Eagle Ipo?

[FWAAA]

Like I posted above, I have no idea if Eagle is profitable, and arguing about it reminds me of a "tastes great - less filling" debate.

What is obvious to me is that Republic is consistently profitable and yet none of its mainline partners have been consistently profitable since the year 2000. Other regionals which focus on providing commuter feed to mainline legacy airlines are also generally profitable.

Reasons for that disconnect vary, depending on to whom one listens, but it appears that Republic has figured out how to share in the upside without taking on much downside risk. During the good times, there's plenty of profits at the mainlines to go around, so watching your regional partners grow fat and happy isn't such a big deal.

But regional FPD deals don't seem to benefit the mainlines when they are ALL losing billions of dollars. And AMR might very well be losing money on its AX partner arrangements. Perhaps Republic, Corporate and Trans States are making money from their AX flights. The good news is that if AA is overpaying American Eagle, AMR can recoup those overpayments from its other pockets.

 

[AAviator]

http://www.bts.gov/press_releases/2004/bts.../bts025_04.html
According to an internal Eagle financial release this is the first quarter that Eagle did not make it's margin of 8%. It came in at, I believe, 6.8%. Overall for the YTD however Eagle has made considerably more than the 8% margin and has made American more than it has cost American under the FPD terms.

There are a few things to note here. First, while Eagle did not cover its margin in the third quarter its operating revenues still exceeded its operating expenses and would have made money even if it wasn't FPD. Second, the "regional affiliate" expenses include Chautauqua, Corporate, and Tran States whose numbers are not broken out individually. However, if you compare the DOT reports for American and Eagle and do a little extrapolation you can see that Eagle is not the carrier causing Americans FPD expenses to exceed the revenues. Third, Eagle is intertwined so tightly with American that the disruption in service caused by a changeover to a new carrier would far outweigh the benefits of a total divestiture and might throw American into bankruptcy. In one of Carty's old speeches he mentioned that the revenues derived from Eagle feed were the difference between profit and loss even in the good times. Considering the times we are in now, it probably isn't wise to interrupt that flow even a little bit.

It seems the wisest way for AMR/American to go would be a 49% spin off. Make some money off Eagle but keep the operation going the way it is.

[post="197863"][/post]​

WFFF, you've got me scratching my head here. You say: "regional affiliate" expenses include Chautauqua, Corporate, and Tran States whose numbers are not broken out individually., Then you say: Eagle is not the carrier causing Americans FPD expenses to exceed the revenues. How can you tell? The revenues at AE aren't even broken out. Only the expenses.


Secondly, I don't know how you can say AE revenues would have turned it a profit, when the ONLY revenue AE has IS the FPD. You can't but a ticket on Eagle, just like you can't buy a ticket on Trans-states. here's a link to TSA's website http://www.transstates.net/ax.html click on fares and reservations and see what you get. The revenue goes to one place in both cases. AA.


As far as Eagle being sooo intertwined with AA, paint the eagle red on the tail, and overnight, one of connection carriers could be the new owner.

FWAA, AMR spent in the neighborhood of 4 billion for the equipment at Eagle. How much did they spend at the connection carriers? How many eons will it take AE to make a profit on the 4 billion spent?

Sell it.

 

[AAviator]

...good examples, but apples and oranges. In order to IPO the company you have to make it attractive to the buyer. The best way to do that is show that it will be a long term player. Why do you think ExpressJet is STILL the primary (about 99%) provider for CO? In order to IPO the company they had to show that it would continue to feed CO (at a healthy margin) for the long term.

[post="197933"][/post]​

That shouldn't be a problem. No one is saying stop using Eagle feed. It would be a way to remove some layers of management, and reduce total employee head count at AMR.

 

[imlars]

FWAA, AMR spent in the neighborhood of 4 billion for the equipment at Eagle. How much did they spend at the connection carriers? How many eons will it take AE to make a profit on the 4 billion spent?

Sell it.

Not long, since Eagle contributes 2 billion a year to the bottom line.

 

[AAviator]

FWAA, AMR spent in the neighborhood of 4 billion for the equipment at Eagle. How much did they spend at the connection carriers? How many eons will it take AE to make a profit on the 4 billion spent?

Sell it.

Not long, since Eagle contributes 2 billion a year to the bottom line.

[post="198385"][/post]​

Thats AA revenue. Not Eagle. With the current set up, AE would never have to, or had to carry a passenger to generate the numbers you speak of.

 

[imlars]

Thats AA revenue. Not Eagle. With the current set up, AE would never have to, or had to carry a passenger to generate the numbers you speak of.

[post="198386"][/post]​

I repeat," Eagle has been fee for departure for 1 year." It didn't make much of a difference. Capacity purchase simplified accounting but added little to the coffers. Since Eagle only connects 50% of pax now, I understand the argument. In reality it makes little difference. AMR was willing to purchase the capacity because it does make Eagle look better for a spin, but the simplicity was the icing on the cake. (The first 19 years) Eagle pays AMR for res, AA station charges, Fuel ect. AMR pays Eagle for pax, for Eagle stations servicing mainline, ect. Not any more with FFD. Anyhow, whatever money leaves the company, meaning what AMR pays for connecting pax is a total loss in todays fare environment. How can AMR aford to pay $100 a pax to connect to a $99 fare.? The answer, " own your feed" the money never really leaves(AMR). Pay FFD to a non-owned affiliate the cash goes buh-bye.(no matter how cheap the FFD is). To sum: For AMR to float the spin idea again shows a real sign of desperation. Having a garage sale to pay the mortgage, is not a good financial position.

 

[AAviator]

I repeat," Eagle has been fee for departure for 1 year." It didn't make much of a difference. Capacity purchase simplified accounting but added little to the coffers. Since Eagle only connects 50% of pax now, I understand the argument. In reality it makes little difference. AMR was willing to purchase the capacity because it does make Eagle look better for a spin, but the simplicity was the icing on the cake. (The first 19 years) Eagle pays AMR for res, AA station charges, Fuel ect. AMR pays Eagle for pax, for Eagle stations servicing mainline, ect. Not any more with FFD. Anyhow, whatever money leaves the company, meaning what AMR pays for connecting pax is a total loss in todays fare environment. How can AMR aford to pay $100 a pax to connect to a $99 fare.? The answer, " own your feed" the money never really leaves(AMR). Pay FFD to a non-owned affiliate the cash goes buh-bye.(no matter how cheap the FFD is). To sum: For AMR to float the spin idea again shows a real sign of desperation. Having a garage sale to pay the mortgage, is not a good financial position.

[post="198451"][/post]​

50 seat rj's are dinosaurs. Sell 'em while they've got residual.

 

[will fix for food]

WFFF, you've got me scratching my head here. You say: "regional affiliate" expenses include Chautauqua, Corporate, and Tran States whose numbers are not broken out individually., Then you say: Eagle is not the carrier causing Americans FPD expenses to exceed the revenues. How can you tell? The revenues at AE aren't even broken out. Only the expenses.
Secondly, I don't know how you can say AE revenues would have turned it a profit, when the ONLY revenue AE has IS the FPD.

[post="198381"][/post]​

Here you go.

http://www.bts.gov/press_releases/2004/bts.../bts025_04.html

 

[imlars]

50 seat rj's are dinosaurs. Sell 'em while they've got residual.

[post="198471"][/post]​

Good point.

1) Never listen to the Boyd group (have they ever been right?)
2) Which is the bigger Dino, the MD80 or EMJ 145?
3) The company knows, thats why they cancelled the last 18 orders
4) Better sell why you still can as mainline financials are dragging down the regional too.
5) I agree sell and sell quickly, but beware of the Oedipus syndrom, or more recently Crossair/Swiss Air.

AMR financials still not a pretty picture. 21billion debt vs the 1billion for Eagle. I guess its a start.

Lars

 

[AAviator]

Here you go.

http://www.bts.gov/press_releases/2004/bts.../bts025_04.html

[post="198491"][/post]​

wow your awesome. You contradict yourself then respond with a link that doesn't support a statement you made? Try again.

 

[AAviator]

Good point.

1) Never listen to the Boyd group (have they ever been right?)
2) Which is the bigger Dino, the MD80 or EMJ 145?
3) The company knows, thats why they cancelled the last 18 orders
4) Better sell why you still can as mainline financials are dragging down the regional too.
5) I agree sell and sell quickly, but beware of the Oedipus syndrom, or more recently Crossair/Swiss Air.

AMR financials still not a pretty picture. 21billion debt vs the 1billion for Eagle. I guess its a start.

Lars

[post="198533"][/post]​

1. Yes, more often than you'd like
2. EMJ145
3. See your number 2
4. with lower fuel costs mainline turns a net profit, ae remains a welfare case
5. Get some fresh air.

 

[will fix for food]

wow your awesome. You contradict yourself then respond with a link that doesn't support a statement you made? Try again.

[post="198606"][/post]​

That link breaks out Eagle's operating margins.


2Q 2004 Rank Regional Carriers 2nd Quarter 2003 (%) 3rd Quarter 2003 (%) 4th Quarter 2003 (%) 1st Quarter 2004 (%) 2nd Quarter 2004 (%) 2nd Quarter Operating Profit/Loss $(Millions)
1 American Eagle 16.2 15.7 20.6 16.3 15.5 53.7
2 Sky West 11.4 15.3 12.1 13.7 13.1 35.2
3 Express Jet 12.4 12.8 12.9 12.5 12.6 43.3
4 Air Wisconsin 11.6 21.4 12.6 13.3 9.2 14.8
5 Comair 13.6 15.8 16.5 6.8 7.9 23.1
6 Atlantic Southeast 15.2 12.7 9.7 7.7 6.7 14.3
7 Atlantic Coast 18.3 16.6 11.5 6.7 -10.5 -20.0
Seven-Carrier Total 14.2 15.3 14.1 11.3 9.0 164.4

Source: Form 41; Schedule P1.2

This is where Eagle revenues are broken out individually, although they are expressed in % and not dollar amounts. As you can see Eagle made a positive contribution to AMR, even after the 8% FPD payments. From this I made a guess that with a "regional affiliate" expense greater than "regional affiliate" revenue, and a positive Eagle operating profit averaging over 16%, that the Connection carriers were the cause.

Didi you even read that link?

 

[AAviator]

That link breaks out Eagle's operating margins.
2Q 2004 Rank Regional Carriers 2nd Quarter 2003 (%) 3rd Quarter 2003 (%) 4th Quarter 2003 (%) 1st Quarter 2004 (%) 2nd Quarter 2004 (%) 2nd Quarter Operating Profit/Loss $(Millions)
1 American Eagle 16.2 15.7 20.6 16.3 15.5 53.7
2 Sky West 11.4 15.3 12.1 13.7 13.1 35.2
3 Express Jet 12.4 12.8 12.9 12.5 12.6 43.3
4 Air Wisconsin 11.6 21.4 12.6 13.3 9.2 14.8
5 Comair 13.6 15.8 16.5 6.8 7.9 23.1
6 Atlantic Southeast 15.2 12.7 9.7 7.7 6.7 14.3
7 Atlantic Coast 18.3 16.6 11.5 6.7 -10.5 -20.0
Seven-Carrier Total 14.2 15.3 14.1 11.3 9.0 164.4

Source: Form 41; Schedule P1.2

This is where Eagle revenues are broken out individually, although they are expressed in % and not dollar amounts. As you can see Eagle made a positive contribution to AMR, even after the 8% FPD payments. From this I made a guess that with a "regional affiliate" expense greater than "regional affiliate" revenue, and a positive Eagle operating profit averaging over 16%, that the Connection carriers were the cause.

Didi you even read that link?

[post="198690"][/post]​

Those are eagle "operating" numbers. yes anything that EA doesn't spend from the FPD program goes back into AMR's pocket. That is understood. Clearly. If they hold costs down, that number goes up.

Again, those are "operating" numbers. Not NET numbers. Mainline has been operating with an "operating" profit for some time now. Plug in the total cost of eagle, to include the 791 million $ that went out the door for rj's this year, and the NET numbers will show a loss. Just like they do in the S.E.C. filing for "regional operations". How can you maintain AE isn't the one causing the loss?

Reduce headcount, get the debt off the balance sheet, remove some layers of management.

 

[will fix for food]

Mainline has been operating with an "operating" profit for some time now.

[post="198914"][/post]​

Table 2: Quarterly Domestic Operating profit/loss margin (in percent)
Network Carriers
Ranked by 2nd Quarter 2004 Margin
(Operating Profit/Loss as Percent of Total Operating Revenue)

Excel | CSV

2Q 2004 Rank Network Carriers 2nd Quarter 2003 (%) 3rd Quarter 2003 (%) 4th Quarter 2003 (%) 1st Quarter 2004 (%) 2nd Quarter 2004 (%) 2nd Quarter Operating Profit/Loss $(Millions)
1 Northwest 0.2 5.4 -0.2 -3.9 4.3 84.3
2 US Airways -7.1 -5.7 -4.8 -11.0 2.0 31.9
3 Alaska 1.6 10.6 -4.2 -11.2 1.1 5.5
4 Continental 8.8 -4.3 -8.5 -9.9 -4.3 -59.8
5 American -13.9 -6.3 -13.8 -8.3 -4.6 -145.3
6 United -12.1 0.04 -8.9 -12.2 -4.7 -125.9
7 Delta -6.9 -6.0 -6.7 -13.1 -6.2 -198.0
Seven-Carrier Total -6.7 -2.7 -7.8 -9.9 -2.8 -407.3

Source: Form 41; Schedule P1.2

 

[AAviator]

Where do you get this stuff?

http://biz.yahoo.com/e/031024/amr10-q.html

operating earnings of $165 million Q3 2003

http://biz.yahoo.com/e/040423/amr10-q.html

operating income was $42 million for Q1 2004


http://biz.yahoo.com/e/040722/amr10-q.html

operating income 196 million Q2 2004, and (a note of 87 million operating profit Q2 2003)

:down:

Lets do everyone here a favor and continue this (if you wish) via the private message system.

Thanks