AMR going down? Stock crashes (down 35% today so far)

[grapejelly]

What's the story with American Airlines??

[dcarrigg]

Re: AMR going down? Stock crashes (down 35% today so far)

What's the story with American Airlines??

Chapter 11?

[lsa420]

Re: AMR going down? Stock crashes (down 35% today so far)

I guess all the bankruptcy rumors were negative for the equity....probably not so good for the debt either ;)

[aaron]

Re: AMR going down? Stock crashes (down 35% today so far)

Anybody flown with them recently? They are god-awful. The sooner they are taken out the better.

[lsa420]

Re: AMR going down? Stock crashes (down 35% today so far)

Anybody flown with them recently? They are god-awful. The sooner they are taken out the better.

Agree. I used to live by DFW and flew them frequently. Disaster comes to kind.

[doom&gloom]

Re: AMR going down? Stock crashes (down 35% today so far)

I am scheduled to leave for SA on the 16th, and return about 10 days later. Hopefully they will still be flying during this time.

[Thailandnotes]

Re: AMR going down? Stock crashes (down 35% today so far)

I was flying to Santo Domingo from NY via Miami. Just as we crossed into Florida, the
Eastern Airlines pilot announced all flights had been canceled. Good luck.

"AMR's stock was halted seven times on the New York Stock Exchange on Monday. Trading is halted on the NYSE each time a stock moves more than 10 percent in a 5-minute period."

[mikedev10]

Re: AMR going down? Stock crashes (down 35% today so far)

i figure it's ok to paste this here now - it's months old. agora financial, strategic short report, 3/18/11, some excerpts:

Unfortunately for the sick pigeon companies that constantly purchase commodities as part of their operations, the inflation created by Congress and the Federal Reserve is leaking into commodity prices. This price pressure will squeeze corporate profit margins.
Alas, it remains the case that there is no free lunch in economics — especially if it’s paid for with money created out of thin air.
Sick pigeon companies routinely consume far more capital than they will ever return to shareholders, and should be liquidated or restructured so capital can be freed up for more productive uses. Some companies have consumed so much capital that the book value of the equity on their balance sheet has fallen deep into negative territory, requiring ever-increasing debts and other liabilities to support their asset bases. AMR Corp. (AMR) is one such company. AMR equity represents the thin slice of hope between its assets and its liabilities. It’s only $6 per share, but looks headed for the low single digits:


...


Among industry watchers, American Airlines is most notable for being the only major U.S. airline to avoid bankruptcy over the past decade. While many consider this a badge of honor, in the capital-destroying airline industry, one should view it as a competitive disadvantage. The kind of restructuring and cost cutting AMR requires may only be possible in Chapter 11, a process that usually results in a total wipeout of the stock’s value.

...

Net working capital is negative $1.9 billion (i.e., current liabilities exceed current assets by $1.9 billion). And according to AMR’s 10-K, almost all of its aircraft assets are already encumbered by secured financing arrangements. This limits future financing options. So an awful lot is hinging on how much cash AMR can generate from operations in 2011. As we saw above, AMR’s competitive position precludes it from delivering an impressive earnings year in 2011. Anything short of a blistering recovery in demand for air travel, combined with lower oil prices and an agreeable unionized work force, means AMR’s financial health will continue to worsen.

...

We have yet to consider AMR’s pension and retiree health care liabilities. They are enormous. They remind me of pre-bankruptcy General Motors. AMR has a $16 billion projected benefit obligation. The assets to fund this obligation are a mere $8 billion. AMR is $8 billion short of fully funding the obligation, and accounts for this as a $7.8 billion liability on its balance sheet. Because of the deep underfunded status, AMR’s required contributions to shore up its pension will be high in the coming years.

...

One more word on airlines hedging fuel exposure: The financial media often characterize this activity as an elimination of fuel price risk, but it’s merely a time-shifting and earnings-smoothing activity. In a steadily rising jet fuel price environment, even if hedges temporarily shield against price risk, eventually, the futures contracts must be rolled over at higher prices. So eventually, airlines (and passengers) pay for higher fuel prices — it’s only a matter of when.
The bottom line: 2011 is shaping up as a year that pushes AMR into a highly stressed financial state, possibly resulting in a Chapter 11 filing and wipeout of equity value.

***Action to take: Sell short AMR Corp. (AMR) above $6 per share. Your broker should have plenty of shares available to borrow. Liquidity in this stock is abundant, with an average daily volume of 13 million shares. The short interest in AMR is 47 million shares, against a float of 328 million shares, so future short squeezes should be mild.

AMR could easily fall to the $2-3 range as jet fuel prices increase, competition toughens, debt markets grow less accommodative to AMR’s refinancing needs, and shareholders start fearing bankruptcy risk. This short sale offers a good hedge for the long positions in your portfolio.

[CanuckinTX]

Re: AMR going down? Stock crashes (down 35% today so far)

Anybody flown with them recently? They are god-awful. The sooner they are taken out the better.

Call me crazy but I only fly AA - partly because they have the most options out of Austin but they've also been pretty consistent for me and with my status I don't get screwed with bag fees and such like other people do. I flew United for a long time but now hate them since they stole the leg room from the back to put it in Economy 'Plus' and charge extra to sit there.

Airlines are like cell phone companies, you'll easily find one person who hates a carrier for every one who likes them.

[mikedev10]

Re: AMR going down? Stock crashes (down 35% today so far)

Call me crazy but I only fly AA - partly because they have the most options out of Austin but they've also been pretty consistent for me and with my status I don't get screwed with bag fees and such like other people do. I flew United for a long time but now hate them since they stole the leg room from the back to put it in Economy 'Plus' and charge extra to sit there.

Airlines are like cell phone companies, you'll easily find one person who hates a carrier for every one who likes them.

i fly both, by necessity not choice. seems longer to get a priority status for united? prefer them though.

[aaron]

Re: AMR going down? Stock crashes (down 35% today so far)

I hate UA too.
I had good experience (for economy) with Virgin. Alaskan Airlines has also not angered me too much.

Airlines in the U.S. are just like fast food. Is it expensive? Do they spit in the food? Is the help rude and surly? If you can answer no, then that is a "good" airline. The standards are very low and UA and AA still cannot meet them.

[c1ue]

Re: AMR going down? Stock crashes (down 35% today so far)

United is great for their Asian routes; American Airlines has very poor relative presence.

American Airlines has the west coast of South America; United has the east coast.

American Airlines, via its BA partnerships, has good service to Africa.

United as more routes to Europe and the 'strategic ellipse'.

Frequent flier wise: United had the most stringent of all the major airline frequent flier programs. With the Continental merger, this is now going back closer to 'industry mean', though hopefully not so far as Continental's legendarily difficult mileage ticket availability.

At this instant in time, AA has a better top tier frequent flier program: 8 systemwide upgrades vs. 6 for United.

I speak of this as someone with 600K lifetime AA miles vs. 800K lifetime UA miles (1M+ post December 31, 2011) in 15 years of flying.

[Mega]

Re: AMR going down? Stock crashes (down 35% today so far)

[mikedev10]

Re: AMR going down? Stock crashes (down 35% today so far)

United is great for their Asian routes; American Airlines has very poor relative presence.

American Airlines has the west coast of South America; United has the east coast.

American Airlines, via its BA partnerships, has good service to Africa.

United as more routes to Europe and the 'strategic ellipse'.

Frequent flier wise: United had the most stringent of all the major airline frequent flier programs. With the Continental merger, this is now going back closer to 'industry mean', though hopefully not so far as Continental's legendarily difficult mileage ticket availability.

At this instant in time, AA has a better top tier frequent flier program: 8 systemwide upgrades vs. 6 for United.

I speak of this as someone with 600K lifetime AA miles vs. 800K lifetime UA miles (1M+ post December 31, 2011) in 15 years of flying.

can you find your flight miles vs. your total miles? UA shows this in my mileage account, but AA does not. i can kiiind of straddle between them both at my current job, and have been opting for UA over AA - any thoughts? i can kind of pick one or the other and run now i think... and work would prefer AA. through credit cards and some hoops you can get about 225k via promotions for AA right now.

[c1ue]

Re: AMR going down? Stock crashes (down 35% today so far)

can you find your flight miles vs. your total miles? UA shows this in my mileage account, but AA does not. i can kiiind of straddle between them both at my current job, and have been opting for UA over AA - any thoughts? i can kind of pick one or the other and run now i think... and work would prefer AA. through credit cards and some hoops you can get about 225k via promotions for AA right now.

AA surely has this, but doesn't display it because it isn't relevant for them.

The lifetime numbers matter for the million miler calculations for each airline.

1 million miler in AA is much easier to get, but you only get lifetime silver (i.e. lowest tier frequent flier, but called gold in AA's system), whereas the present United 1 million miler would get you lifetime gold (i.e. international alliance top tier frequent flier). Present Continental 1 million miler is lifetime silver, but you can also make your spouse lifetime silver.

However, because of the Continental merger, United is switching over to more of a Continental style calculation. On December 31, 2011 United will make a one time recalculation of all past United flights using Continental's system as a bonus, and will switch to 1 million miler being lifetime gold + spouse benefit.

If you fly a lot, but might not forever, my suggestion is to evaluate whether you're going to hit 2 million AA or 1 million 'new' United.

For me this is a big deal because I don't fly a lot any more - having lifetime gold is very nice.

And yes, if you think the 1 million United/2 million AA lifetime is good, the higher tiers are even better.

3 million 'new' United is lifetime 1K with all of its ridonkulous benefits including systemwide upgrades; AA doesn't have an equivalent.