Agree that aal revenues being pressured in number of areas, todays luv ceo comments a huge positive but I doubt aal pps will hit 50$ anytime soon unless oil tanks to around 50$ or less.
Airlines Fly as Southwest Caps Growth
By Ben Levisohn
Southwest Airlines (LUV) said it would limit its capacity growth–giving its shares and those of competitors like Delta Air Lines (DAL), American Airlines (AAL), and United Continental (UAL) a big boost today.
Airlines have been beaten down in recent weeks as investors became concerned that the industry was forgoing the discipline that had helped make their shares a must own until this year. It wasn’t hard to see why: Southwest Airlines, for one, said it would grow its capacity by as much as 8%, while American Airlines’ CEO Doug Parker said he would cut ticket prices to battle low-cost competitors.
With that as the backdrop, the promise by Southwest CEO Gary Kelly to back off the 8% target came as a breath of fresh air, and helped give the beaten down sector a lift today.//
//Kelly keeps the girls mouth shut moving forward// lol Soooo....bummer that Libya such a mess or imo oil would be closer to 50$. ISIS in Iraq, Libya, Yemen one reason oil has risen and imo biggest geopolitical risk per oil.
Id prefer the "unreasonable" of 40-50$ wti which unfortunately is whats likely needed to get aals pps back up to 50$...
Agree need to keep plenty of unrestricted cash on hand and imo they will in part be refinancing/borrowing vs. using the cash on hand. Parker has said as much...
Friday OPEC meeting on Friday big event of week along with I believe an airline conference ex aal. Consensus is that OPEC will not cut output, look out if they actually do. Best case scenario is we get some positive capacity comments at the conference and OPEC does not decrease output..
Agree, Bob does not holda candle to the clown aal bull on CNBC the other day who when questioned why aal eps would be 2$ share less in 2016 answered that was due to capacity issues, not a word that due to taxes.
Yes Parker could have at least said demand is strong and expecting very busy summer etc, maybe he did but I don't remember it. Leads me to think may miss 2q estimates and/or next 6-12 months will be getting more challenging vs less and that's not really factoring merging the reservation system and operational issues that need addressed. Little bit of bait and switch by Parker promoting all stock comp and than talking up capacity issues.
//It IS what it IS, plain and simple. Just reiterate their guidance will be enough, how hard is it to do?//
Reiterating guidance would help a lot..right now there is an info void that is causing a lot of angst and rightly so imo...the market does not like wishy washy outlooks especially in airline sector. I for example have lost a lot of confidence in aal's 6-12 month outlook and am looking for management to say something to change the current negative narrative.
Agree and agree but as some analysts have said its more about messaging and especially Parker's comments are sending the wrong message. So far today aal is underperforming and its because aal is under the most domestic and Intl pressure. The message has to change. If its not as bad as you think than Parker went overboard in his comments.
ULCC's and LUV are adding capacity...hopefully demand will be strong enough to counterbalance the added capacity and fare pressure. If revenue still grows it can mitigate prasm weakness...need an airline executive to say as much.
//The only reason this should make ANY airline analyst less bullish is if they believe we're likely to see more irrationality. If you believe that, say that. If you don't, you should probably say something else//
Unfortunately that is what they believe. I really do have concerns per aal being squeezed in a number of areas more so than other airlines. Venny and Brazil just a mess, Intl pressured, number of their domestic hubs are seeing increased competition and noy addressing operational improvements until get thru merger matters. This all started 2q last year and has only gotten worst..making a planeload of money is obviously not enough to offset these challenges as far as the market sees things.
They do make some good points. Per pps targets, they almost always lower them when a stock drops 20% which makes some sense especially because they do not put a timeframe on their targets...
That and one or more of airlines stating that they will not be adding excess capacity, will not be engaging in any old school price wars..just oil dropping may not help as witnessed today. Big part of current selloff due to low fuel undermining capacity restraints. Yup, the proverbial catch 22, double edged swordy stuffy...
Also explains why Parker layed the gauntlet down warning LUV etal that they will pay a price for capacity adds. He is being the good sheriff in town and I think it is the right decision long term.
I think the market is overreacting but this is the airline business so it is understandable and I think that is the point Keay is making. Investors have been burned too many times with airlines and have little patience for bad behavior.
Yes, not greatest time to sell calls but I have quite a bit of sold puts that need to hedge by covering or selling calls. Need a positive catalyst but negative ones such as oil continuing to rise, analyst downgrades are just if not more likely. Really have a hard time seeing pps rebound much or holding any rebound with this type of "fundamental" selloff unlike the Ebola selloff. Dead cat bounce is what I would like to see to sell calls into .