American Air: Our Industry Is Great but for Congress and Virgin
BY Ted Reed Follow |
09/17/14 - 11:35 AM EDT |
This is start of good article by Ted Reed on The Street that sheds some light on a couple reasons aal pps has been dropping since 2q report. For pps to get back to highs and above aal imo will need to show substantial cost savings thru merger synergies/fuel savings and this assumes fares hold up which is not a certainty and that labor cost increases are manageable....yes the pe is very low but this is the airline industry which still gets limited respect and is overregulated and Congress/Publics whipping boy...
DALLAS (TheStreet) -- American Airlines' (AAL_) two top officers spoke out from opposite ends of the country on Tuesday, as both CEO Doug Parker and President Scott Kirby applauded the current state of the airline industry but said a few kinks still need to be worked out.
Parker, who spoke at an "aviation summit" in Washington, D.C. that was sponsored by industry lobbyist A4A, said, "Everything about our business feels dramatically different and greatly improved until I get to Washington -- Here, our industry doesn't seem to be appreciated.
"It often feels like we are viewed as a federally owned utility," Parker said, as he itemized the industry's gripes.
Chiefly, an array of federal taxes and fees, unique to airlines, accounts for 21% of the cost of the average $300 ticket. Three-and-a-half decades after deregulation, excessive regulation remains, led by steep fines for delays exceeding three hours. Progress has been maddeningly slow on air traffic control improvements that could vastly benefit the economy. All this is in stark contrast with the approach of Middle East countries that work with their national airlines to build traffic even though the countries lack something most airline passengers would seem to want: desirable destinations.
I have listened to most and since planning on holding long term and not adding more shares do not have to follow as closely/urgently like last year at this time. Compared to last couple years holding aal now is a walk in park. Agree per Parker et al and one of main reasons plan on holding long term. I don't go back as far as you with Parker and company but have followed and owned LCC for years...
I will buy in teens if in fact it drops that low...
I think at 28c share there is a pretty good chance to at least double your money here betting on the occasional huge spike up in price such as occurred in august when jumped to 90c... does not mean a double or so is justified but we have repeatedly witnessed worthless shipping stocks soar for no fundamental reason..see NEWL..just have to cash out when happens.
Agree and imo more realistic for drys to improve cash/debt position by tapping orig than to expect rates to increase substantially and stay elevated.
Like the special divvy idea as long as does not negatively impact orig financials/pps...legit way to get more of the gobs of cash flow orig generating and deal with converts issue.
Would say more than slightly, been buying shares based on Teasuries very high burden of proof requirement...
Up 16c premarket, about time got some positive news, now if only the bdi could get off its #$%$ and start climbing...
IMO boils down to believing that drys's debt will be manageable going forward and will not cause dilution or selling off orig shares. Over time assuming orig continues to grow sales and earnings, spins off an MLP (before YE per GE, which will result in more divies to drys and higher valuation for orig ) , increases divvy as earnings grow, drys will inevitably benefit and pps will rise substantially. Thesis also assumes that dry bulk will at minimum stabilize for balance of this year and for 2015 and that tankers will be spun off to the benefit of existing shareholders.
Don’t Underestimate Transocean’s MLP: Morgan Stanley
By Teresa Rivas
Earlier this year, Transocean (RIG) completed the initial public offering for Transocean Partners (RIGP), a master limited partnership holding several of its drilling rigs.
Today, Morgan Stanley’s Ole Slorer and Jacob Ng, reiterated their Equal-Weight rating on the stock, but write that investors should keep an eye on Transocean Partners, which offers a source of funds for fleet replacement, as well as shareholder-friendly policies like share buybacks and dividend increases.
Although they don’t see this playing out in the near term, the write that they “see meaningful scope for medium-term valuation uplift, depending on the path RIG’s board takes.”
More highlights from their note:
RIGP increases RIG’s financial flexibility to fulfill its commitment to return capital to shareholders: Concerns have recently heightened over RIG’s ability to sustain its $3/sh annual dividend. However, RIG now has the ability to tap on RIGP as an additional source of funding at a lower cost of capital. We believe that accelerated dropdowns could unlock shareholder value for RIG via dividend support, the funding of outsized buybacks, and multiple expansion. Also, see link to RIGP initiation report, published Aug 26th 2014.
Roadmap to a $60 bull case: An overlooked element of value in RIG is the embedded “MLP” worth of its fleet, and our bull case is contingent on RIG accelerating the monetization of 6G+ units with sufficient contract coverage while divesting the rest of its lower-spec fleet. Furthermore, RIG’s pace of monetization falls within its control as opposed to the rig market headwinds that it is sailing against. Meanwhile, we believe that activist presence could also motivate RIG to adopt a more aggressive approach to asset monetization. We see a higher bull case to the extent lower-spec assets could also be monetized, but this could require a more robust rig market than today, in line with our 2017/18 expectations.
Agree that drop in RASM big factor in selloff and all the other issues , while manageable, are negatives..agree also with wgrsh that Parker et al will manage thru this period. The 2q report was a negative surprise to myself and the market..I was expecting a very strong report and held off on selling some covered calls on part of my holdings expecting the same...really like the quarterly divvy, will keep me more firmly in my position and believe will reduce selling pressure during market selloffs.
The real kicker has been the downdraft in the offshore drilling sector, drys is first and foremost a play on orig and orig has been penalized even though crushing estimates...
Lovin the shrimp comment, lol and totally agree Obama and Dems blew the stimulus big time...