// restricted Cash pile required for the credit rating //
unc ... how much unrestricted cash do they have? And can you explain where your credit rating statement is coming from?
iahphx ... I'm doing this by memory but isn't most of LUV's capacity in 2016 going to be international? If so, their 2015 domestic increase will in essence be spread over 2 years making it more aligned with gdp growth. And for that matter the same could happen with their 2016 capacity. As well, we will have to see if LUV does tweak down some capacity plans ... maybe, maybe not.
Although all capacity is capacity, LUV is only increasing departures 1% in 2015 with the remaining capacity being additional seats on planes and increased stage length.
Has anyone actually calculated what the cost of competing with Spirit out of Dallas to Las Vegas is? What would be the cost for AAL to run 4 more flights to LAS and charge "0" for a quarter and what would the EPS impact be? Obviously, they wouldn't compete like that, but it gives you what might be the worst case scenario.
Has anyone figure what would be the cost to the whole industry if they decided to compete with Spirit's whole network per year? That's not going to happen, but Spirit may want to consider staying in its niche.
// RASM won't decline if the seats are filled. //
Adding seats by themselves will drop prasm, total revenue will be the same though.
Adding seats and lowering some fares and filling the seats will lower prasm, but increase total revenues.
From a total revenue standpoint it can be neutral to positive, but be negative for prasm.
Sometimes I get the feeling people think decreasing prasm is a decrease in total revenue (which it could be in dire conditions, but not now). Do people really think that?
// they have 2 unique opportunities now: 1) Love Field restrictions ending; 2) an int'l terminal that IAH built for them. //
Yes, but the Wright Adm was dismantled over time. LUV probably felt entitled to traffic in the previous dismantled pieces of Wright ... and in the past they were able to get it. I think AAL is saying with this last dismantling, we don't see this the traffic you think you deserve as your assumed right. We are going to compete and match fares. Romo, LUV's CFO, is going to have to refigure the metrics. LUV is trying to paint this as an innocent move (within an oligopoly) ... other carriers could jump on them in markets they are not watching.
There has been some technical damage here, and things need to reverse quickly for things to settle down. Having said that a H&S pattern developed and there are gaps around the target of the H&S. Even LUV could head for the $35 area, DAL to $40 ... this downside action has been building for some time, and it seems down is where the industry is headed. Fundamentally, these prices are low if oil stays below $80 (Brent) and synergies are realized ... but sometimes fundamentals don't matter ... then they do matter.
For 2016, the words I heard were margins "above" 2014 and "thinner" than 2015 (remembered the word) .... yes, between 2014 margins and 2015 margins with some color.
And who knows, GDP could pick up and/or someone might scale back. DAL announced some capacity reduction later this year, didn't they (maybe that was international) ... their growth internationally raised some eyebrows earlier in the year ... they're making some adjustment. 2016 capacity growth by LUV is international as opposed to domestic, if I caught the drift. It's still capacity though.
// baked in the cake //
That's the question, and supposedly the reason for the low valuations is the capacity fear, so maybe it is baked in as you say ... I could make a case for the stock going either way ... or staying range bound. Not much help here.
For the time being, (and the margin projection can change) ... paraphrasing ... margins higher than 2014 and "slightly" (if that was the word) off 2015's margins. Anyway, for the time being, margins look closer to 2015 margins. Slightly off 2015 margins still gives some good earnings. And moving the res changeover up will put the synergies closer.
// LUV is the great disruptor right now ... //
Yes LUV is, but this capacity was in the works for a long time. Sometimes it is hard to "unplan" and you end up in not quite the favorable conditions you wanted. The industry will work through it.
Having said that, in the webcast, I think, AAL disrupted LUV's CFO whose figures probably went into that capacity planning when AAL said in a matter of fact tone after the others commented about capacity discipline, "AAL is going to match." Romo, LUV's CFO, who is generally articulate, and was when she presented LUV's capacity growth in her first comment, seem to stumble around searching for words after AAL's words of determination that they were going to match ... and continue to match. Both are competitors ... it should be interesting.
LUV's labor groups coming up for contracts should listen to the webcast. If I can paraphrase Romo, "umm our pilots, umm, umm are very, ummm nice. They are the highest paid in the industry. Ummm, we should, ummm, all like them umm." I could feel her calculating labor casm costs under a new contract she doesn't want them to get.
How about the regional banks, unc ... saw you over there on the board (RF).
Goodyear (GT) looks like it is breaking out of an inverted H&S which should take it to the $36-39 range ... has the earnings to do it too.
Plenty of oil cav ... Iraq is pumping and plans to double over the years ... Iran and Libya in the wings. I still say we could get a switch to nat gas for over the road trucks ... over time ... another 2M per day savings. And speaking of that, the Saudis are not only worried about shale, but also the impact of alternative energy in the future ... they don't want to make that too attractive. But we all know the price of oil has its own crazy nature.
You know what they say about stocks, or sectors, that show relative strength in a down market ... bodes well for the future ... you want to be in them when the market turns.