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How long will it last?

Old 10-24-2020, 04:56 PM
  #271  
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Originally Posted by chrisreedrules View Post
Sounds like the ship is taking on water and the bilge pump is broken...
Is the bilge pump on the plane located by the Chem Trails bottles?
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Old 10-24-2020, 05:29 PM
  #272  
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Originally Posted by Excargodog View Post
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.
It's not any more complicated than that. New debt cost is $500m a year. Axing management saved $500m a year. Axing 150 aging aircraft and consolidating fleet types saved another $500m a year. So we are already $1b in lower overhead going into 2021 than we were 2020, or a (-$500m) including debt.

The only thing that needs to happen now is a recovery in revenue, which needs to happen for everyone to recover.

The $1b or so due over the next few years will just be paid out of our cash stock pile. I'm not worried about it as long as there is a recovery.
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Old 10-24-2020, 07:34 PM
  #273  
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A truer barometer of Wall Street sentiment on airlines might be the bond, rather than the stock, market. Marketwatch says if a “blue wave” (Democratic sweep) is coming, you should be on the lookout for junk bonds. There are plenty of high yielding sub-investment grade (aka junk) bonds from Delta and United in the bargain bin.

One is a Delta Air Lines bond with a maturity date of 01/15/2026, a 7.375% coupon and yield-to-worst of 5.77% (CUSIP 247361ZZ4). But the bond is junk-rated at B+ by Standard and Poor’s with a negative credit watch. meaning that the rating agencies believe it bears a higher risk of default.

Risk-lovers might look at bonds from United Airlines Holdings. One maturing on 01/15/2025 (CUSIP 910047AK5) is trading below par, at 89.00, while offering a potential yield to maximum of 7.97%. The United bond is a junk-rated B, with a negative credit watch.

Fidelity has a handy list of ratings by bond ratings leaders, S&P, Moody’s and Fitch. The lowest “investment grade” rating from Standard and Poor’s is BBB-. The Delta bond is rated by S&P as four levels below “investment grade;” the United bond, five levels below. Fitch lowered American Airlines ratings to B- in n September, noting, “The likelihood that air traffic will remain subdued for the next several years combined with American's heavy debt load create significant pressure on credit metrics.”
https://www.forbes.com/sites/michael.../#310ead179afa
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Old 10-25-2020, 04:35 AM
  #274  
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You know what it means when someone tells you to invest in junk bonds, right?
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Old 10-25-2020, 02:14 PM
  #275  
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Originally Posted by Downtime View Post
The crazy thing is our debt and Deltas are now roughly equal. I am not sure the terms of their debt but I imagine all of are gonna take a while to get back to profitability after revenue returns. The airlines will be focused on maintaining a fortress balance sheet and paying off debt. My other fear is now anytime some sneezes borders will close.
American Airlines had the greatest long-term debt, with over $28 billion. United came up next with $18.7 in long-term debt, followed closely by Delta, which recorded $18.5 billion in long-term debt.

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Old 10-25-2020, 05:21 PM
  #276  
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Originally Posted by Al Czervik View Post
You know what it means when someone tells you to invest in junk bonds, right?
Here is a revolver with which to play Russian Roulette. I have taken the liberty to load five of the six chambers with bullets. All you have to do is spin it and pull the trigger. Good luck.
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Old 10-26-2020, 07:53 AM
  #277  
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Originally Posted by FlyyGuyy View Post
I once turned 300$ into 33$ on a penny stock that was a "sure thing". Doesn't sound bad, but I was in college and broke as a joke.
Back in college I turned $2 (what I had in my wallet) into $20 on a slot machine while being the DD for the night. Was able to stock up on Ramen for the month lol
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Old 10-26-2020, 10:03 AM
  #278  
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What would be the surest bet for saving the airline industry? Controlling Covid. Why isn't that part of the conversation here? Travel will not come back until covid is under control. Pilots take a black and white view of covid and we miss the nuance that goes into most people's travel decisions. The general public isn't terrified of covid, they're making rational choices based on risk. Traveling sucks right now, you can see it on your overnights and deadheads. Who would voluntarily go out into this and risk catching something that could put them out of work for weeks and possibly kill grandma? What company would send their employees out on business trips? Who wants to vacation like this?

There are common sense measures that we all could be promoting that would help save our industry and speed recovery. Yes, we're all waiting for the vaccine but there are things we can do today that'll have positive consequences. The less people that have covid when the vaccine arrives the faster we beat this thing.

We're likely to get a vaccine that's 60% effective. That means we'll still have to wear masks, social distance, and contact trace until covid has shrunk back to nearly nothing. Less total cases means a faster return to normal. I don't know why pilots aren't on the forefront of promoting safe behaviors and voting like your career depends on it. Look at where covid is spiking right now: it's the states that don't enforce mask rules and where they opened the schools. This massive wave we're seeing is going to push back recovery. No one is saying go back to lock down, but be sensible, lower your risks of transmission wherever possible. Vote for leaders who listen to the specialists, believe in science, and have a plan. If we continue on the current path we're going to wallow in covid for another year or two and see another 200,000 deaths.
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Old 10-26-2020, 10:10 AM
  #279  
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Originally Posted by LonesomeSky View Post
What would be the surest bet for saving the airline industry? Controlling Covid. Why isn't that part of the conversation here? Travel will not come back until covid is under control. Pilots take a black and white view of covid and we miss the nuance that goes into most people's travel decisions. The general public isn't terrified of covid, they're making rational choices based on risk. Traveling sucks right now, you can see it on your overnights and deadheads. Who would voluntarily go out into this and risk catching something that could put them out of work for weeks and possibly kill grandma? What company would send their employees out on business trips? Who wants to vacation like this?

There are common sense measures that we all could be promoting that would help save our industry and speed recovery. Yes, we're all waiting for the vaccine but there are things we can do today that'll have positive consequences. The less people that have covid when the vaccine arrives the faster we beat this thing.

We're likely to get a vaccine that's 60% effective. That means we'll still have to wear masks, social distance, and contact trace until covid has shrunk back to nearly nothing. Less total cases means a faster return to normal. I don't know why pilots aren't on the forefront of promoting safe behaviors and voting like your career depends on it. Look at where covid is spiking right now: it's the states that don't enforce mask rules and where they opened the schools. This massive wave we're seeing is going to push back recovery. No one is saying go back to lock down, but be sensible, lower your risks of transmission wherever possible. Vote for leaders who listen to the specialists, believe in science, and have a plan. If we continue on the current path we're going to wallow in covid for another year or two and see another 200,000 deaths.
You’re so right, Trump is also to blame for Europe having record cases right now too, what an idiot. Yes, voting for a guy who hates fossil fuels is the answer. It’s almost like it’s a virus that can’t be seen and is hard to predict and stop, luckily liberal Democrats know sciencey stuff and will fix it, maybe Kamala slept with the right scientists and knows what to do.
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Old 10-26-2020, 10:13 AM
  #280  
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Originally Posted by bababouey View Post
You’re so right, Trump is also to blame for Europe having record cases right now too, what an idiot. Yes, voting for a guy who hates fossil fuels is the answer. It’s almost like it’s a virus that can’t be seen and is hard to predict and stop, luckily liberal Democrats know sciencey stuff and will fix it, maybe Kamala slept with the right scientists and knows what to do.

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