And who the **** are you?

 

Who is anybody?

 

Let's actually read the financial statement.

American does not have 21 billion in cash, not even close. They ended 2021 with 273 million of unrestricted cash and if you add restricted cash, total of 408 million.

They ended 2021 with 15.8 billion of liquidity. The problem is, they had to borrow 6 billion more to reach that number. They now have liabilities including debt of almost 60 billion dollars. That's why their shareholder deficit is 7.3 billion, so their shareholders lost almost half a billion since 2020, because that increased "liquidity" is just added borrowing, not actual cash.

Their operating loss, excluding all the fluff, was 1 billion dollars in 2021. Add 1.8 billion in interest payments, and you can quickly see how much more revenue they need before they can start paying back that debt. Finding almost 3 billion of profit is not going to be easy. Until that happens, AAG will keep hemorrhaging money. Having 15 billion in liquidity doesn't help when it's less than half of what they borrowed. And before you say "but we have new airplanes!", the liabilities exceed the assets by over 7 billion dollars. As a matter of fact, the whole fleet of AAG is only worth 37.8 billion dollars. Every single airplane. With current and non-current debt at 38 billion, you can see the new airplanes argument is pretty weak.

AAG might be too big to fail, I don't believe anyone wants to Ch7 it, but they will have to do something to restructure the airline. The numbers don't lie.

And no, this is not a "get your financial house in order" post, I'm just stating cold hard numbers. Interpret them the way you want.

 

AA may very well declare. If that happens UAL and DL will also declare. The other two won’t be able to compete with the new cost structure of the third. That’s been proven previously.

 

American has 15B in cash.

Just a quick google search on current Debt-as of 7/21
AA: 40b
UA: 36b
DL: 29b

Lastly, if AA declares BK I wouldn’t think the pay rates/ contract would be hit. There would be zero chance of recruitment if that were to happen. That’s already an issue across the board.

 

Liquidity, not cash. Maybe a technicality to some.

Total noncurrent liabilities
54,777
Total current liabilities
19,005

That's end of 2021 statement. These numbers are approx. 5 billion higher than end of year 2020.

I also don't think pilot contracts are the first to go. They would spin off WOs and get rid of a lot of fat before they can substantially touch the pilot CBA.

 

Not an economist or anything, but I would like to point out that as we go into an inflationary environment AA may not be in a bad spot so long as it can fix its cash flow. Long term secured debt will become ever more easy to pay off as the currency debases. This is the same reason why mortgage payments turn to peanuts thirty years later. Airlines provide a commodity service that is resistant to inflationary forces (in real terms), as fares will likely have to rise (in nominal terms), meanwhile interest and principals on debt remain constant. Debt can be a blessing and a curse

 

I think there is no near-term risk of bankruptcy to be honest. I think in a few years if there is not a return of business and international travel to 2019 levels profit will be a challenge. And I think in general, the full/premium-service airlines are going to be trying to figure out how to pivot to more budget-savvy travelers. There’s always going to be a niche premium traveler, but maybe not enough to support a bunch of carriers offering premium services. Time will tell and a lot will change over the next couple of years. The regionals are going to look anemic in just a year and likely headed towards some type of collapse in 2 years with the current trends. More flying will have to be brought back in-house. I don’t think AA will need to spin anyone off, they’ll just absorb the pilots and reduce the flying.

 

You guys are confusing me. Do I need to sell my Geo Tracker or not?

 

Girls too. We have girls.