How long will it last?
10-23-2020, 07:11 PM
#261
Gets Weekends Off
Joined APC: Apr 2020
Posts: 250
Originally Posted by Battlinbear
Speaking of stocks. just flew w a capt who turned 30k into 175k in 3 weeks. Picked up a charlotte observer on a sit and started reading about how they were going to start mining lithium in Gastonia. Company was Piedmont Lithium. was $6 a share. then jumped to over 50 in less than 2 weeks. Ended up selling for $44 before we started the trip. damn dinner was good that night. Wish all the older dudes were like him. Also, GD!! what a home run on a 2 hour sit.
Ask this guy how much he lost in other speculative plays. I’d imagine it’s way more than 175k if he’s willing to throw 30k on a tip from a jumpseater.
10-24-2020, 03:36 AM
#262
Line Holder
Joined APC: Dec 2018
Posts: 91
You can believe pilots who don’t stay in their lane or the others who actually do this stuff for a career.
- Andrew Didora, Bank of America: “We estimate AAL now has liquidity into 1H22 with no improvements in cash burn.”
- Michael Linenberg, Deutsche Bank:“The improvement in cash burn combined with a record level of liquidity ($15.6 billion, which includes the full amount available under the CARES Act Loan Program) gives us a confidence that not only will American be able to ride out the downturn, but is well-positioned to participate in the recovery once demand bounces back.”
- Helane Becker, Cowen: “We continue to believe American has enough liquidity to survive the remainder of the pandemic.”
- Jamie Baker, JP Morgan: “Recent deals in the space (most notably UAL and DAL’s loyalty-backed debt raises) continue to further lower the risk of bankruptcies in the industry in the near-term.”
10-24-2020, 03:51 AM
#263
Gets Weekends Off
Joined APC: Mar 2014
Posts: 774
Originally Posted by Rockiepilot
You can believe pilots who don’t stay in their lane or the others who actually do this stuff for a career.
- Andrew Didora, Bank of America: “We estimate AAL now has liquidity into 1H22 with no improvements in cash burn.”
- Michael Linenberg, Deutsche Bank:“The improvement in cash burn combined with a record level of liquidity ($15.6 billion, which includes the full amount available under the CARES Act Loan Program) gives us a confidence that not only will American be able to ride out the downturn, but is well-positioned to participate in the recovery once demand bounces back.”
- Helane Becker, Cowen: “We continue to believe American has enough liquidity to survive the remainder of the pandemic.”
- Jamie Baker, JP Morgan: “Recent deals in the space (most notably UAL and DAL’s loyalty-backed debt raises) continue to further lower the risk of bankruptcies in the industry in the near-term.”
10-24-2020, 05:30 AM
#264
Gets Weekends Off
Joined APC: Jan 2014
Posts: 1,295
Originally Posted by ny797
and the award for dumbest post of the year goes to!!!!!
Ask this guy how much he lost in other speculative plays. I’d imagine it’s way more than 175k if he’s willing to throw 30k on a tip from a jumpseater.
Ask this guy how much he lost in other speculative plays. I’d imagine it’s way more than 175k if he’s willing to throw 30k on a tip from a jumpseater.
10-24-2020, 11:41 AM
#265
Perennial Reserve
Joined APC: Jan 2018
Posts: 11,503
Originally Posted by Name User
???
It's all long term debt. AA isn't financing any more bonds AFAIK and won't until things improve, and by then rates will have normalized (hopefully).
It's all long term debt. AA isn't financing any more bonds AFAIK and won't until things improve, and by then rates will have normalized (hopefully).
Long term debt is still debt, and having to roll it over at higher rates certainly isn’t helpful. And lower rates will depend upon convincing the Bond market which currently is skeptical.
An excerpt:
In short, American Airlines is going to be operating with a ton of debt for the foreseeable future, with billions of dollars maturing every year. Since it's unlikely to generate enough cash to pay down all of its debt maturities, some will have to be refinanced -- possibly at significantly higher rates. (American issued secured debt at a 10.75% interest rate last month; earlier this year, it was able to issue unsecured debt with a coupon of just 3.75%.)
10-24-2020, 12:00 PM
#266
Gets Weekends Off
Joined APC: Jul 2017
Posts: 1,729
Originally Posted by Excargodog
https://www.fool.com/investing/2020/...more-bad-news/
Long term debt is still debt, and having to roll it over at higher rates certainly isn’t helpful. And lower rates will depend upon convincing the Bond market which currently is skeptical.
An excerpt:
Long term debt is still debt, and having to roll it over at higher rates certainly isn’t helpful. And lower rates will depend upon convincing the Bond market which currently is skeptical.
An excerpt:
How long is that sustainable?
10-24-2020, 02:07 PM
#267
Gets Weekends Off
Joined APC: Mar 2014
Posts: 3,095
Originally Posted by havick206
Isn’t that akin to paying off one credit card with another, but instead of consolidating at lower rates their cost of money is going the opposite direction?
How long is that sustainable?
How long is that sustainable?
What he's not taking into account is that in all probability rates won't be 12% by the time our debt comes due.
Half our debt is in aircraft financing which is long term and paid over time like a car payment. A few years ago GAAP changed to include leases in that figure as well. Those are set in stone.
The other half is comprised of interest plus a ballon payment at the end of the period. These have various maturity dates with some ($1b?) coming due in 2022/23 but the majority coming due in 2027 and beyond.
If things haven't recovered by 2027, there won't be an AA. In won't matter if we can or cannot refinance.
However, assuming things somewhat return to normal over the next year, rates will come down significantly and be more normalized. Maybe they won't be sub-4%, but they aren't going to be anywhere near 12 either.
Will AA return to profitability and be able to pay back all our debt while remaining competitive? Who knows. With Parker being on uppers for every crew news or interview he does it's hard to tell by body language if he believes what he's saying...
I lost $150k on AA stock.
10-24-2020, 03:44 PM
#268
Perennial Reserve
Joined APC: Jan 2018
Posts: 11,503
Originally Posted by Name User
Sort of.
What he's not taking into account is that in all probability rates won't be 12% by the time our debt comes due.
Half our debt is in aircraft financing which is long term and paid over time like a car payment. A few years ago GAAP changed to include leases in that figure as well. Those are set in stone.
The other half is comprised of interest plus a ballon payment at the end of the period. These have various maturity dates with some ($1b?) coming due in 2022/23 but the majority coming due in 2027 and beyond.
If things haven't recovered by 2027, there won't be an AA. In won't matter if we can or cannot refinance.
However, assuming things somewhat return to normal over the next year, rates will come down significantly and be more normalized. Maybe they won't be sub-4%, but they aren't going to be anywhere near 12 either.
Will AA return to profitability and be able to pay back all our debt while remaining competitive? Who knows. With Parker being on uppers for every crew news or interview he does it's hard to tell by body language if he believes what he's saying...
I lost $150k on AA stock.
What he's not taking into account is that in all probability rates won't be 12% by the time our debt comes due.
Half our debt is in aircraft financing which is long term and paid over time like a car payment. A few years ago GAAP changed to include leases in that figure as well. Those are set in stone.
The other half is comprised of interest plus a ballon payment at the end of the period. These have various maturity dates with some ($1b?) coming due in 2022/23 but the majority coming due in 2027 and beyond.
If things haven't recovered by 2027, there won't be an AA. In won't matter if we can or cannot refinance.
However, assuming things somewhat return to normal over the next year, rates will come down significantly and be more normalized. Maybe they won't be sub-4%, but they aren't going to be anywhere near 12 either.
Will AA return to profitability and be able to pay back all our debt while remaining competitive? Who knows. With Parker being on uppers for every crew news or interview he does it's hard to tell by body language if he believes what he's saying...
I lost $150k on AA stock.
There are two substantial lots of bonds - one for $750 million and one for $500 million - that come due by summer of 2022 with, as the article says billions more to follow in subsequent years. And yes, it would be HOPED that things would turn around sufficiently that American would be able to make those refinancing sat a lower interest rate, but so far that’s not the case. In fact, both S&P and Fitch have downgraded AA bonds since the $2.5 billion junk bond sale which normally tends to drive the required coupon even higher.
Then there is the cost of the existing debt service. In 2019, Annual debt service for AA was, IIRC, about $950 million. But they have added considerable debt since that time, which will drive that expense up. The $2.5 billion at 12% ALONE will add $300 million in annual debt service. The cheapest money they got - the CARES loan - was another $5.5 billion, and that was at LIBOR plus 3.5%, which today would be approximately 3.9% total, but even at that cheap rate the debt service will be another $200 million annually. And yeah, I know, the first $950 million is not a NEW expense, since AA was already paying that in 2019, but it was being paid at the time of 2019 flying from 2019 revenues, not from the lesser flying of a downsized Airline.
And yeah, much of that debt was indeed for the purchase of airplanes and those bonds are backed by the equity of the aircraft themselves, but those aircraft are no longer new and the used aircraft market has taken a heck of a hit, with used aircraft values falling due to all the international airlines going out of business or downsizing. So the previous equipment does not have the value it once did as collateral for new loans either, and The selling of unsecured loans typically demands a higher coupon than Selling well secured loans.
So in answer to the question of how long is this sustainable, that totally depends on how soon the market perceives the prospects are for AA to become profitable.
If the market believes they will pull out, refinancing cost will indeed drop. But you are looking at AAL being smaller in the future with more debt than it had a year ago and higher debt service costs than when it (and everybody else) was riding high in 2019. That’s an uncomfortable position to be in.
PS: Don’t put big money into the stock of the place you work, a black swan event can cost you your job and your investments.
10-24-2020, 04:02 PM
#270
Gets Weekends Off
Joined APC: May 2020
Posts: 484
Originally Posted by Excargodog
It is a little more complicated than that.
There are two substantial lots of bonds - one for $750 million and one for $500 million - that come due by summer of 2022 with, as the article says billions more to follow in subsequent years. And yes, it would be HOPED that things would turn around sufficiently that American would be able to make those refinancing sat a lower interest rate, but so far that’s not the case. In fact, both S&P and Fitch have downgraded AA bonds since the $2.5 billion junk bond sale which normally tends to drive the required coupon even higher.
Then there is the cost of the existing debt service. In 2019, Annual debt service for AA was, IIRC, about $950 million. But they have added considerable debt since that time, which will drive that expense up. The $2.5 billion at 12% ALONE will add $300 million in annual debt service. The cheapest money they got - the CARES loan - was another $5.5 billion, and that was at LIBOR plus 3.5%, which today would be approximately 3.9% total, but even at that cheap rate the debt service will be another $200 million annually. And yeah, I know, the first $950 million is not a NEW expense, since AA was already paying that in 2019, but it was being paid at the time of 2019 flying from 2019 revenues, not from the lesser flying of a downsized Airline.
And yeah, much of that debt was indeed for the purchase of airplanes and those bonds are backed by the equity of the aircraft themselves, but those aircraft are no longer new and the used aircraft market has taken a heck of a hit, with used aircraft values falling due to all the international airlines going out of business or downsizing. So the previous equipment does not have the value it once did as collateral for new loans either, and The selling of unsecured loans typically demands a higher coupon than Selling well secured loans.
So in answer to the question of how long is this sustainable, that totally depends on how soon the market perceives the prospects are for AA to become profitable.
If the market believes they will pull out, refinancing cost will indeed drop. But you are looking at AAL being smaller in the future with more debt than it had a year ago and higher debt service costs than when it (and everybody else) was riding high in 2019. That’s an uncomfortable position to be in.
PS: Don’t put big money into the stock of the place you work, a black swan event can cost you your job and your investments.
There are two substantial lots of bonds - one for $750 million and one for $500 million - that come due by summer of 2022 with, as the article says billions more to follow in subsequent years. And yes, it would be HOPED that things would turn around sufficiently that American would be able to make those refinancing sat a lower interest rate, but so far that’s not the case. In fact, both S&P and Fitch have downgraded AA bonds since the $2.5 billion junk bond sale which normally tends to drive the required coupon even higher.
Then there is the cost of the existing debt service. In 2019, Annual debt service for AA was, IIRC, about $950 million. But they have added considerable debt since that time, which will drive that expense up. The $2.5 billion at 12% ALONE will add $300 million in annual debt service. The cheapest money they got - the CARES loan - was another $5.5 billion, and that was at LIBOR plus 3.5%, which today would be approximately 3.9% total, but even at that cheap rate the debt service will be another $200 million annually. And yeah, I know, the first $950 million is not a NEW expense, since AA was already paying that in 2019, but it was being paid at the time of 2019 flying from 2019 revenues, not from the lesser flying of a downsized Airline.
And yeah, much of that debt was indeed for the purchase of airplanes and those bonds are backed by the equity of the aircraft themselves, but those aircraft are no longer new and the used aircraft market has taken a heck of a hit, with used aircraft values falling due to all the international airlines going out of business or downsizing. So the previous equipment does not have the value it once did as collateral for new loans either, and The selling of unsecured loans typically demands a higher coupon than Selling well secured loans.
So in answer to the question of how long is this sustainable, that totally depends on how soon the market perceives the prospects are for AA to become profitable.
If the market believes they will pull out, refinancing cost will indeed drop. But you are looking at AAL being smaller in the future with more debt than it had a year ago and higher debt service costs than when it (and everybody else) was riding high in 2019. That’s an uncomfortable position to be in.
PS: Don’t put big money into the stock of the place you work, a black swan event can cost you your job and your investments.
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