DrBenway

Airlines Hit Hard by Bevy of Factors

I am just curious why you are not short some way UAUA and AMR. I am also curious about your take on JBLU, which in my humble opinion, should be a big beneficiary of the "majors" trouble.

On Oct 07 06:30 PM David White wrote:

> DrBenway: No its not a typo. Yes, all of the above named airlines
> are in danger of going bankrupt in the next year or two. One of the
> reasons for the recent rally has been that banks have recently relaxed
> their lending attitude toward these airlines. That meant that the
> airlines did not have to worry as immediately about facing bankruptcy.
> However, that does not mean they are out of trouble. They are still
> in very serious trouble. Also the euphoria from the better lending
> atmosphere is waning as you can clearly see from the FAA 3 or 6 month
> chart. This makes CAL a good short.
>
> In fairness I should point out that the market value of the airplanes
> owned by many of these companies is likely at a low. If there is
> a substantial recovery in the next few years, the plane values might
> go up enough to push UAUA's head above water again. Still the planes
> are getting older with time. Plus the recovery is supposed to be
> long and drawn out. This likely means a lot more time spent losing
> money by these airlines. This is trouble. CAL for example has a big
> cash flow problem. Others too. As 2010 rolls around, talk of bankruptcy
> for all of the 4 airlines listed above will likely return. Stock
> prices will likely fall. From the FAA chart it looks like airline
> stock prices should fall 12% to 20% from their current values near
> term before the FAA ETF hits good technical support. Since all of
> the companies listed above are currently losing money, this seems
> like a strong possibility, especially with an overall market retracement
> likely in the works.

Airlines Hit Hard by Bevy of Factors

Wow...I first thought Debt-To-Capital ratio above 100% was a typo. You almost never see that in a solvent company. I was wrong! UAUA is -18 per share of negative equity, a quick ratio of 0.6, and a negative cash flow.

So it can't borrow and can't meet its short-term obligations within a year. I am just thinking of a plausible scenario (short of the goverment bailout) where it will not go bankrupt.

Any comments?