Another, in regards to financially illiterate travel bloggers generating clickbait articles, and the pilots who view them as gospel…
FWIW. Just the messenger.

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This whole line of nonsense is completely bogus. “Total liabilities“ is not the same thing as net debt and it includes things like leases paid out to perpetuity and financing carried out for full terms with full interest schedules, and pension obligations for employees based on the most conservative schedules- many things that will never happen. total Liabilities vs assets are recorded at cost and not market value and don’t include the value of depreciation. I could go on and on about why this snapshot, while not a ringing endorsement of the state of the balance sheet at this point in time, does not in any way suggest that we are in danger of insolvency.
Some of these bloggers assert things like “the airline is tapped,” and “they have no more assets to leverage.” My gosh, the airline has 15.6 B in liquidity, plus financing on relatively new aircraft at low rates, all of which can be leveraged through EETCs and other media for literally billions if necessary. Typically a company the size of AA would carry 7B in liquidity and all that extra can be used to repay debt.
THE COMPANY DOES NOT have to refinance debt at “High rates.” First they get a huge discount by prepaying debt versus refinancing and that is exactly why they are reducing debt by 15b by 2025. Also, any refinance can be backed by quality assets like these new delivered aircraft which due to shortages and interest rates are worth more on the finance market then they cost BY a LOT. (This true value isn’t calculated in the Total Liabilities vs Assets calculation either.)
Let’s not forget the fact that the airline has ALREADY REFLEETED and our competitors have to assume much larger total debt (read total liability) in order to do the same thing. Let’s not also forget that with only ONE quarter of truly solid revenue the company has STILL reduced total debt by 5.2 B and has the projected free cash flow to continue to reduce debt going forward to their -15B goal by 2025.(This is not a ringing endorsement of our management team, who are terrible at operations but quite good at finance.)
All this reminds me of late 2020 when our current negotiating chairman Hamel was literally telling the board that we were going bankrupt in a few months and furloughing 5-6 thousand pilots because THAT is what the company told him.
Good grief. I’ve never met a group so subject to fear grenades that are absolutely and totally without merit as we are.
Finance isn’t simple, which is why we need consistent good advice from folks who understand it keeping our leadership well informed.