// Why is this? //
rocko ... AAL is reporting earnings "after tax". However the "taxes" aren't paid out of "cash". If you look at Q12016 an amount of $405 million in taxes was taken from its deferred asset account on the balance sheet, not cash. They showed a total of $417 million in Q1 for taxes, and without getting in the "weeds", 12 million was paid in cash and that was for state taxes, etc and the $405 million just reduced the their deferred asset ... it was non cash ... they didn't write a check to Uncle Sam for that amount. Remember at the end of 2015 the deferred asset just magically showed up from that extra amount added to their pretax earnings ... it was a required way to account for the NOLs when the NOLs are determined to be more likely to be used ... and it will majically disappear as they report taxes in future quarters
unc ... nobody is talking about the $3 million they paid in taxes ... people are discussing the taxes associated with the NOLs ... don't assume everyone is confused except you.
// //AAL has to account for taxes now, but doesn't actually pay any.//
Nope, it's just accounting "issue", they don't really pay tax //
Unc ... you're generally right about many things, but your remarks about posts are a little confusing sometimes. Above iahphx said, "AAL has to account for taxes now, but doesn't actually pay any" and then you said, " Nope, it's just accounting "issue", they don't really pay tax" You said "Nope" to iahphx and then said the same thing he said.
unc ... you started this conversation by saying, assume they'll get $6.2bn OCF ... guess I was using $6.1bn. Anyway, you said they would be forced to use their line of credit and/or drawdown their liquid cash. You said the $4.5bn aircraft capex (along with other things) was going to come out of the $6.2 .... I added that they plan to finance the a/c capex, so their cash flow available will be 6.2 plus 4.5. And I concluded that they won't need to draw their line of credit or necessarily have less cash at the end 2016 as 2015.
unc ... They have what you say at the end of 2015, plus a cash flow this year of about 10.6 billion ... I'm counting the planned financing for aircraft of $4.5 billion. If they don't spend more than 10.6 billion this year, they should have at least what they had at the end of 2015.
// money gotta come out from either borrowing, Cash on hand, or even line-of-credit. //
Well, they have 10.6 billion to play with before more "borrowing, Cash on hand, or even line-of-credit."
// I don't care much about EPS, the OCF matters to me. //
I don't recall saying anything about eps, but understand you don't care about it. And I know you are talking about OCF, but let's assume they get $6.1 from operations and get $4.5 financing their aircraft capex. How would they ever need their line of credit at this point? And for that matter change their cash position that much?
unc ... isn't their planned financing going to cover their capital expenditures for aircraft this year ... leaving only the non-aircraft capex of $1.2 billion?
Even if an airline guesses right for a year, the cost of doing it over time makes it a losing bet. And after their money making hedges run out, they are stuck with costs that all in the industry have to cover. So, just adjust operations to get your margins for the given conditions.
// Smart how simply Math works? //
Maybe even more than a dime lower. Though I have to ask how much lower than 590 million shares are you expecting?
// October 2014 (ebola days) price closed at 28.58 //
Yup ... there is a stick of butter there and everyone has been trying to heat the knife ... I've been waiting to see how that plays out.
// What exactly would anyone worry about? //
When things are in a state of flux, people can worry about a lot. Time is on the side of the worriers.
I think the worry is that for 2017, eps will go to around $4. And there are scenarios that the case could be made for an even lower eps. Those scenarios are beyond AAL's current margin guidance of between 2014's margins and 2015's margins going forward, but there are always those that can argue guidance can be revised over time ... they are just getting ahead of the situation. For example, what if oil is $60 in 2017, revenue stays flat and you get the same yoy casm bump? That ignores a credit card agreement and assumes no revenue increasing prasm bump ... but those things haven't happened yet.
And for 2016, I wouldn't be surprised to see the eps come down closer to $5 ... personally I would like to see eps for Q2 to come down another 10 cents just to cover the lower end of margins guidance.
It shouldn't be just AAL that gets nailed though, because the other airlines will be impacted by $60 oil plus they almost all have substantial labor contracts in the works that AAL isn't faced with ... its kind of hard to think that the industry won't be making adjustments and raising fares.
That is not a bad eps going forward (+/-).
I certainly understand that "doubt" could be created about the airline industry (even after 6 years of behaving rationally), and that "doubt was pushed recently. The ground work is being laid with the announced capacity adjustments this fall/winter/next year (and I imagine things will be tweaked in the interim as well). If the airlines show that they are going to manage for investable margins, I feel, multiples will be more apt to expand coming out the other end.
// guide was dropped at March report //
I think AAL dropped their margin outlook (for 2016) back in 2015 ... it's just playing out. But the industry is making adjustments to stop, and possibly improve upon, the slide. Isn't their latest guide going forward for between 2014 and 2015 margins? Both of which are more than enough to justify a $30 stock ... actually make it very attractive.
I agree with unc that the fuel situation for Q2 will pressure the range midpoint for Q2.
Yes, agree ... DAL's revenue was just tad down yoy ... ASMs helped a lot, plus "other".
Fare hikes are going to be needed ... others carriers with labor contracts coming may feel pressured, but sometimes they put up with that pressure while negotiating. I would think the other side can see through that tactic given industry practices though.
Got to finish penciling out a real estate investment, and get to bed.
There usually is a "price leader", but companies can take turns. Historically, different airline companies have been doing it since 2009. And many times the shape of fare increase isn't accepted by all, so it fails. DAL put one through recently ... SAVE went along but AAL and LUV didn't. They'll come up with one ... eventually.
What will the market do in the interim?
cav ... maybe you think an oligopoly is something it isn't. By all definitions it is an oligopoly (domestically), and there are benefits. Does that mean there is always stability? There have been huge cost changes, and it will take a little time for margins to stabilize. It shouldn't have been a surprise to see fuel bottom in Q1 and have prasm follow it down ... that was a surprise dip in fuel and it changed the timing on prasm recovery. In the mean time the airlines all made good money.
As far as Munoz goes, he could have been referring to capacity in the domestic market, but that is planned to be reigned in ... a positive and rational first step in the right direction. However he very well could have been thinking internationally about capacity. And thinking about possible consolidation taking place internationally. European carriers have been talking about the need to consolidate, and you probably heard about DAL's and UAL's possible moves on Avianca (was that on Munoz's mind?).
And I probably agree with the few possible domestic mergers that iahphx mentioned.