View Poll Results: Will AA declare bankruptcy?
Yes
219
70.65%
No
91
29.35%
Voters: 310. You may not vote on this poll
Bankruptcy
01-09-2021, 01:15 PM
#71
Gets Weekends Off
Joined APC: Jan 2018
Posts: 644
I came here to learn a little about the financial future of my parent company, but 90% of this makes about as much sense as accountants arguing about the technical details of the MAX, except with Twitter troll-ishness.
I don't have a financial background aside from playing the stock market, but my immediate "gut feeling" is that the accountants at AA aren't stupid and they're making their decisions based on the projection that things will be 90% back to normal next fall. We also just quantitatively eased (printed) $3T for COVID relief, so there'll be a lot of inflation next year, which waters down existing debt. That's how the rich get richer from inflation; even Trump has used this tactic. So, yeah, AA has a ton of debt on their shiny new airplanes, but they also bought them when the trolley used to cost a nickel vs everyone else, who will have to update their fleets at future post-COVID inflation dollars. I'm not saying this can't backfire horribly, I'm just saying that it seems to me there're some extra dimensions here that aren't being discussed.
I don't have a financial background aside from playing the stock market, but my immediate "gut feeling" is that the accountants at AA aren't stupid and they're making their decisions based on the projection that things will be 90% back to normal next fall. We also just quantitatively eased (printed) $3T for COVID relief, so there'll be a lot of inflation next year, which waters down existing debt. That's how the rich get richer from inflation; even Trump has used this tactic. So, yeah, AA has a ton of debt on their shiny new airplanes, but they also bought them when the trolley used to cost a nickel vs everyone else, who will have to update their fleets at future post-COVID inflation dollars. I'm not saying this can't backfire horribly, I'm just saying that it seems to me there're some extra dimensions here that aren't being discussed.
01-09-2021, 02:18 PM
#72
Gets Weekends Off
Joined APC: Aug 2015
Position: Gramercy Riffs
Posts: 491
Originally Posted by Finessed
I was in the November 2013 class buddy. I was with the CP flows and call backs. I’m not lying.
I’m looking at the DL seniority list, got it right in front of me, current as of January 4, 2021. Delta didn’t run any classes in November 2013. First class to be hired after 2010 was in January 2014.
Just passing on the facts, draw your own conclusions.
Last edited by beernutt; 01-09-2021 at 02:32 PM.
01-09-2021, 02:21 PM
#73
Gets Weekends Off
Joined APC: Jan 2021
Posts: 1,121
So while everyone’s trying to identify the trolls, I’ll expose myself, SkyWest on the E175.
Ok first, I honestly can’t believe anyone would be cheering for the demise of AA as it would affect all pilot groups in a very negative way. Everyone should be cheering for the success of American Airlines and their wholly owned affiliates.
This does need to be said. AA holds more debt, but specifically more bad debt than any other carrier in the industry. Does that mean they’re going to fold? I have no clue! Nobody does! I most certainly am praying they recover quickly! If any individual had a crystal ball of the future, they most certainly wouldn’t be pilots, they’d be retired on some beach in the middle of nowhere spending their millions.
While everyone is arguing about the success or failure of the AA business model, something has been brewing behind the scenes that may hurt us all in the not to distant future.
https://www.rigzone.com/news/oil_will_hit_100_in_around_18_months-07-may-2020-162012-article/
As I was reading through Mr. know it all “Finessed” posts, I noticed he mentioned the price of barrels moving up from $50-100. I sent a quick message to a friend who’s involved in finance with degrees and work experience to back it up. His respond was, “Expect oil to move up in price, and if you haven’t already, invest in the energy sector”.
Hope everyone is having a great day.
Ok first, I honestly can’t believe anyone would be cheering for the demise of AA as it would affect all pilot groups in a very negative way. Everyone should be cheering for the success of American Airlines and their wholly owned affiliates.
This does need to be said. AA holds more debt, but specifically more bad debt than any other carrier in the industry. Does that mean they’re going to fold? I have no clue! Nobody does! I most certainly am praying they recover quickly! If any individual had a crystal ball of the future, they most certainly wouldn’t be pilots, they’d be retired on some beach in the middle of nowhere spending their millions.
While everyone is arguing about the success or failure of the AA business model, something has been brewing behind the scenes that may hurt us all in the not to distant future.
https://www.rigzone.com/news/oil_will_hit_100_in_around_18_months-07-may-2020-162012-article/
As I was reading through Mr. know it all “Finessed” posts, I noticed he mentioned the price of barrels moving up from $50-100. I sent a quick message to a friend who’s involved in finance with degrees and work experience to back it up. His respond was, “Expect oil to move up in price, and if you haven’t already, invest in the energy sector”.
Hope everyone is having a great day.
01-09-2021, 02:29 PM
#74
Perennial Reserve
Joined APC: Jan 2018
Posts: 11,503
Originally Posted by Duffman
I came here to learn a little about the financial future of my parent company, but 90% of this makes about as much sense as accountants arguing about the technical details of the MAX, except with Twitter troll-ishness.
I don't have a financial background aside from playing the stock market, but my immediate "gut feeling" is that the accountants at AA aren't stupid and they're making their decisions based on the projection that things will be 90% back to normal next fall. We also just quantitatively eased (printed) $3T for COVID relief, so there'll be a lot of inflation next year, which waters down existing debt. That's how the rich get richer from inflation; even Trump has used this tactic. So, yeah, AA has a ton of debt on their shiny new airplanes, but they also bought them when the trolley used to cost a nickel vs everyone else, who will have to update their fleets at future post-COVID inflation dollars. I'm not saying this can't backfire horribly, I'm just saying that it seems to me there're some extra dimensions here that aren't being discussed.
I don't have a financial background aside from playing the stock market, but my immediate "gut feeling" is that the accountants at AA aren't stupid and they're making their decisions based on the projection that things will be 90% back to normal next fall. We also just quantitatively eased (printed) $3T for COVID relief, so there'll be a lot of inflation next year, which waters down existing debt. That's how the rich get richer from inflation; even Trump has used this tactic. So, yeah, AA has a ton of debt on their shiny new airplanes, but they also bought them when the trolley used to cost a nickel vs everyone else, who will have to update their fleets at future post-COVID inflation dollars. I'm not saying this can't backfire horribly, I'm just saying that it seems to me there're some extra dimensions here that aren't being discussed.
And there is competition. The future will be brightest for the airlines whose flying comes back first, and that would not appear to be those highly dependent on business and international flying.
01-09-2021, 02:33 PM
#75
Gets Weekends Off
Joined APC: Jan 2021
Posts: 1,121
Originally Posted by beernutt
Quote: Originally Posted by Finessed [img]/images/buttons_new/viewpost.png[/img]
I was in the November 2013 class buddy. I was with the CP flows and call backs. I’m not lying.
I’m looking at the DL seniority list, got it right in front of me, current as of January 4, 2021. Delta didn’t run any classes in November 2013. First class to be hired after 2010 was in January 2014.
Just passing on the facts, draw your own conclusions.
I was in the November 2013 class buddy. I was with the CP flows and call backs. I’m not lying.
I’m looking at the DL seniority list, got it right in front of me, current as of January 4, 2021. Delta didn’t run any classes in November 2013. First class to be hired after 2010 was in January 2014.
Just passing on the facts, draw your own conclusions.
He’s a troll, just leave it be.
01-09-2021, 03:16 PM
#76
Gets Weekends Off
Joined APC: Jan 2018
Posts: 644
Originally Posted by Excargodog
The problem is that interest rates ARE NOT cheap for any of the airlines. Recently United paid 10% on their bonds. This summer AA paid 12% while my mortgage company is trying to talk me into refinancing at 2.5%. I agree with Rickair that with the current surplus of used aircraft and white tail aircraft, existing bond holders might cut the airlines some slack, but with their bonds essentially junk bond rated, I think the airlines are still going to have to refinance their maturing bonds at a lot more than the 2.5-3.5% they were financed at five or ten years ago when - yes, the Fed was ALSO flooding the market with money to try to get us out of the Great Recession.
And there is competition. The future will be brightest for the airlines whose flying comes back first, and that would not appear to be those highly dependent on business and international flying.
And there is competition. The future will be brightest for the airlines whose flying comes back first, and that would not appear to be those highly dependent on business and international flying.
That makes sense. I wasn't tracking United's 10% bonds, so it is good to know we're not the only ones. I know there's a big difference between personal finances and corporate finances and I'd like to think that there's a plan, but I know with corporate finance that plan could mean my entire company is an expendable line item. But hey, if the wheels come off, at least I got a decent amount of turbine time this year!
01-09-2021, 03:58 PM
#77
Perennial Reserve
Joined APC: Jan 2018
Posts: 11,503
Originally Posted by Duffman
That makes sense. I wasn't tracking United's 10% bonds, so it is good to know we're not the only ones. I know there's a big difference between personal finances and corporate finances and I'd like to think that there's a plan, but I know with corporate finance that plan could mean my entire company is an expendable line item. But hey, if the wheels come off, at least I got a decent amount of turbine time this year!
S&P Global Ratings downgraded United Airlines Holdings Inc. to B+ from BB-, saying that the company is likely to generate a significant cash flow deficit this year due to a steep decline in airline bookings as a result of the COVID-19 pandemic.
The action covers all ratings of United Airlines, including the issuer credit rating. S&P Global Ratings also removed the airline from CreditWatch and gave it a negative outlook.
The rating agency expects the U.S. flag carrier to record adjusted negative EBITDA of at least $2 billion in 2020 compared with positive EBITDA of $8 billion a year ago. The airline is projected to return to positive EBITDA of at least $4 billion in 2021.
United Airlines' efforts to cut capacity and associated costs and benefits are likely to be more than offset by much weaker traffic and revenues, the rating agency said. It noted that while passenger traffic has started to pick up, the slow and uneven recovery will likely continue into 2021.
S&P Global Ratings could lower United Airlines' rating over the next 12 months if it sees a prolonged or weaker-than-expected recovery, leading to continued cash flow burn.
The action covers all ratings of United Airlines, including the issuer credit rating. S&P Global Ratings also removed the airline from CreditWatch and gave it a negative outlook.
The rating agency expects the U.S. flag carrier to record adjusted negative EBITDA of at least $2 billion in 2020 compared with positive EBITDA of $8 billion a year ago. The airline is projected to return to positive EBITDA of at least $4 billion in 2021.
United Airlines' efforts to cut capacity and associated costs and benefits are likely to be more than offset by much weaker traffic and revenues, the rating agency said. It noted that while passenger traffic has started to pick up, the slow and uneven recovery will likely continue into 2021.
S&P Global Ratings could lower United Airlines' rating over the next 12 months if it sees a prolonged or weaker-than-expected recovery, leading to continued cash flow burn.
KEY RATING DRIVERS
Delta's Corporate Rating: Fitch downgraded Delta's Long-Term Issuer Default Rating (IDR) to 'BB+' from 'BBB-' on April 10. The Rating Outlook is Negative. Although Delta remains a stronger credit than its network peers, debt raised to sustain liquidity through the pandemic will drive credit metrics outside of a range supportive of investment-grade ratings at least through 2021 and likely into 2022.
Rising Debt Balances: Delta has raised a material amount of debt, including the proposed issuance, which will weigh on its balance sheet, and prolong the time necessary to delever coming out of the coronavirus crisis. Debt raised to date, including the company's $5 billion secured transactions issued in April, the debt component of the PSP program within the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and today's proposed unsecured issuance, are materially above the amounts incorporated into Fitch's April 2020 forecast. Fitch expects that Delta's total debt balance at YE 2020 may be roughly double the balance at YE 2019. The increase in debt is partly offset by higher expected liquidity balances. Fitch expects the company to end the year with a substantial amount of liquidity, even in a harsh stress scenario where demand remains depressed through the end of the year. Delta also has certain debt maturities in late 2020 and early 2021, and shoring up liquidity to manage maturities would be credit neutral.
Given Delta's rising debt balance, Fitch views the company's headroom within the 'BB+' rating as diminished, and future ratings downgrades are possible should recovery prove slower than Fitch's expectations.
Shares of American Airlines Group Inc. AAL, -1.63% rallied 6.2% in afternoon trading, even as the air carrier's credit rating was cut to a peer-group low of B- from B at S&P Global Ratings. The credit rating agency said the outlook on the rating, which is now six notches deep into speculative grade, or "junk" territory, remains negative. S&P said it's also maintaining its assessment of liquidity at "less than adequate," given the expectation of a "substantially negative level of cash generation" over the next 12 months. "We expect American to generate a substantial cash flow deficit in 2020 due to the impact of the coronavirus, but to return to positive cash flow generation in 2021," S&P said. "While the company is reducing capacity and some associated costs, and benefits from the steep decline in oil prices, we expect these to continue to be more than offset by much weaker traffic." Meanwhile, S&P rates the credit of United Airlines Holdings Inc. UAL, -0.76% at BB-, Delta Air Lines Inc. DAL, -0.52% at BB, Southwest Airlines Co. LUV, -0.74% at an investment grade level of BBB and JetBlue Airways Corp. JBLU, +1.24% at BB-.
New York, September 01, 2020 -- Moody's Investors Service ("Moody's") assigned first time ratings to Spirit Airlines, Inc. ("Spirit" or "the company"): B1 corporate family rating, B1-PD probability of default rating and SGL-2 speculative grade liquidity. The ratings outlook for Spirit is negative. Moody's also assigned a Ba3 rating to the senior secured notes due 2025 ("Notes") that Spirit announced on August 31, 2020.
https://www.fool.com/investing/how-t...ds/junk-bonds/
These bonds are generally high risk-high reward for investors, but they ALWAYS have to pay more interest than investment grade bonds. The lower the ratings, the higher the interest generally demanded.
But the chance of the wheels coming completely off - that is a Chapter 7 - for any major airline is pretty low. But everyone’s career is taking a hit - except for the very most senior guys. (And the cargo guys.) But for anyone but the top guys gains in seniority came to a screeching stop when hiring stopped, as will upgrades, getting a line, etc.
Black swans are like that.
01-09-2021, 07:45 PM
#78
Gets Weekends Off
Joined APC: Dec 2005
Posts: 8,898
Originally Posted by LAXtoDEN
Seriously, it’s crazy those recent new hires at DL, specifically right before COVID....
This is one example but he’s one of those “Pilot Instagram influencers”.
https://instagram.com/pilot.sergio?igshid=s1sqfqy9x49r
Good for this kid but looking at his history, he spent 6 months at Republic, hired at Spirit, then hired at DL a few months later. He probably has less than 500 hours of turbine SIC time. No way he was the only one either.
This is one example but he’s one of those “Pilot Instagram influencers”.
https://instagram.com/pilot.sergio?igshid=s1sqfqy9x49r
Good for this kid but looking at his history, he spent 6 months at Republic, hired at Spirit, then hired at DL a few months later. He probably has less than 500 hours of turbine SIC time. No way he was the only one either.
Covid black swan has definitely humbled a lot of people, that's for sure.
01-09-2021, 08:17 PM
#80
Gets Weekends Off
Joined APC: Jan 2021
Posts: 1,121
Originally Posted by ShyGuy
My one complaint about these influencers is their refusal to show the negative side of the industry. The black swan events. Downgrades and furloughs. Or anything negative for that matter. From that link, that Sergio guy seemed to have posted every month on his progression and all things Delta. But then in Aug he stops and no more posts? Either something happened to him or (more likely) he just doesn't want to show the instagram crowd the reality of the airline industry, from "everything is great" to "oh we're parking 600 airplanes and cutting 70% capacity." Why not make an instagram post showing a 1 month unshaved beard talking about not flying anymore and getting 30 hrs pay and how that is different than times in the past when people were furloughed with 0 pay? Give the gut wrenching reality. Not the overly top stuff he's got going on.
Covid black swan has definitely humbled a lot of people, that's for sure.
Covid black swan has definitely humbled a lot of people, that's for sure.
Btw, he still posts on his Instagram story. Usually it’s an email directly from Ed Bastion to his employees. Obviously he wants to make sure everyone still knows he employed at delta....
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