Wow CNBC, nailed it with both guys, how true they are!
Julius? I don't think he was even aware he was on TV.
A bit past his prime. Now to people more relevant.
Jamie Baker, J.P. Morgan: J.P. Morgan’s analysts begin their note with three words: ”We were wrong.” Previously, J.P. Morgan had deemed a voluntary bankruptcy filing as highly unlikely. “‘The company has approximately $4.1 billion in unrestricted cash and short-term investments… [and] is anticipated to be more than sufficient to assure that its vendors, suppliers and other business partners will be paid timely and in full….’ So, this WASN’T about liquidity (liquidity is about 18% of LTM revenue).” On the filing’s implication for the industry, J.P. Morgan adds: “LCC filed. DAL filed. UAL filed. Today, those airlines are producing returns nobody ever dreamed possible, against a backdrop of 9% unemployment and ~$100 oil. There’s no evidence that those three are ‘going after one another.’ A more viable AMR doesn’t pose a threat, it contributes to an even more viable industry, in our view.
Michael Linenberg, Deutsche Bank: “The read through for the rest of the industry is that today’s bankruptcy filing is specific to AMR and a reflection of the company’s struggles to achieve a more competitive cost and debt structure. In that regard, the US airline industry is on track to generate a net profit in the seasonally-weak December quarter, something that we have observed only twice during the past decade. Furthermore, we expect that AMR’s restructuring will include further rationalization of its network which likely means some capacity cuts.”
Daniel McKenzie, Rodman & Renshaw: “The implications for the industry are positive; airlines in Ch. 11generally shrink, and AMR likely comes out of Ch. 11 a merged airline with US Airways (friendly or hostile). A restructured industry is clawing back pricing power, however, with 34% of AMR’s (and the industry’s costs) continuing to get whipsawed 30-50% from excessive volatility in commodity markets, the industry needs to cut yet more capacity and park more planes, and we would expect that to be part of AMR’s restructuring plan. It’s premature, but we would argue UAL, DAL, LCC, JBLU, and LUV should all be the largest direct and indirect beneficiaries from the reduced capacity.”
Will Randow, Citi: “We would not be surprised to see pursuit of an AMR-LCC merger, as LCC has pursued consolidation with other legacy airlines and AMR’s CEO Gerard Arpey, prior to today’s transition to new CEO Tom Horton, preferred a go-it-alone strategy.”
