AA stopping buybacks
 

According to the article share repurchases are being stopped. This is most likely part of a distress plan. Article alludes to that. Reduce capacity, stop FA hiring, reduce expenses, shore up the balance sheet, park certain fleets, reduce pilot hiring etc. Regardless what we all think about the media and the public’s various reactions to Coronavirus this company is making preparations for either a more severe turn in consumer spending or a recession.

https://www.forbes.com/sites/tedreed...A#9878daf7b360

“However, American has suspended its share buyback program. “It’s not because of the stock price,” Parker said. Rather, “It didn’t seem right.”

The old buy high but don't buy low philosophy.

This situation is definitely going to test Parkers statement that AA will never lose money again. If he fulfills his prediction, he will be regarded as a truly great airline CEO by history when this virus is finally a memory.

Parker was buying back his stock at the highs. Meanwhile AA has more debt the Delta and United combined and negative cashflow. He should have been paying down debt vs lining his pocketbook. Now this misstep may cause another bankruptcy

Both United and Delta also bought back stock at the highs. In fact, 95% of all corporate buybacks are bought at highs and that cash forever lost.

Pay back debt? No way. Do you know how much money per month that $12b in retired debt would've saved? (the answer is in our quarterly report)

This happens every decade or so. Large world events that put carriers without cash and the means to raise it under. If Doug was truly playing the long game he would've kept that cash in a vault and waited patiently. Then go on a shopping spree.

This is what SWA did post 9/11, catapulted by their fuel hedges. It's what warren buffet has done over the past few years...sitting on $130b in cash and taking heat for it. He knew this was coming, it always does.

[QUOTE=Name User;2998039]Both United and Delta also bought back stock at the highs. In fact, 95% of all corporate buybacks are bought at highs and that cash forever lost.QUOTE]

The difference between them is they have a lot more cash on hand and a LOT less debt. Be interesting to see if they can pay these bonds that are about to mature without government assistance. More assistance is more debt to repay. Slippery slope with all this debt and no revenue coming in. Doug has been criticized by almost every analyst for years on his strategy and it's really starting to show why. Delta and United will come out fine because they have real management in place who understand the numbers.

[QUOTE=stbloc;2998220]

There is no guarantee any airline comes out fine from this.

[QUOTE=stbloc;2998220]Last I looked AA by far has the most cash on hand of the three.

If you're talking cash vs operating expenses, Spirit is by far the most capitalized even though they only have $1b in cash.

No large debt payments due until 2022.

[QUOTE=stbloc;2998220]Where do you get your info from? American has more liquidity than any airline, not just in the US, but the entire world. Delta is the most profitable, not necessarily the most stable for a huge short term hit like this.

I didn’t write the majorly of what you quoted.

The question was about CASH. Liquidity is not exactly the same thing, as it includes additional debt that can be called upon. AA entered into this with about $4b in cash and another $3b on their credit card that wasn’t yet tapped.

But having the most cash (or liquidity) isn’t really the best metric, if your burn rate is higher than your competitor. So what if AA has $7b in money they can access right now...if they are burning $2b a month and Spirit is burning $200m a month, Spirit wins (those are just example numbers for illustration purposes). AA goes down and the resulting capacity gets taken out, improving the other carriers yields.

Right now carriers are burning the furniture so to speak selling any seat they can for almost nothing. Assuming they survive this initial freak out period, they can look forward to months or even a year or more of depressed yields because of all the fare sales going on into the future.

It’s a mess.