AA updates investors, defers aircraft, raises CASM guidance

[jcw]

New aircraft cost money. The economics of new vs old are simply not as favorable with low fuel prices. It isn't possible to logically argue that low fuel prices make growth profitable but not recognize the impact on fleet replacement. And while AA has a more efficient mainline fleet, it is behind other competitors in regional carrier capacity

So it costs money for new aircraft and you are saying AA will not benefit from these investments in new mainline aircraft due to fuel prices. Then two posts later you switch to how DL is going to win because it has spent money to increase fuel efficiency of its regional jets. this means DL had to spend money to buy those new aircraft.

It's amazing that if DL spends money on new aircraft it's great - is AA does its viewed as spending earnings

 

[WorldTraveler]

never did I say that AA doesn't benefit from new aircraft or investments. I said they are benefitting from a newer mainline fleet but the return on investment is not as great because fuel prices are lower; fuel is part of the formula and not the only one but lower fuel prices mean the return on investment will take longer.

Also, no one ever said that AA should not invest in aircraft. The concern that analysts who have addressed AA's fleet strategy have is that AA has the highest level of fleet expenditures among US airlines.

It absolutely costs money to replace fleet - regional or mainline.

The difference is balance - how much improvement each carrier can get in their finances compared to its peers for the amount of investment it makes.

AA is investing in fleet at a level far higher than its peers.

and lest you and others think this is just an AA vs DL comparison, you would do well to consider that WN's fleet is considerably older than some of the legacies and WN is not replacing its fleet at the speed to push down its fleet age.

and a major portion of what DL is spending on fleet is to move capacity from regional carriers to mainline, which also serves to push down mainline CASM because DL mainline is growing and growth is a proven strategy to push down CASM. IN contrast and as FWAAA noted, AA is growing its mainline capacity at a much slower rate than its peers which means a great deal of its fleet expenditures are going to mainline fleet replacement.

AA's regional capacity is growing at a much faster rate than AA mainline and other competitors. Given that AA is increasing gauge on its mainline fleet which is actually shrinking in numbers, AA mainline is shrinking but capacity is increasing because of larger aircraft while AA's regional carriers are increasing number of seats per aircraft as well as number of aircraft.

IN contrast, DL and to a lesser extent UA so far is reducing its regional carrier aircraft size (gauge) while shifting flying from regional carriers to mainline and in the process are pushing down their mainline and system costs. WN even without the regional carrier issue is also increasing gauge and number of flights.

AA is not pushing down mainline CASM to the same extent because of new aircraft purchases - their investor update says that AA's mainline CASM growth will accelerate as the year progresses to as high as 5-8% by the end of the year. They are investing in a lot of new aircraft but they are not pushing mainline CASM down.

AA is simply spending more money on aircraft and not getting the same cost benefit as other airlines from its expenditure right now.

 

[FrugalFlyerv2.0]

AA could always emulate DL:  purchase a decrepit refinery, sink oodles of money into it to bring it back online, and sustain several years of operational loses before it breaks even - but - it would certainly save on financing costs for new planes and lower the costs to fill up fuel-inefficient planes.  For a carrier like DL, that is called 'winning' by some posters on these boards.

 

[WorldTraveler]

since this is the AA forum, how about you show us the math of how much more AA's mainline CASM will be with 5-8% on a year over basis on top of what AA reported a year ago and if you want to compare, use the guidance that other carriers have provided and their last year's CASM and then tell us how AA's mainline CASM will compare to others - if you want to do comparisons.

and since you mentioned the refinery, it was within $20 million of being profitable since acquisition as of the last quarter. Based on previous guidance, when DL reports on Wednesday it should be profitable enough to make the investment profitable from the date of acquisition.

Financial statements are your friend.

 

[jcw]

if you are suggesting the AA forum be used to discuss AA topics let's keep it that way - lets see how the numbers come out

 

[FrugalFlyerv2.0]

and since you mentioned the refinery, it was within $20 million of being profitable

 
So in reality what you cannot bring yourself to say is that DLs refinery is losing money (i.e. unprofitable).

 

[FrugalFlyerv2.0]

if you are suggesting the AA forum be used to discuss AA topics

 
as if

 

[Kev3188]

if you are suggesting the AA forum be used to discuss AA topics let's keep it that way...

Yes please.

As for the refinery, the facility itself may lose $$, but if it still results in an overall savings to the carrier, who cares?

*I'm aware of the irony in discussing Trainer after agreeing about keeping the AA board AA related. Sorry for the drift...

 

[Hope777]

http://www.prnewswire.com/news-releases/psa-airlines-continues-fleet-growth-with-additional-bombardier-crj900-nextgen-aircraft-300031791.html
 
Looks to me as if AA is replacing older RJ's with New and improved CRJ's and EMB's.   These are AA owned carriers we are talking about.  AA could have went the way off DL and shut down a company, but did not

 

[dfw gen]

 
So in reality what you cannot bring yourself to say is that DLs refinery is losing money (i.e. unprofitable).

its funny how if aa owned the refinery it would be a money loser since its delta its "within" 20 million of profitability.

 

[CMH_GSE]

and since you mentioned the refinery, it was within $20 million of being profitable.

I guess this is the same as saying DL was within several hundred Million of being profitable with their fuel hedges as well.

Ok, I got it now, thanks for that clarification...

 

[WorldTraveler]

Nowhere have I ever said AA can't get the same results for an asset as any other carrier
Kev is correct and the standard is not just benefit to the whole airline but also on a standalone accounting basis.
AA is not thru with Envoy and they are adding more regional capacity partly thru upgauges than they are doing with mainline. Those facts are straight out of AA's traffic report and investor guidance

 

[AirLUVer]

So American airlines defers aircraft deliveries in Delta cancels theirs

 

[silverbird007]

Hell, I'm within $20 million of being profitable!

 

[WorldTraveler]

then you are behind the times... with the current financial reports, some ventures are now fully profitable on an operating basis going back to the acquisition. Of course the cost of the acquisition will take years to pay off but that is the reason for long term accounting which applies to fleet, buildings, or other long-term assets.

as an employee, it is not possible to argue that your employer has to wait 20 or 30 years to get a return on their investment since that comes every day.....