Will American Airlines Nose Dive???
American Airlines Group Inc., through its subsidiaries, operates as a network air carrier. It provides scheduled air transportation services for passengers and cargo and operates a fleet of 942 aircraft serving 365 destinations in approximately 61 countries.
Due to the lack of demand and despite U.S. airlines last month being awarded $25 billion in Treasury cash grants to cover payroll costs for six months. But 30% of the aid instead would be low-interest loans that they would have to pay back with securities that could be converted to stock.
American airlines said they will be forced to cut jobs if demand doesn’t pick up. American airlines has cut their airline schedules by more than 80% and thousands of plains have been grounded.
Let me give you a couple of stats:
In America, air travel is down 95%.
Around the world, global flights schedules are down 63%.
66% of commercial aircrafts are ground.
14k to 16k of air crafts are ground.
Warren Buffett’s Berkshire Hathaway disclosed that it sold large blocks of stock in Delta Air Lines and Southwest Airlines. Two months ago, Warren Buffett through Berkshire bought an additional 976,507 shares in Delta at an average per-share price of $46.40.
During Berkshire’s annual shareholders’ meeting, Warren Buffett says his company the world has changed because of the COVID-19 and that he had been wrong to invest in the airline industry. As a result, his company sold its stake in American airline companies which consisted: 11% stake in Delta Air Lines, 10% of American Airlines, 10% of Southwest Airlines, and 9% of United Airlines.
American Airlines Group Inc. received a big blow from Wall Street on Friday as Evercore ISI analyst Duane Pfennigwerth slashed his price target on the Fort Worth, Texas-based carrier to $1 from $10.
The airline, which entered the coronavirus-fueled crisis with the weakest balance sheet in the group, may not see “meaningful” recovery in its share price, the analyst said. As American, and the entire industry, tries to raise additional liquidity, Evercore estimates its net debt will far exceed revenue by the end of this year.
Pfennigwerth expects American’s net debt to Ebitdar ratio to stand at about 9.8 times on reduced 2021 estimates. The analyst now expects a 2020 loss per share of $13.90, compared to a prior estimate of a $6.90/share loss, and a 2021 loss/share of $1.55, down from a profit estimate of 75c.
American lost $2.2 billion in the first quarter, attributing about half the loss to special items, including $676 million in write-downs for aircraft and parts and $205 million for early-retirement payouts.
On the earnings call this past week, executives told analysts the company will emerge from the Covid-19 as a smaller company. American is in the process of retiring about 10% of its fleet which includes Boeing 757s, Boeing 767s and Airbus A330-300s.
American’s executives told analysts they have no choice. Demand is not returning soon, they said, and American has been burning $70 million in cash per day. It's not looking good for American Airlines as the chart suggests price will decline at least to the monthly demand zone at $7.50.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
I'm by no means an expert and mainly a casual observer of the markets but some days I see the stock prices go up of these stocks and I can only WTF.
Boeing especially, it still hasn't sorted out the problem of its new plane s falling out of the sky, who exactly is going to buy their planes, who wants to fly in their planes? Yet the price goes up at times, I don't get it but like I said I'm a complete amateur.