//LUV still hasn’t disclosed its 2017 capacity growth//
Kelly did say something about it in either the Q1 or Q2 CC. Mentioned that they were no longer going to keep their older planes as the new ones came online, and they were thinking about getting rid of the old before the new came online, which meant they would go to flat ASMs and possibly negative (but that could be just over a quarter or so). I understand what the Fish are saying ... Kelly didn't speak to the whole year.
I said Keay said 8.5 PE for pretax, not me. Most analysts had some pretty high PTs, and probably were slightly lower than Keay's 8.5. You do realize AAL made $4.2B in 2014 ... divide that by 700 shares and multiply by 8, or 8.5, what p/s do you get? True, people pushed for higher when fuel dropped, but then as you well know prasm became the new question mark. Actually, it was appropriate that prasm dropped as fuel dropped, if margins weren't going to go through the roof. And prasm dropping provided the perfect scenario (or story) that the airlines were back to their old ways ... so, the perfect excuse for volatility (or is it opportunity)
Well, the airlines now are starting to set up capacity to make fare adjustments ... if they manage fares going forward the fear of the "old ways" will dissipate and it might surprise people. Most airlines are setting up for that to happen. And the adjustments are coming this fall/winter, not tomorrow. Who knows when the market will notice.
Q1 was a low for fuel ... prasm better be done dropping (except for YOY comparisons for another quarter or so)
// but untaxed eps misled everyone imo...//
You have a short and selective memory, cav. The whole board a few years ago was talking about an 8 PE pretax and 12 PE for taxed. And the analysts were saying the same thing. I think it was Keay that said 8.5 PE pretax. No one was misled.
Just adding to unc ... AAL guided to 2014 to 2015 margins going forward. Essentially, $4.2B to 6.2B. This year they should hit near the midpoint, and for 2017 I'm deferring an estimate until I see what the industry does with fares and capacity this fall ... and also what bears said about the fish thinking about fuel going to $60 (that'll make the airlines adjust). Anyway, the industry in general has been making those margins since 2013 (LCC did that in 2013 pre-merger). That's going to be almost 5 years of consistently good margins, during generally weak economic times, and no credit for it. Somebody will notice someday.
//switch from PRASM to RASM forecasts//
With the credit card deal done, RASM get a YOY boost. With AAL saying Q1 PRASM was trough (12.43 cents), I worked out a while back that this quarter shouldn't be down more than 5%, and in Q2 their guide was beating that by about 1.5%, which they bettered. Anyway, Q3 guide down 3.5 - 5.5% wasn't surprising, actually in line. Q4 will only be down slightly and with credit card income they could be flat/(positive?) RASM. With capacity cuts in the fall, could even go positive. At least Q1 will be flat to positive YOY.
iahphx ... I read that Verizon was going to drop Yahoo's news, finance, even mail, etc and use AOL's sometime in 2017. So, all I can say is that it has been fun all these years ... appreciate the board and all the comments. If anyone knows where else to go, since even "conversations" may go away ... post the sites.
// That would mean you know their earnings //
Bears ... just a discussion of what their cash may look like down the road. Just assuming low end of margin guidance going forward to calculate a profit, looking at their capex, and required principal payments every year ... (taking into account the non-cash taxes for as long as they last, adding back depreciation, etc. etc. etc.)
And unc ... as long as the debt is mostly equipment trusts related to aircraft capex let's not say they are buying the aircraft with OCF ... (I know it is all fungible) ... let's talk the CF. And when they say they can renew the debt, I think that is afterwards and they negotiate new debt based on the residual value.
unc ... the point of the discussion (or the direction the discussion was going) was to compare future sources of cash, added to current cash, and look at how that compares to the required debt payments over the next 3-4 years. Personally, I don't think it is a problem if they hit the low end of what they think their margins will be, but to a degree, I think this issue is at least part of the "short story". How low can margins go (and for how long) before it is a problem?
// By the way, Cash ain't "Profit", Cash is Cash. //
Do you really think I don't know the difference? The implication of "have cash (profit)" was that profit is a source of cash, not your backward interpretation of cash is a source of profit. That was your backward interpretation not mine uncle.
// I'm thinking cash taxes will not begin before 2020 //
Maybe I figured it wrong but doesn't it look like sometime in the last half of 2017?
// But at some point I think margins would (find) an equilibrium point. //
Yes, AAL thinks margins will settle between 2014 and 2015 margins. Essentially all of 2014 was with high fuel. 2013 is difficult to figure for AAL, but I think when they separated out the companies LCC made about $1.1B ... and there were more fare hikes in early 2014. 2013 was all high fuel.
Looks like it will be a while, but starting to trend down from the 2017 debt level in 2018. They do have cash (profit) needs going forward, so I'm sure the above will be considered in dividend discussions. And for that matter that is why AAL said they were going to keep an extra $2b in cash over what they need.
// "debt reduction" plan (when and how much). //
The annual report has the amount of planned debt to be paid back each year through 2020 and then a lump sum for the years beyond. For example this year they are planning about $2.5 b, but they also have $4.5 in additional capex debt. I think in 2017 it is $1.5b, 2018 is $3.5b and the same in 2019. They can always do more if profits are high enough.
Anyone have the capex plans going forward off the top of their heads? Otherwise, I can check when I have time.
// The airlines have shown they can produce large profits during good times. //
Generally I know what you're saying, but I don't know if the 1.5-2.0% GDP growth can be considered particularly "good times". There is room to grow earnings if times ever get really good again. So, airlines have shown large profits in mediocre times.
Then there is always the fuel drop if times are bad. (Parker's natural hedge) And fares are strong when times are good and oil is up.
If my notes are correct, then Q1 2016 prasm was 12.43, and AAL said it would be trough prasm. Q4 2015 prasm was 12.69. Q4 can only be down 2% without a change of guidance. Actually, credit card rev should make that flat rasm in Q4, and if they beat the trough by the 1.5-2.0% ... flat prasm and positive rasm in Q4. Should definitely have positive yoy revenue in Q4 with the additional asm's.
I understand that they can always change their guidance.
// If they could only get an upgrade in the multiple. //
I would think if the industry shows they can manage for good margins, stabilized or growing prasm with stabilized or growing casm, that would go a long way in showing "it is different this time", and I would think the airlines then might just get some "multiple" respect.
cav ... you can figure it out. AAL said Q1 prasm would be the trough. If that it still true, Q4 prasm can be down at most by - 2%. It looks like Q2 prasm is beating the trough by 2%. It is not my opinion. It is just straight arithmetic if they continue to beat the trough by 2%.
And even if they don't beat it by 2%, with 2% asm growth would put revenue flat yoy (excluding credit card rev)
The midpoint of down 6-7 % prasm beats the Q1 prasm trough by about 2%, which means they have a good chance of going to flat prasm by Q4. And that would be higher yoy revenues (plus credit card revenues).