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Originally Posted by LAXtoDEN
(Post 3185224)
The CRJ200 is 30% (closer to 20% a year from now) of the SkyWest fleet. 200’s are all paid off, they have more 175’s coming on property, and own all the future orders of ERJ175’s with the CRJ program shut down. I’d assume some 200’s would be moved to SkyWest leasing, and the rest to the dessert.
A scenario of the 50 seater going away would hurt the pilot group and with no scope changes would most likely lead to SkyWest furloughs, but SkyWest Inc. would be just fine. |
Originally Posted by Hedley
(Post 3185251)
Finding someone that wants to lease a high mileage CRJ200 could prove to be extremely difficult these days, especially if fuel prices start to rise. You’re right about SkyWest Inc though. They are large, diversified, and set up to survive.
For cargo ops which do two (or less) relatively short flights per day, the economics work in favor of dirt-cheap used airframes, even at the expense of gas mileage. 1. The airplane's not constantly flying, so it can't support the big mortgage of a new bird. 2. Fuel cost isn't that important if you don't fly much. |
While future plans stated on earnings calls tend to -maybe- happen, it does sound like United is interested in reducing its international exposure by flying those seats domestically which up gauges every route. That is great news for 50 seat reductions.
I didn’t understand how up gauging is going to “increase connectivity”. I’m guessing it means 737s doing routes 700s and 175s couldn’t. That would cut down on passengers visiting two United hubs in a day. In the end though I don’t think major airlines are going to cut service to class D airports but instead these 50 seaters might be flown in the regional colors on a code share. They want riders our of xyz, they just don’t want their brand on the napkin. |
Originally Posted by Excargodog
(Post 3185194)
Except the last bonds that AA sold they had to pay 12% for the loan of the money. ForUnited it was 11%
https://i.ibb.co/k0MwvbV/EA6-D4865-1...F794-CB1-F.jpg and their financial situation is more precarious now. Except for Alaska, I think all the majors are junk-rated now. And they don’t have the money to pay off their junk rated bonds, instead they must refinance them by selling new bonds collateralized by older airplanes in the face if their own declining credit ratings. That’s bad enough - akin to refinancing credit card debt by repeatedly charging it on a new credit card at higher and higher rates. Add inflation to that, and the yields will skyrocket. How can ANY company make enough profit to pay off $40 billion (which certainly at least AA will reach before this is over) while paying 15-20% interest on that debt? Inflating your way out of debt might work for the government which after all prints money, but it will put every major airline (and most regionals) in bankruptcy if it happens. Airlines can hedge most of their costs, so I doubt large inflation would be an insurmountable problem. Even such things as pilot pay get locked in for years in the future via the CBA and inflation has no bearing on that. The real issue is if there's shocks to the system instead of a nice steady climb in inflation. Back on topic, the US government (the group that can tax) is much more likely to use inflation than taxes to pay off their debts. |
Originally Posted by JediCheese
(Post 3185288)
No one wanted those airplanes (why would you agree to finance old airplanes at the previous value when there's no market for them). I think Delta and SWA aren't junk. United is junk but they can still access the market.
Airlines can hedge most of their costs, so I doubt large inflation would be an insurmountable problem. Even such things as pilot pay get locked in for years in the future via the CBA and inflation has no bearing on that. The real issue is if there's shocks to the system instead of a nice steady climb in inflation. Back on topic, the US government (the group that can tax) is much more likely to use inflation than taxes to pay off their debts. One cannot hedge interest expense on future debt refinancing. Not when your credit rating is already junk - and yeah, Delta and SWA ARE junk. Anything not A-rated is junk. https://www.fitchratings.com/research/corporate-finance/fitch-takes-rating-actions-on-north-american-airlines-10-04-2020 so back on topic, with serious inflation most of the heavily indebted carriers will be forced to go into bankruptcy. |
Originally Posted by Excargodog
(Post 3185299)
Anything not A-rated is junk.
https://en.wikipedia.org/wiki/Bond_credit_rating |
Originally Posted by rickair7777
(Post 3185328)
Close but not quite, some of the upper B's are investment grade.
https://en.wikipedia.org/wiki/Bond_credit_rating Broadly speaking, all bonds can be placed in one of two categories:
The point though, is that airlines are ALREADY paying huge amounts in debt service and will be paying even more in refinancing. This summer AA did a bond sale for $2.5 BILLION at 12%. That one transaction alone means an annual debt service of $300 million. And how much OTHER debt does AA have? We’ll know in another week, but it has to be north of $35 Billion... |
Originally Posted by JediCheese
(Post 3185288)
No one wanted those airplanes (why would you agree to finance old airplanes at the previous value when there's no market for them).
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Run from this career
If you are even remotely thinking about this as a career....run, run like mad. The future is dismal, bleak, horrific.
https://www.reuters.com/article/us-u...-idUKKBN29W0YS “This is just the start. It will get worse,’' said Brook Simmons, president of the Petroleum Alliance of Oklahoma. “Meanwhile, the laws of physics, chemistry and supply and demand remain in effect. Oil and natural gas prices are going up, and so will home heating bills, consumer prices and fuel costs.’' |
Originally Posted by WhiskyWhisky
(Post 3187022)
If you are even remotely thinking about this as a career....run, run like mad. The future is dismal, bleak, horrific.
https://www.reuters.com/article/us-u...-idUKKBN29W0YS “This is just the start. It will get worse,’' said Brook Simmons, president of the Petroleum Alliance of Oklahoma. “Meanwhile, the laws of physics, chemistry and supply and demand remain in effect. Oil and natural gas prices are going up, and so will home heating bills, consumer prices and fuel costs.’' |
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