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Speculation: AA Survival? Headed for Bankruptcy Reorganization (Ch.11)?

Speculation: AA Survival? Headed for Bankruptcy Reorganization (Ch.11)?

Old Mar 3, 20, 4:56 pm
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Speculation: AA Survival? Headed for Bankruptcy Reorganization (Ch.11)?

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.
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Old Mar 3, 20, 4:58 pm
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Old Mar 3, 20, 5:00 pm
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Old Mar 3, 20, 5:30 pm
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AA still had a lot of debt, especially compared to its peers. The stock represents just the equity component of the total firm value, which also includes the debt. For companies that are highly levered, the equity piece will be a lot more volatile.
I donít know all that much about AAís capital structure but I imagine it will come down to the decline in earnings caused by Coronavirus and the related impacts and whether that causes AA to violate any debt covenants it has. Thatís when it could get ugly although one might think banks/bond holders will be somewhat willing to negotiate temporary waivers in this particular situation.
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Old Mar 3, 20, 6:07 pm
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Originally Posted by guv1976 View Post
"It's hard to make predictions, especially about the future."

-- Y. Berra
🤣
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Old Mar 3, 20, 7:11 pm
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I wish I had as much job security as Doug Parker.
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Old Mar 3, 20, 7:14 pm
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Maybe they realized how much less revenue they will have with Citi buying fewer miles.
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Old Mar 3, 20, 7:21 pm
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Originally Posted by flyer4512 View Post
Maybe they realized how much less revenue they will have with Citi buying fewer miles.
Yeah, Iím sure thatís a huge factor
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Old Mar 3, 20, 7:46 pm
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Originally Posted by JonNYC View Post
Yeah, I’m sure that’s a huge factor
...it''s a big part of AA's revenue


We know that certain percentage of credit card holders and loyalty program members will let their points expire. We also know that redeeming miles on some airlines for a flight usually requires paying fuel surcharges and other fees. Alternately, some reward mile holders may opt to spend their earnings on merchandise in the rewards catalog at an extremely unfavorable rate. All of this means that when airlines such as American sell points, it is an enormous source of profit. This source also requires very little expenditure and cost to the company. An article by Travel Weekly shows that for 2017, American Airlines brought in an astounding $3.1 billion from AAdvantage program points sales.
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Last edited by JDiver; Mar 3, 20 at 10:46 pm Reason: Redacted overly personal / snark
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Old Mar 3, 20, 7:51 pm
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Originally Posted by flyer4512 View Post
...it''s a big of AA's revenue
Great sentence, but the loss of the churners has nothing to do with AA’s utterly dire, dire financial picture, don’t be ridiculous. (Probably a plus if anything. )

Here’s the thread for that particular fantasy:
AA accounts restricted (Nov/Dec 2019)

Last edited by JDiver; Mar 3, 20 at 10:47 pm Reason: Redacted previously deleted post content
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Old Mar 3, 20, 7:56 pm
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Originally Posted by JonNYC View Post
Great sentence, but the loss of the churners has nothing to do with AA’s utterly dire, dire financial picture, don’t be ridiculous. (Probably a plus if anything. )

Here’s the thread for that fantasy:
AA accounts restricted (Nov/Dec 2019)

But "hero" Citi will be buying less miles going forward.............less revenue for AA

AA just confiscated hundreds of millions of miles for which it was already paid for ..............the revenue stream is DEAD going forward ............Maybe a hero can help them, LOL

<personal attack removed>
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Last edited by JY1024; Mar 3, 20 at 9:12 pm Reason: Personal attacks not permitted
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Old Mar 3, 20, 8:10 pm
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Originally Posted by flyer4512 View Post
Listen "hero", it''s a big part of AA's revenue


We know that certain percentage of credit card holders and loyalty program members will let their points expire. We also know that redeeming miles on some airlines for a flight usually requires paying fuel surcharges and other fees. Alternately, some reward mile holders may opt to spend their earnings on merchandise in the rewards catalog at an extremely unfavorable rate. All of this means that when airlines such as American sell points, it is an enormous source of profit. This source also requires very little expenditure and cost to the company. An article by Travel Weekly shows that for 2017, American Airlines brought in an astounding $3.1 billion from AAdvantage program points sales.
Flyer- I thought some of the things you stated in your post at one time, but later read an article that stated the airlines have to account for the miles sold as a debt to their earnings and balance sheet. It is not "free chicken". The accounting stuff for frequent flyer miles at the worlds largest airline is well above my pay grade- but AA does have accounting rules to book the frequent flier miles as some type of liability.
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Old Mar 3, 20, 8:15 pm
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Did read an article last week before the general market crash the AA PUT options indicate a higher than normal bet by some traders that BK is in AAs future. Maybe the same bunch that bet against Tesla and Herbal Life.... Who knows.

But I do think Chairman Parker was not serving the long term viability of AA a few years ago by buying back AA shares in the forty dollar range instead of putting that cash to reducing debt. But who am I am tell him anything, he increased his net worth by nine figures in the past five years, I have not.
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Old Mar 3, 20, 8:16 pm
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Originally Posted by GunsOfNavarone View Post
Flyer- I thought some of the things you stated in your post at one time, but later read an article that stated the airlines have to account for the miles sold as a debt to their earnings and balance sheet. It is not "free chicken". The accounting stuff for frequent flyer miles at the worlds largest airline is well above my pay grade- but AA does have accounting rules to book the frequent flier miles as some type of liability.

I would certainly hope a portion of the miles sale has to be reported as some sort of debt ( a % of the miles will be redeemed at some point) but regardless of how it's SPUN AA makes $$$$ selling miles


We know that certain percentage of credit card holders and loyalty program members will let their points expire. We also know that redeeming miles on some airlines for a flight usually requires paying fuel surcharges and other fees. Alternately, some reward mile holders may opt to spend their earnings on merchandise in the rewards catalog at an extremely unfavorable rate. All of this means that when airlines such as American sell points, it is an enormous source of profit.
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Old Mar 3, 20, 8:23 pm
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Originally Posted by flyer4512 View Post
But "hero" Citi will be buying less miles going forward.............less revenue for AAA just confiscated hundreds of millions of miles for which it was already paid for ..............the revenue stream is DEAD going forward ............Maybe a hero can help them, LOL

<personal attack removed>
C'mon... churners are a rounding error, the same was as mistake fare searching FTers are. 200 million miles is the welcome bonus for 3000 AA Barclays cards. 3000 is a tiny tiny tiny fraction of the number of cards AA advertises and opens.

So sure,they confiscated 200 million miles. A tiny rounding error.
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Last edited by JY1024; Mar 3, 20 at 9:13 pm Reason: Redacted personal attack
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