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Microsoft Corporation Message Board

wgrsh 366 posts  |  Last Activity: 11 hours ago Member since: May 11, 2005
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  • Reply to

    Traffic concern

    by markusgzee Mar 4, 2015 11:10 PM

    markus ... I think AAL cut revenue seats and added seats that still need to develop revenue. You're seeing that, and worrying. But they will develop those added, no cost seats, and that will balance things out by the end of the year ... maybe even provide a positive impact to profits.

  • Reply to

    Traffic concern

    by markusgzee Mar 4, 2015 11:10 PM

    // fare prices are down about 3% on average //

    PRASM is down 3%, not fares.

    Let's look at an imaginary airline with 11 airplanes each flying one route/day, 10 seats at a fare of $100. Stay with me on this.

    The airline cuts capacity by dropping one route and loses $1000 in revenue, but also saves $900 in costs. So it loses $100.

    The airline adds a seat to the other aircraft so now it has the same ASMs (PRASM is down (fares are still the same)), and this extra seat has no cost. If it fill just one of those extra seats it clears $100 and profits don't change YOY.

    Pretty simplistic, but think this is what AAL is saying about what's going on for that component of the PRASM decrease. Anyway, compared to last year (ex-fuel), it is labor costs that will cause the profits to be different.

  • Reply to

    Traffic concern

    by markusgzee Mar 4, 2015 11:10 PM

    markus ... Let say fuel is the same as last year ... what percent of this years miss will be due to labor expense and what will be due to the revenue you worry about?

  • Reply to

    Traffic concern

    by markusgzee Mar 4, 2015 11:10 PM

    markus, you didn't comprehend what I said. You said they won't duplicate last year, and I agreed, but (ex-fuel) meaning I understood that eps would be higher due to fuel, and the main reason they wouldn't beat last year (ex-fuel) is the labor expense. That's the biggy.

    And given that you didn't follow me in that, you probably didn't understand what I meant about costs.

  • Reply to

    Traffic concern

    by markusgzee Mar 4, 2015 11:10 PM

    // i disagree that we can't hit results due to labor expense, as fuel more than covers it at this time //

    Gee whiz, markus ... I know I don't articulate things as well as they should be, but I did say, "Generally, true (ex-fuel). "

  • Reply to

    Traffic concern

    by markusgzee Mar 4, 2015 11:10 PM

    // anyone expecting last years results will be disappointed //

    Generally, true (ex-fuel). And that is because of the labor expense bump, but synergies will get that back over time. That said, the revenue change you're worried about was "self-imposed". But if you look at their capacity cuts impacting revenue, it was the type that also cut costs. The extra seats that brought capacity back up, are essentially free of costs. Also, I think, as the year goes on, things will improve in the areas you are concerned about, but take into account the "costs" involved with the capacity movements.

  • Reply to

    Why are we down today?

    by markusgzee 14 hours ago

    // nothing makes sense anymore //

    The problem may be that you are trying to predict daily price movements ...

    markus ... get a grip ... you're going to be a father soon. Family needs youl

  • Reply to

    Traffic concern

    by markusgzee Mar 4, 2015 11:10 PM

    // SO again, is anyone concerned about the overall drop in traffic?, .. //

    markus ... Short answer, no. AAL had a two edged sword. They cut capacity, but made it up with the extra seats. So, in the current quarter revenues have "both" of those impacts. I would think AAL's yield is holding up just as well as other carriers.

    All airlines are in a pullback, not just AAL. I think the real reason for the malaise is not operational, but the question of how soon oil rebounds. Nobody knows, but people aren't going to accept the current oil situation as normal unless it becomes normal. So, a short term benefit is good, but not a huge bump to valuations.

    I'm sure if oil starts rising, it will stop at a level that is still very profitable for the airlines, but that remains to be seen and many don't believe that yet. As far as I'm concerned, if Brent stays at $80 or below, things are good.

  • Reply to

    BOA sees it my way

    by scottmmoore826 Feb 28, 2015 7:24 PM

    Well ... maybe that was just because there was general stability in prices, and you saw a correlation but the correlation wasn't the causative correlation. Just do a search and you'll find numerous article dating back many years that state oil products are based off of Brent.

  • Reply to

    Traffic concern

    by markusgzee Mar 4, 2015 11:10 PM

    This happens every year ... certainly not worse than last year. Didn't DAL say the other day that one of the reasons for their prasm weakness was fewer cancellations than last year? I know AAL said during the CC that was a component of their prasm projection, among other things (extra seats, currency, etc)

  • Reply to

    BOA sees it my way

    by scottmmoore826 Feb 28, 2015 7:24 PM

    // would have the affect you think it would on refined products //

    I agree, Brent would have to follow the drop in WTI to change that. We'd just export the jet fuel to other places in the world and get a higher price ... that's why jet fuel is essentially tied to movements of Brent.

  • Reply to

    Hey What validity

    by shoenfield Mar 4, 2015 9:06 PM
    wgrsh wgrsh Mar 4, 2015 9:22 PM Flag

    // What will aal be selling for by June? //

    Which day?

  • Reply to

    Contango Tango

    by bearsrunfrombulls Mar 4, 2015 2:00 PM
    wgrsh wgrsh Mar 4, 2015 7:33 PM Flag

    unc ... thanks ... I vaguely remember the Saudis switching ... thanks. Do you recall the reason they ditched WTI? Did it have anything to do with the persistently weak dollar, or something else?

  • Reply to

    Exxon CEO sees years of $55 oil

    by iahphx Mar 4, 2015 5:43 PM
    wgrsh wgrsh Mar 4, 2015 7:08 PM Flag

    unc, I think the majority of the talking shirts think oil will rebound in another year, and the current drop, (and whatever it does in the short term ... even going to twenty), is just a relatively short term aberration that will play out and then oil will go up.

    Of course, I understand what is discussed on the board.

  • Reply to

    Exxon CEO sees years of $55 oil

    by iahphx Mar 4, 2015 5:43 PM
    wgrsh wgrsh Mar 4, 2015 6:35 PM Flag

    If I'm not mistaken, Exxon sold off some of its oil assets a few years ago ... and I can add at probably top dollar ... pretty smart. They're probably on the hunt to get some back. But that said, it's good to hear someone say oil may sit in this area for longer than what most think. Using the current level oil AAL gets 80% of that $5 billion.

    Also, if the US is going to pump, pump, pump at $75 ... what is going to allow oil to go higher? And then there is the strong dollar impacting the situation. At $75, AAL gets half of the $5 billion. And by that time the company should be generating additional income from the synergies. It's hard to make this story look bad.

    I can understand the majority of people feeling that oil has to go up, and the current situation is an aberration ... not having it go up disrupts their view of the world ... that's tough to overcome.

  • Reply to

    Jet Fuel to date

    by unclespeaking Mar 4, 2015 12:08 PM
    wgrsh wgrsh Mar 4, 2015 4:00 PM Flag

    // AAL better keeps its guidance Monday //

    Kirby said this week that he felt pretty safe saying they still see the down 2-4% prasm.

    And with all the talk about figuring what fuel will be, and what to use to figure it out, AAL is probably the best source. When fuel wasn't volatile they usually hit it, and now with the volatility, they update guidance that has changed from previous guidance. If they feel fuel will be outside its previous guidance, they'll update.

  • Reply to

    Contango Tango

    by bearsrunfrombulls Mar 4, 2015 2:00 PM
    wgrsh wgrsh Mar 4, 2015 2:29 PM Flag

    Anybody here recall the reason that Brent and WTI flipped a number of years ago? Brent was always less than WTI ... and the crack spread was seemingly less as well.

  • Reply to

    BOA sees it my way

    by scottmmoore826 Feb 28, 2015 7:24 PM
    wgrsh wgrsh Mar 4, 2015 1:43 PM Flag

    // A crashing WTI price helps 80% of the economy //

    It depends on whether these benefits are just temporary or longer term. Many feel consumers won't spend if these windfalls are perceived to be short term ... rather save/pay off debt. Even Moody's came out today saying airlines will get a temporary windfall with fuel, and capacity discipline. (Funny that capacity discipline has been in place since 2012 and started a few years before that ... temporary?)

    Lots of different opinions out there when things change fast ... we'll see. At worst, the currency change will provide some long term savings with fuel over previous years.

  • Reply to

    Kirby's speech yesterday

    by iahphx Mar 4, 2015 10:17 AM
    wgrsh wgrsh Mar 4, 2015 10:37 AM Flag

    Besides just reiterating what was said in CC about the added seats, Kirby also emphasized (mentioned as well in CC) that the seats added weren't available in the inventory to be sold until after the fact. So, when they came back online, it almost ensured some empty seats, which he said would be corrected over time.

    Only parts of the world to worry about are 4 countries in South America ... others look okay. Growing in Asia, strength in Europe, domestic strength.

    Dallas situation was what they expected and the 50 other markets they didn't expect problems from ... those problems are dissipating and resolving.

    So, AAL, and airlines, are just trading here until the market changes sentiment.

  • Reply to

    Pilot contract "I told you so's begin"

    by flyballboy Mar 3, 2015 9:38 AM
    wgrsh wgrsh Mar 3, 2015 10:57 AM Flag

    Thanks again Fly, so if the company had to cut back instead of flying 82-85 avg, they could lower that to, say 70 hours and not layoff?

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