Originally Posted by
AR1978
Did AA pay down some more of the debt this quarter aside from interest payments or servicing the debt?
They continue to pay it down so someday it will cease to be such a drag on profits. That's why they always include a bullet point about liquidity in the earnings statements. The airline has been on bankruptcy watch for a long time. Management wishes Wall Street will stop thinking that and bid up the stock. Time will tell if that's a good strategy.
Originally Posted by
ImSoSuss
It was a poor strategy from the beginning. "Killing it" is relativistic. You were never going to make the billions in profit going that way, you need that premium and business travel. That's like saying Susy's Lemonade Stand is killing it because she made 1000% profit, spent 10$ and made $100. While the supermarket down the street is not because they only made 10% profit for $1,000,000.
Absolutely. Basic economy was the answer to the ULCC model in the US and it's why they are having so much trouble now, their business model was successfully checkmated.
As you say, scale matters. Walmart has margins in the 2% range but when you do hundreds of billions in sales, small percentages add up to real money. We lag Delta and United on margins for two primary reasons, fewer premium seats to sell and debt service. Management has acknowledged this and is working on it but there's no quick fix.
As mentioned earlier it really sucks that Delta and United now have enough free cash flow that they can take aircraft deliveries without financing, that's going to make it much harder to catch them.