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GK: "Radical restructuring" for WN if no travel increase by fall

GK: "Radical restructuring" for WN if no travel increase by fall

Old May 14, 20, 3:35 pm
  #1  
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GK: "Radical restructuring" for WN if no travel increase by fall

Southwest CEO Gary Kelly said Thursday he will have to "radically restructure" the airline if travel demand does not improve dramatically by the fall.

As part of $3.29 billion in federal payroll loans and grants to Southwest, the company may not lay off workers through Sept. 30 due to the coronavirus pandemic.

"We've got $14 billion in cash, you can do the quick math in your head," Kelly told FOX Business' "Mornings With Maria." "Things have to improve here quickly or we run out of money, and if they don't improve after Sept. 30, we would have to radically restructure not just Southwest Airlines but the whole industry."
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Old May 14, 20, 7:24 pm
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There will surely be lots of folks that will complain and yell the airlines (most/all of them) are just money hungry pigs.

BUT - in the end, they are a business. A business survives by taking in more money than it spends. Plain and simple. If they can not do that, it must change or go away.
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Old May 14, 20, 8:16 pm
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The major airlines are publicly traded companies that have recently bought back hundreds millions of shares of their stock.

Two words...............SECONDARY OFFERING....................there is your cash flow

Airlines are begging for a bailout, but they've used 96% of their cash flow on buybacks over the past 10 years. It highlights an ongoing controversy over how companies have been spending their money.




https://ycharts.com/companies/LUV/stock_buyback



https://markets.businessinsider.com/...0-3-1029006175





https://www.marketwatch.com/story/ai...cks-2020-03-18

Last edited by flyer4512; May 14, 20 at 8:23 pm
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Old May 15, 20, 1:22 am
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Soon any business will be able to make money by borrowing from the Treasury at negative interest rates.
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Old May 15, 20, 9:14 am
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Until / unless someone figures out what to do with surplus commercial aircraft, airlines will have little choice but to default on their leases, take significant write downs on owned assets, creditors will have few options. Even the US Treasury will eventually have to stop buying debt from troubled companies without some form of collateral, Fed insisted this week it is not ready to drop rates below zero.

Expect the most experienced pilots to take some form of voluntary / forced retirement, resulting in flight crews with much less experience. IMHO, it was their instincts and steady hand that prevented AA and WN 737MAX disasters.

US Government, EU will prop up Boeing and Airbus through their defense and space businesses, respectively.
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Old May 15, 20, 9:53 am
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Originally Posted by flyer4512 View Post
The major airlines are publicly traded companies that have recently bought back hundreds millions of shares of their stock.

Two words...............SECONDARY OFFERING....................there is your cash flow
Buy high, sell low!

Who will buy stock in a company that has no prospect of becoming profitable? They need to show a plan to get there.
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Old May 15, 20, 1:00 pm
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Originally Posted by diver858 View Post
Expect the most experienced pilots to take some form of voluntary / forced retirement, resulting in flight crews with much less experience. IMHO, it was their instincts and steady hand that prevented AA and WN 737MAX disasters..
there is no "forced" retirement for the most senior (only voluntary), and only if the company and pilot's union agree on terms.

Since the pilots are union, all layoffs are based on seniority, so the most junior will be the ones to be let go (furloughed)

Last edited by nachosdelux; May 15, 20 at 2:07 pm
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Old May 15, 20, 3:17 pm
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Originally Posted by nsx View Post
Buy high, sell low!

Who will buy stock in a company that has no prospect of becoming profitable? They need to show a plan to get there.
What makes you think a secondary offering can't be profitable for the investor ? The $$ from the secondary often gives companies $$ to expand and make more $$ or in the case of airlines, survive.

Companies have them all the time and I can't remember any where all of the shares were not purchased.

The obvious plan for airlines would be we need the secondary $$ to survive and will make more money and thus buy back shares as people begin to travel again, if not they may go belly up and make the stock worthless.

Of course they can just have the taxpayers give them ANOTHER BAILOUT.

BTW, United had a secondary about a month ago.

https://www.cnbc.com/video/2020/04/2...1-billion.html

Last edited by flyer4512; May 15, 20 at 3:38 pm
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Old May 15, 20, 3:45 pm
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I'm not really investor, so not familiar with investing terms . . . but if this is what you mean by a secondary offering, Southwest has already done this.

Southwest Airlines Announces Offering Of Common Stock And Convertible Senior Notes Due 2025 ? Southwest Airlines
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Old May 15, 20, 4:53 pm
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Originally Posted by nachosdelux View Post
there is no "forced" retirement for the most senior (only voluntary), and only if the company and pilot's union agree on terms.

Since the pilots are union, all layoffs are based on seniority, so the most junior will be the ones to be let go (furloughed)
Agreed - will be strictly voluntary. If there is even a hint of a Chapter 11 filing, expect a long list of volunteers: https://www.nytimes.com/2005/05/11/b...ion-plans.html explains the impact of United terminating its pension plans as part of a bankruptcy filing in 2005, handing off responsibility to the Pension Benefit Guaranty Corporation (US Government agency).
..."It's a hammer blow to thousands of retirees who will have to somehow make do with lower pension checks," said Joseph Tiberi, a spokesman for the International Association of Machinists and Aerospace Workers. "The promises United made to them are worthless,"...

Queue the too big to fail responses.
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Old May 15, 20, 5:34 pm
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Southwest does not have a defined benefit (pension) plan for its pilots, so what happened to United in 2005 is not the same scenario
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Old May 15, 20, 8:29 pm
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Originally Posted by peanutsplease View Post
I'm not really investor, so not familiar with investing terms . . . but if this is what you mean by a secondary offering, Southwest has already done this.

Southwest Airlines Announces Offering Of Common Stock And Convertible Senior Notes Due 2025 ? Southwest Airlines

Don't be confused by the word "secondary" . All Secondary means is that more shares were issued since the company first went public, there can be more than one secondary offering and WN may indeed issue more shares.
.
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Old May 16, 20, 4:23 am
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Originally Posted by Tanic View Post
Soon any business will be able to make money by borrowing from the Treasury at negative interest rates.
They have negative-interest-rate mortgages in Denmark. Thats what I am waiting for.
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Old May 16, 20, 9:40 am
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Originally Posted by flyer4512 View Post
What makes you think a secondary offering can't be profitable for the investor ?
I was ridiculing the company's decision to repurchase shares at high prices then sell new shares at low prices. IMHO share repurchase is a statement that the company has no good ideas to use its capital to grow its profits.
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Old May 16, 20, 11:28 am
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Originally Posted by nsx View Post
I was ridiculing the company's decision to repurchase shares at high prices then sell new shares at low prices. IMHO share repurchase is a statement that the company has no good ideas to use its capital to grow its profits.

Repurchasing the billions of shares is a good part of the reason why WN stock went up in value, less float = more $$ per share and brings the most value to shareholders...................which is all they care about.

As far as the "company " repurchasing shares, the people who make those decisions are usually MAJOR stockholders so reducing the float makes them richer.

Stock buybacks across all large public companies are a major reason why the markets continued to rise the past few years, they took the tax savings and repurchased stock.............again, the stockholders are what matter.

While Covid is a different animal and can't be predicted it also explains for some why execs sell stock during good times to secure a profit.

Those same people are probably buying back at lower prices ( or being given stock options as part of their pay package) which in all likelihood will increase in value over the years as people start flying again AND the company repurchases stock

If the company falls on hard times AGAIN because they didn't stash away the profits the American taxpayer bails them out.....................the rich get richer and many are so stuck in dem vs GOP, oblivious to this cycle so it just continues..................sad

Last edited by flyer4512; May 16, 20 at 12:37 pm
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