seats with people who will pay for bags and seat selection. If the casual traveler drops off, the seats are exposed to go empty as the USA GOV is the largest mass purchaser of domestic airline seats in the US, and AA chose not to court many of those GOV travelers in 2020.
Mar 4, 2020, 7:23 am
#38
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25% is a possibility but seems unlikely, even with a recession, fuel prices are already so low.
I'd be more concerned that the travel industry was booming in 2019 and AA's margin was still very low. During their last earnings call Dougie was asked about this and rambled on for a while saying they'd try to chip away at the margin gap that United and Delta have on them without providing any sort of plan or road map.
One thing in particular that will harm them that no one is mentioning is casual flyers. AA collected $1.2B in bag fees in 2018, most of which is likely margin. If bag fees collections were to drop in half that'd be a 10% hit to their EBITDA, holding everything else the same.
I'd be more concerned that the travel industry was booming in 2019 and AA's margin was still very low. During their last earnings call Dougie was asked about this and rambled on for a while saying they'd try to chip away at the margin gap that United and Delta have on them without providing any sort of plan or road map.
One thing in particular that will harm them that no one is mentioning is casual flyers. AA collected $1.2B in bag fees in 2018, most of which is likely margin. If bag fees collections were to drop in half that'd be a 10% hit to their EBITDA, holding everything else the same.
Mar 4, 2020, 8:55 am
#39
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I don't see coronavirus doing anything dramatic to the airlines in any country if it can be contained within a short space of time. If it spreads and takes hold in the population, every business in every walk of life is 'at risk' - airlines will not be immune but, due to their importance to the US, at some point the government will step in.
Mar 4, 2020, 10:07 am
#40
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I don't see coronavirus doing anything dramatic to the airlines in any country if it can be contained within a short space of time. If it spreads and takes hold in the population, every business in every walk of life is 'at risk' - airlines will not be immune but, due to their importance to the US, at some point the government will step in.
Mar 4, 2020, 10:36 am
#44
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Mar 4, 2020, 11:22 am
#45
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My own theory is that the 3 legacies should have controlled capacity and not chase the Spirit customer. If the economy falls for whatever reason (and it will) those $59 fare flyers will be fleeting. And the legacies, AA in particular has lots of debt and leases on newer a/c. They can't be easily parked like old MD80s or 763s. The other day at CLT when I took VOL (and that a whole another rant in itself) I could not believe half of an A321 was Group 9. Not to mention the numbers that are probably ending up in a MCE seat. I would think the number of BE flyers landing in DL Comfort Plus is few and far in between.