Originally Posted by
Margaritaville
Only in corporate America can they call a $641M loss a $169M profit on paper, then pop the corks.
Things don't look good long term over there. Almost every other airline is on the brink of breaking even, without the government cheese.
To a casual observer, maybe. But to people that actually understand things like economics, finance, and accounting, things are not bad at all.
How many aircraft do United and Delta have on order that are not on their balance sheet yet? AA has almost zero. It's just a numbers game. AA has the largest fleet and newest fleet, and has already paid off a huge chunk of it. The others will be in a much worse position once they put that debt on their balance sheet.
Don't forget, inflation is happening and 2022 is likely going to be a TERRIBLE time for large capital expenditures as prices are going up across the board. Plus, with supply chain shortages, the advantage goes to the airline that is not counting on hundreds of new orders (deliveries are expected to be backed up for years) and to the airline that has the newest fleet requiring the least repairs.
AA is showing a loss for tax purposes as it depreciates its aircraft and pays them off. They will get a huge tax check back this year because of it, and have actually gained revenue in the terms of assets.
Here's an over simplified version of what is happening (doesn't work exactly like this, but it is the same theory). Let's say you own a construction business and are doing well. Would you rather pay $250,000 in taxes at the end of the year, or purchase equipment and depreciate it so you actually have an extra $1,000,000 in expenditures and show a loss so you do not need to pay those taxes? You still made the same profits as a company, but chose to hide the profits into scheduled depreciation and purchases. Maybe you pay for materials for projects that you have in 2022 and put them in inventory for now. You repair equipment in December that was not scheduled to be repaired until January, so those expenses show as 2021 expenses and not 2022. Maybe you pay vendors early. Maybe you accelerate the depreciation on a track hoe and buy another one.
In the future, you have more cash on hand (you didn't need to pay the $250,000 in taxes), have additional equipment that you will use to make you more money, and are better set for the years to come. Your company is worth more as a whole than it was before, and is much healthier. Even though you showed a loss the previous year.