AAL Stock

[WorldTraveler]

there will be plenty of movement in the market but if there is industry over capacity, the Fed is focused on creating jobs, and the Euro zone is looking weak, there will be implications that won't show up in just a couple days movement of the stock.

 

[700UW]

AA is down .222
 
DL is down .5416
 
UA is up .57

 

[700UW]

Now AA is in the positive, while DL is still down.

 

[WorldTraveler]

of course the companies that are actually honest with investors will take the hit, but they also have strong fundamentals for their business.

and if LHR, DFW, MIA, and GRU are where the revenues are strong, then DL will just redeploy its 744s to those markets.



and that little problem of AA's overconfidence will be taken care of real fast.

When the only 2 US and only 2 European airlines that have said anything about excess capacity in the industry say there is a problem and AA acts as if it all is hunky dorey, then you might go asking when the stock options that Parker gets for pulling off the merger expire.

because his personal gain is apparently more obvious that telling the truth about how well the industry including AA is really doing.

or else everyone will move their capacity to AA's strength markets.

one or the other.

 

[robbedagain]

well may be DL will just simply buy UA AA WN  to knock them all outta the ball park  then change their symbol to "WOTW"  meaning We Own The World

 

[Harold Nads]

A symbol I was thinking of is STFUWT

 

[WorldTraveler]

let's see...

I don't think DL is interested in buying any of the other big 3. why should they when DL has had as much success beating them back without having to engage in a merger or acquisition?

As for WN, I hope AA does give WN a run for their money when the Wright Amendment falls but there is little reason to believe that WN won't be successful long-term in shifting a significant portion of demand from DFW to DAL. It has happened in every other market that WN can serve from DAL.

considering that AA's average fares from DFW to its top business markets are above average compared to other markets in the US, there is absolutely room for WN to bring the fares down and take a piece of the market.

Parker knows it's coming along with the degradation of new AA market share at DCA and soon after that Latin America - thus his interest in trying to paint a picture that everything is going just fine at new AA so the stock can run up and he can make money before the bottom starts to drop out.

Add in that if things are really as great as they are at AA, labor will be demanding to be compensated like employees in the rest of the industry and not sit around for years like US employees did with bottom of the barrel wages.

Finally, add in that AA has the largest aircraft order book in the US industry and the highest leverage and AA's financial strength is not as deep as some here would like to believe - and it will only take a little new competition (and AA has a lot of it coming) plus a few int'l economic shocks to show the vulnerability of AA's business plan.

remember, AA and UA have long been in a cycle of up and down. AA emerged from BK and merged with strength derived in part from UA's problems. UA is cutting losses and turning the ship around. They aren't going to be the pushover that they have been for several years that allowed AA to restructure easily.

 

[WorldTraveler]

AA just reported June traffic and its load factor on both the Atlantic and to Latin America was down more than 5 points.

AA added almost 8% more capacity on the Atlantic and 7 percent to Latin America plus 4% to Asia.

For Parker to say that AA is not seeing weakness cannot be substantiated by their traffic report which shows their system load factor down 2% driven by 5% on their int'l network

AA does say it expects RASM to be up 5.5 to 6.5% which is slightly down from previous months but is still decent RASM growth.

Still, AA is adding capacity far faster than the market can absorb it and is largely responsible for the overcapacity that the market has been talking about and which Parker pretends to not see.

 

[commavia]

"Don't think Delta is interested in buying any of the other big 3" ... as if Delta would have that choice regardless of their interest.
 
As for all the usual hysterics about AA's investor update, it's notable that while AA's load factor dropped on higher traffic, that traffic was - according to the update - driven in no small part by upgauging to larger aircraft (lots of EMB140s and MD80s leaving the fleet, lots of 737s and A321s coming in), and as Scott Kirby recently said, this upgauging is almost always accretive to profits because the marginal revenue increase far outweighs the incremental marginal cost of those extra seats.  And that's borne out in that, while AA expects RASM to be up "only 5.5-6.5%" (which is not really "slightly down," but rather a slightly narrower band), the company also is now projecting pretax margins of 12-13%, which are not only higher than some of the market's previous estimates, but solidly in Delta territory.  So obviously for all the consternation, faux concern and blatant misreading of AA's investor update, Parker's statement that AA is not seeing any major weakness across its network appears to be fairly accurate given that it looks to be on pace for one of the, if not the, most profitable years for any airline in industry history.
 
It's becoming increasingly clear: the gap is closing, and as a result the fear is rising ...

 

[FWAAA]

It's becoming increasingly clear: the gap is closing, and as a result the fear is rising ...

But, but,  but  AA is adding capacity faster than the market can absorb it.   That spells doom.    

 

[WorldTraveler]

time out there.

there wasn't a thing wrong with AA's domestic traffic numbers so what they did with their RJ fleet and the M80s has nothing to do with anything.

WN also released traffic results which showed higher traffic on slightly more capacity - and strong RASM. the problem isn't the domestic market.

no one has yet said that there is weakness in the domestic market. Analysts just this a.m. pointed out that the US domestic market remains strong.

AA's problem w/ traffic is in the int'l market where they threw capacity into the market and still watched their LF go down in every int'l region.

AA is putting too much capacity into the market, can't fill it, and is using its cost advantage coming out of BK to expand its network to fill in the holes where AA/US are still not competitive - including in continental Europe and Asia.

it is easy to fill capacity in the summer without trashing yields.

Parker has no choice but to fly as much capacity as possible now because if he doesn't then he has to start dealing with the bloated AA/US workforce.

let's keep in mind that the end of US' pricing policies are the biggest reason for domestic yield strength.

Add in UA's problems and it is easy for everyone to see yield pops... but those don't show stronger demand but rather just better pricing.

yes, AA's forecast margins are solidly in DL territory... but they still have yet to deal with the increased competition from the end of Wright, the slot divestitures, and new Latin competition that will come over the next year.

AA has integrated nothing with US so far and pay will start to increase even without integration which will require further pay raises if labor is to play as one team.

AA is running a solid business right now but they are nowhere near at a position to call AA/US one airline operating in a stable, long-term environment.

Given that airline stocks are generally trading stocks, investors don't really care.

employees and other long-term stakeholders do care.

AA has yet to prove they are solid for the long haul. Maybe they will be but it remains to be seen.

 

[eolesen]

Lost in WT's missive:

AA's June RPM's were up in almost every region YOY.

LatAm was essentially flat (down 0.1%) which is incredible when you consider the doom and gloom from WT about World Cup.

Sure, load factor was down due to the density increases, but when you're running at 88% LF's, you're well past the point of diminishing returns, so that may not be a bad thing.

 

[commavia]

Sure, load factor was down due to the density increases, but when you're running at 88% LF's, you're well past the point of diminishing returns, so that may not be a bad thing.

 
Precisely.  What I suspect we are starting to see is the beginning of a trend back towards structurally lower load factors.  It's a constant balance, but through consolidation and restructuring, the airline industry is finally profitable again as thus I expect the pendulum to swing back somewhat away from very high asset utilization and more towards a higher unit revenue focus - the way it was before 9/11.  One manifestation of this is likely to be lower load factors - almost certainly not as low as was standard 15-20 years ago, but probably at least somewhat lower than what the norm has been in the recent past.  I think we're already starting to see that with the level of upgauging occurring at AA, Delta, etc. - with greater pricing power and economies of scale, it's somewhat less critical to maintain system load factors of say, 88% as opposed to 85% if that incremental 3% is dilutive to overall-higher earnings.
 
So in summary, AA is screwed. 

 

[WorldTraveler]

Lost in WT's missive:

AA's June RPM's were up in almost every region YOY.

LatAm was essentially flat (down 0.1%) which is incredible when you consider the doom and gloom from WT about World Cup.

Sure, load factor was down due to the density increases, but when you're running at 88% LF's, you're well past the point of diminishing returns, so that may not be a bad thing.

 

Precisely.  What I suspect we are starting to see is the beginning of a trend back towards structurally lower load factors.  It's a constant balance, but through consolidation and restructuring, the airline industry is finally profitable again as thus I expect the pendulum to swing back somewhat away from very high asset utilization and more towards a higher unit revenue focus - the way it was before 9/11.  One manifestation of this is likely to be lower load factors - almost certainly not as low as was standard 15-20 years ago, but probably at least somewhat lower than what the norm has been in the recent past.  I think we're already starting to see that with the level of upgauging occurring at AA, Delta, etc. - with greater pricing power and economies of scale, it's somewhat less critical to maintain system load factors of say, 88% as opposed to 85% if that incremental 3% is dilutive to overall-higher earnings.
 
So in summary, AA is screwed. 

No, it wasn't lost.

I specifically noted that AA is attempting to grow the SIZE of its int'l network by using resources - airplanes and people - that it has no choice but to use or pay high costs to remove.

There isn't another airline in the industry that has decided that consolidation in the industry is justification for reducing load factors.

the simple fact whether you two AA mgmt. loyalists (which is all the more ironic given that everyone knows how much you railed against Parker and the merger and yet you now line up behind him just as strongly as you did behind Horton and co.) is that Parker justified the economics of the merger based in large part based on US' pricing policies and low pay for its employees.

The DOJ pointed out the communications that took place at AA/US over those pricing policies but you couldn't figure out they were a key reason for US' survival relative to the bigger legacies but also are the very reason that AA/US can now claim success in the marketplace - because those pricing policies have now been eliminated?

trash industry pricing for years and then eliminate your strategy and then claim success because you finally had to end the practice or else face the consequences of it?

and then you continually argue AGAINST the reality that other carriers such as WN will now provide the pricing discipline in new AA's key markets such as DCA and DFW. that is PRECISELY what the DOJ intended to do - and has succeeded at. AA/US bragged to the DOJ about their pricing power so the DOJ hit them with competition - exactly what they avoided - in the very markets where they most capable of harming consumers by eliminating US' behavior that kept market pricing in check?

The DOJ didn't require that remedy from DL, WN, or UA.

and the INDUSTRY is benefitting because of the elimination of US' pricing policies while the impact of the divestitures will be born by AA.

as for labor costs, Parker knows full well that he has a small window in which he has labor cost advantages because of AA's BK and before the nAAtives - all of them - expect pay raises as a result of AA's success and in order to make the merger work.
He is doing everything he can to grow AA as quickly as possible, including to fill in the holes in AA's network that US did noting to fix - and to do it all before competition showed up.

No, AA is not doomed, screwed, or anything else.

But AA has not demonstrated that it has what it takes to maintain the same level of success in the industry in the midst of much greater competition than it has today, with higher labor costs, and without the advantage of artificially induced RASM growth based on the elimination of AA/US' own pricing policies and not based on the strength of its own long term strategies.

you and your internet supporters can vote my posts down dozens of times all day long but you would be better served understanding and addressing the strategic basis for what I say than in constantly running around trying to exterminate any bit of rational thought that might question what AA is doing.

it's also worth noting that UA in its most recent traffic report stopped reporting its fuel costs which makes DL the only airline to do so. Given that UA's fuel costs on its traffic reports were always higher than DL's, it might highlight why they stopped - and why Parker doesn't want to show it either.

 

[commavia]

So much emphasis, over and over, again and again, incessantly, about all of the pressure and "discipline" that competitors will provide for AA, with nary a mention of the immense competitive "check" and "discipline" that AA will now provide against its competitors - chiefly Delta.  And therein, of course, lies the flaw in all these arguments - that of course being the "heads-Delta-wins-tails-everyone-else-loses" mentality that if anything allegedly shows Delta in a good light (or can be misconstrued or manipulated to do so), we all have to hear about it ad infinitum, but if not, then anyone suggesting otherwise is an idiot, a "management loyalist," or worse - what a hallmark of insecurity and weak argument.
 
I'm no AA "management loyalist," and in fact I have supported this merger since the day the Parker-AMR union deals were announced.  (Feel free to check the other corners of the internet you're banned from for proof.)  I've said it before and I'll say it again - the fear is growing stronger.  The reality is setting in that the gap between Delta and the industry is closing rapidly, and every petty, stupid argument thrown up in the last half-decade - to somehow immortalize Delta's brilliance and the insurmountability of its lead - is crumbling, argumentative brick by argumentative brick.  Please go back to the kids table.