Any capacity tightening, I would expect to come after Labor Day and more likely going into the winter. Q3 still has the bulk of their summer schedule. I think last year, AAL had a weaker prasm in Q3 2014 than DAL (have to look it up) because of VZ. Maybe yoy stats can look comparatively better ...
DAL's margins are strong though.
Wasn't the date for the start of switching some LCC flights to the AAL res the 17th of July? If so, anyone hear of any glitches with any of the switched flights? I imagine by the earnings CC, AAL might be able to say something on how it is going ... if it started on the 17th.
cav ... It's not what I think, it is what analysts are using to model their target stock prices. If you take an analyst's eps estimate and divide it into their target you'll get their "modeled" PE. And I think most are around 8 (under pre-tax reporting). Keay mentioned he was using 8.5 to get his target. As eps has been taken down recently, target prices have moved down, but the PE has generally stayed the same for target stock price reasons.
Sure, after a number of years of good earnings and balance sheets improve (nothing like profits to improve balance sheets), and the airlines show they can do well over the business cycle, the market may expand multiples. Having said that, once in an after tax situation, target prices shouldn't change ... just PE's expanding to an after-tax PE. Otherwise why don't analysts say the target price is "this or that" using pre-tax and a different target using after tax earnings.
cav ... thought VZ was slight to about .5% in Q1 and Q2 (mostly Q2) 2014 but then went to 1.5-2.0% in Q3 and Q4 ... guess we'll find out. Yes, there is that domestic glitch ... hope it is resolved going into the fall.
cav ... right now target prices are using about 8-9 times whatever the analyst has for eps. Are you saying that as they report after tax eps, the analysts are going to drop target prices about 35%?
DAL and AAL have about the same tangible net assets on their BS. Actually DAL was right to pay down their debt, though with other liabilities added, it has the same total liabilities as AAL. DAL was essentially financing their "goodwill" prior to paying down debt (they have more goodwill than AAL).
// It doesn't work that way, even when they switch they'll add back in "special items", so take $6.84 as it is.
DAL switch in 1Q14. //
unc ... you just talked about an apple, orange and a peach
unc ... we were just talking about targets (in general), not what the market is doing now, but thanks for reminding us to "Right (y)our minds".
I agree with you, bearsrunfrombuls. Depending on what you want to estimate for fuel and synergies, they do between $7-10, and most likely $8.
cav ... the problem with oil is that (I believe) most are looking at low oil as temporary. Recently the "lower for longer" crowd is becoming more vocal. If "lower for longer" takes hold, then it might become more material to airlines, which haven't gotten the full credit for oil's drop.
OPEC is going to pump like crazy to meet there budgets. What I don't have a handle on is the 50 mbd coming from non-OPEC and non-US ... are they doing any new drilling? Pickens says they are just going to deplete, but I can only imagine that some of them have budgets too along with other incentives to produce oil.
PRASM decreasing yoy can be misconstrued. AAL did say that it is not getting worse, and they are already matching fares in all markets. PRASM can seasonally stay the same (in cents) and revenues increase through GDP growth as they fill more of the seats they added to their planes, or seats available through realigning gauge on route after the res system is done (more passengers at same prasm is more revenue). And as UNC says the ancillary revenues are always there. Anyway, AAL did say the they felt PRASM was stable at current levels ... yoy comps won't tell you that.
DAL thought they would be flat prasm in Q1. And DAL didn't say when positive prasm would occur. They could be flat for Q1 and Q2 and not turn positive until the second half. Anyway, AAL may be a tad behind DAL, and then again maybe not.
A couple of talking shirts mention forced selling because of margin calls in the commodity holdings. At least the market held at the 2079-80 area ... for today.
There are numerous ways to take Kirby's comment about 2H 2016 (and DAL's comment of being flat prasm going into Q1 which theoretically fits Kirby's comment, but AAL may be a quarter behind DAL in that respect). And I can't remember anything about prasm getting worse as you indicated, bperfett. Anyway, I would think AAL is closer to DAL's comment than prasm getting worse.
Maybe AAL is projecting parity in the dollar in Q2 2016 and that is the only reason it won't be going positive in Q2 ... or Q1, or were there other factors? Needed follow-up questions. Can't remember off hand what UAL said in their CC about prasm going into 2016.
Being non-hedge has its benefits. I thought I heard that LUV is carrying $1.3 billion in future hedge losses, and it's been awhile since I went over hedge accounting, but I don't think that counts the cost of getting in the hedges. Certainly in the future if oil goes up LUV's loss decreases, but that has to come to pass just to get even with being non-hedged.
// That's quite a Fish Talk, ... //
I feel he didn't complete he thought. He said, as you quote, "If oil prices go up expect capacity cuts ... ". If oil goes up, it may mean the economy is picking up and airline demand will increase, and grow into existing capacity (and prasm will go up). So, possibly no capacity cuts. In addition he said, as you quote, " If oil stays cheap PRASM will stay soft ..." ... maybe not. Airlines will manage for investable returns (what is that 14-16% pre-tax margins over the business cycle? Pick a number.) AAL has said a goal was to exceed their cost of capital over the business cycle. And that goal should be the goal of any business. So if oil continues down, prasm may not drop if all airlines want to meet their profit goals. And since they all have balance sheet repair to do, (except a few), and profits repair balance sheets, they will manage for profit goals and manage capacity at some point even with oil down. Also, as a side note, airlines don't always get capacity right and right now planned capacity for 2015 wasn't right for 2015 demand.
// Oil CEOs gloomy forecast that chickened out the oil traders and encouraged the short sellers; as soon as they find a way for them to make money, they'll come right back. //
Except the "massive passives" (as some call them) probably won't be back.
Isn't the Yuan stronger today than a few years back? Isn't world GDP growth not too much different than a few years ago? We'll survive a stronger dollar, but it may impact what the Fed does. Deep down the Fed may be looking for a reason to meet the IMF and EU request to hold off. Still, I think, even if they raise rates, the Fed has always said it will be within the context of an accommodative monetary policy, not for restrictive monetary reasons.