AA's currency impairments

[WorldTraveler]

DL's gross operating margin was higher than AA's.

It has been noted multiple times why DL had a lower net profit margin.

No, Q, it is neither correlation or coincidence.

it is a result of the restructuring of which a whole lot of other people had a part in.

and if you want to look for correlations, how about you address that nearly all of AA's pre-merger executive team was sent packing to be replaced by PMUS mgmt.

no other airline merger has resulted in as large of a turnover of executive mgmt.

is it a coincidence that the strategies I have highlighted are all related to PMAA mgmt.?

And, you can't take a special charge for operating money losing flights which is what AA is doing in Asia right now.

If you lose money, you have to show it as losses and take the appropriate actions to reverse the problem or continue to take losses.

And, AA absolutely will take special charges as part of its restructuring. They just don't want to do it at this time because they could not have the net profit margins they now have.

once they start taking charges, they will take them as many as they can at one time because once you shoot your financial performance, you might as well take as much as you think you will take.

the chances are real high that AA will take a currency impairment charge and also do fleet and facilities related charges as well as other merger related charges at the same time.

AA will take those charges - it is just a matter of time.

 

[WorldTraveler]

Huh? On an apples to apples basis, Delta's 3rd quarter profits were 33% greater than AA's profits. DL earned $1.6 billion pre-tax, excluding special items and AA earned a measly $1.2 billion, excluding special items.

AA's 3rd quarter profits were significantly smaller than AA's 2d quarter profits (20% smaller), even though the 3rd quarter is typically the most profitable. Obviously, the increase in labor costs and the sharp decline in some revenues impacted AA's earnings.

DL's net profit was smaller than AA's even though DL's gross operating profit margin was higher.

that is the gist of where this conversation has been for several days.

and the reason for AA's underperformance compared to the previous quarter was revenue related.

an 11.7% decrease in RASM in your largest global region will do that.

 

[will fix for food]

I joined this forum way back when it all migrated from plane business. I rarely come here anymore because it is entirely predictable what I'll see.

However I do have to chime in and say that the hobby of armchair airline financial analyst has me totally baffled. Of all the millions of things to get interested in in this world that's it?

I can see if your an employee and you want to have a good understanding of the true financial health of your employer, or if you are a trader, or even an economics professor, but just a civilian? Come on.....

I bring this up because since I come here so infrequently I can see where WT's Delta obsession is really getting over the top. I mean like really freaking bizarre. Troubling even.

WT, I bet Deltas CFO puts less time into pouring over the financial minutia than you do. I bet if he met you he would tell you to take up the guitar or ANY other hobby and stop obsessing about this stuff.


Anyhow, rant over, carry on.


But since I know you can't quit cold turkey there is a rumor that AWAC is leaving AAG and going to fly for Delta. That would leave a hole in AAG's feed network.

There you go, run with it.

I'm going upstairs to restring my Les Paul.

 

[WorldTraveler]

and specific to this topic, AA still has $700 million in revenue tied up in Venezuela that it might have to write off.

here is an article that highlights not only the size of the Venezuela issue but also that the airlines have a disproportionately large exposure to Venezuela compared to other industries.

http://www.forbes.com/sites/nathanielparishflannery/2014/10/28/how-bad-are-venezuelas-economic-problems/?partner=yahootix

 

[jcw]

Let me translate

See AA really doesn't have that much tied up there in the grand scheme thing and although many airlines have cash trapped - I will go to no no length to rehash it

I'm still struggling with a list of challenges

Plus I'm crushed that AA made more money so I will keep finding every thing wrong with AA to keep grinding my axe

 

[WorldTraveler]

I'm struggling how you don't understand that $700 million in cash tied up in one country that can't be brought out IS a big thing.

 

[jcw]

Your struggling because you have a axe to grind - it's trapped money but once again you don't understand how 109's of companies have trapped money overseas

Once again even with trapped cash and following GAAP accounting rules AA made more money than DL and DL drove down operating profit 47%

That's what matters not you digging up every little thing to bash AA

How's that list coming - still have your head in the sand

 

[WorldTraveler]

yes, the article I noted says that many companies had losses because of Venezuela.

did you get that... major US companies had LOSSES.


It's not the end of the world but it is a huge potential LOSS that AA faces... that's the price of being the largest airline in a country that hasn't been playing by the rules of int'l business for years.

heads other than in the air would have to belong to those who can't seem to accept that there are genuine business risks involved in Latin America - the region where AA has enjoyed healthy profits in the region for years.


$700 millions in currency that might have to be written off plus an 11.7% reduction in RASM is hardly the way Latin America became so profitable for AA.

AA will adapt - but the golden days of Latin America profits might take a while to return.

 

[jcw]

Grind grind grind

You can't help yourself

Where is your list - it's a tough one for you to be objective

Would it help if we started a thread for everyone to find out everything negative about DL

Remember which you can't - AA made more money and had better operating margin improvement compared to DL