Originally Posted by
757Driver
I'll take that bet. This cancellation spells out one thing only. Reducing Capital Expenditures and more stock buybacks. RJ's to max out at the contractual limit with a hat in hand attempt later by management to increase it.
From Barrons....
Capex Deferral – United announced the deferral of 61 737NGs to 737MAX (undisclosed amount but we expect less) which is expected to reduce capex by ~$1.6B in 2017-2018. The company also announced new Embraer orders which will add roughly $550m in capex so the net capex savings is roughly $1B which we see as a positive. We had previously seen United’s ramp in capex over the next few years as a negative and
view the incremental $1B in savings to be largely returned to shareholders. We would also expect this to put some pressure on Delta to re-evaluate the expected ramp up in its own capex.
CASM-ex Guidance Better Than Expected – United expects 2017 CASM-ex to increase 3.5%-4.5% in 2017 (above its prior “guidance”) but which now includes 1.5%-2.0% of growth from contracts for its IBT group and
snap-up rates for its Pilots to the new Delta rate (calculated by the y/y increase in pay rate). Beyond 2017, United expects to keep CASM-ex below 1% from 2018-2020 which is a bullish guidance, in our view, and should significantly contribute to an improvement in United’s relative margin performance.
United Continental: It?s Not Just Warren Buffett - Stocks to Watch - Barrons.com