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  • American Airlines: An Analysis After The Sell-Off [View article]
    BikerX, I totally agree. I may have overreached by using the Cowboy word, but I have heard him speak and believe that he is still playing to an "America West" audience, while American Airlines attracts shark analysts that are not as forgiving. He still should have formulated his comment better. I did just hear Rick Perry the other day and he is definitely more polished this year than he was 4 years ago. I hope Parker can come up to speed quickly.
    May 21, 2015. 06:46 PM | Likes Like |Link to Comment
  • American Airlines: An Analysis After The Sell-Off [View article]
    User 9246221, its hard to generalize that the Love/DFW battle really matters. Since a large percentage of passengers going there would have routed differently, creating a "hub" presence at Love Field merely takes passengers that would have gone through other cities like Houston. Southwest has had the free right to fly everywhere out of there. Right now Southwest is at about 130 flights per day out of Love and announced it will increase that number to 180 flights. This does at the expense of other flights and routes since the total number of aircraft in the Southwest fleet is basically flat at about 668 today. By end of year, Gary Kelley announced that number to go to 700. That is what shook the market Wednesday. Love Field is not slot constrained, but has a shortage of gates. Expect the city of Dallas to build more gates.
    May 21, 2015. 05:07 PM | Likes Like |Link to Comment
  • American Airlines: An Analysis After The Sell-Off [View article]
    samurat, actually, the problem is larger than just a 5% shave. With an 18-20% pretax guidance from American, a 5% haircut turns that into 13-15%, or about a 25% reduction in pretax profits, (BTW still a good investment for American at current prices). If Spirit matches with a 5% fare reduction, they would go from about 23% pretax to 18% pretax. Eventually American will run out of leverage in the fare "War" and would just lose money. That is why merely dropping prices on tickets will never work. Remember that the ULCC takes away business as well as building a market for people that otherwise could never fly. If you think American got hit hard Wednesday, look at Spirit. Spirit wins in the long run regardless of what American does.
    May 21, 2015. 04:17 PM | 1 Like Like |Link to Comment
  • American Airlines: An Analysis After The Sell-Off [View article]
    I like Doug Parker, but recognize that he is in a whole new game with American, where scrutiny is far more intense. He should trade notes with Rick Perry on public speaking.

    CNBC is a major outlet for business news and his statement was so poorly formed that it seems ignorant of the realities of running an airline. Investors are also generally ignorant, so they took the statement and extrapolated it to ridiculous extremes.

    1) Showing capacity by airline means almost nothing. When customers buy tickets, the only capacity that counts is the capacity for where you are going, at near the date and time you want to go. "Markets" for tickets are complex, so you have to have a strategy that links price and service level to the market you are serving.

    2) The "cowboy" concept that Parker mentioned is that he would compete with everyone. A shootout to the OK corral, perhaps? I think he is more concerned about Spirit right now as they open more routes in DFW. AAL has forecasted an 18-20% second quarter margin while Spirit has a 22.7% margin in Q1. How do you drop prices when the guy you are trying to put out of business has a larger margin than you do? I know a professional magician, but no business people that can come up with a winning scenario that doesn't cost AAL hundreds of millions of dollars to try to push a competitor with a larger margin out of the market. Spirits strategy of "swarming" high priced hubs makes it impossible tor the legacy airlines to defend so many routes against the attack. Aggressively dropping prices would suicidal for AAL. IT IS JUST NOT GOING TO HAPPEN.

    When the market wakes up to the realities of airline competition, they will realize that nobody wants to be in a fare war. A fare war kills everybody.

    As for investment opinion, i suggest apportioning an 80/20 investment in LCCs vs. Legacy carriers. LCCs continue to grow regardless of what the big guys do.
    May 21, 2015. 02:58 PM | Likes Like |Link to Comment
  • Airline stocks rattled by oil supply data [View news story]
    wrscomncents, A few corrections, JetBlue has no MD-80s, they only fly Airbus 320s and Embraer 190s. The A320 is currently configured for 150 seats, but going to 165 shortly. The fuel burn rate is probably a good estimate. They will still make money.
    May 21, 2015. 02:19 PM | Likes Like |Link to Comment
  • Airline stocks rattled by oil supply data [View news story]
    Jbucco3, the "advertised" price is just one of many fares on that plane. Albany is a new market they are using pricing to get attention. JetBlue is projecting a 12% operating margin today, not a losing proposition as you suggest.
    May 21, 2015. 02:13 PM | Likes Like |Link to Comment
  • Spirit Airlines & Frontier Merger Ahead? [View article]
    Dorian Ivery, with a 20-25% operating margin and planes 85-90% full, Spirit is unstoppable. Centralize? If you are winning, you don't need to change your strategic plan.
    May 21, 2015. 02:07 PM | Likes Like |Link to Comment
  • Spirit Airlines & Frontier Merger Ahead? [View article]
    Why would Southwest acquire Hawaiian as long as they could just add flights there? The new 737MAX will get the job done. Gary Kelley mentioned Hawaii in the shareholders meeting when discussing future growth possibilities.
    May 21, 2015. 02:04 PM | Likes Like |Link to Comment
  • Airline stocks rattled by oil supply data [View news story]
    This kind of movement has happened several times this year, only to recover over the days following. Tomorrows news will eventually go to other factors like rig count.
    May 20, 2015. 11:27 AM | 4 Likes Like |Link to Comment
  • Virgin America: Too Much Focus On Step-Up Costs [View article]
    The scuttlebutt at the Southwest Airlines shareholders meeting was the number of VA flights already cut at Love. DFW was actually better for VA. Meantime Spirit is back filling VA routes from DFW.
    May 18, 2015. 08:46 PM | Likes Like |Link to Comment
  • Spirit Airlines & Frontier Merger Ahead? [View article]
    AB1526, My bet is that Alaska and JetBlue merge in a pooling arrangement. Remember that JetBlue has a poison pill that will make it complicated, but they would work together forming an airline with 350 planes, a definite force if they do that. Southwest only makes strategic buys and isn't over digesting AirTran, and Frontier and VA only have about 55 planes, too small.
    May 16, 2015. 04:44 PM | Likes Like |Link to Comment
  • Spirit Airlines & Frontier Merger Ahead? [View article]
    Nice speculation, but I think spirit's management is too focused on organic growth for now. Indigo would want a good premium for this deal, so I do not think spirit is likely to pay much more for frontier assets.
    May 15, 2015. 10:11 PM | Likes Like |Link to Comment
  • Delta Air Lines announces new $5B buyback program [View news story]
    Humble Eagles, I agree and when you think about it a stock with a PE of 10 gives you a return of 10%, while a PE of 5, like AAL goes you 20%. Yes there are risks, but where can you get at 20% payback? On here, there are a lot of nervous people that are predicting the next Airline debacle, like Ebola. Look how that turned out for patient investors.
    May 13, 2015. 03:52 PM | Likes Like |Link to Comment
  • Delta Air Lines announces new $5B buyback program [View news story]
    This looks like the first of several dividend increases and buybacks during annual meeting season for the cash rich airlines.

    At current prices, a $5 Billion repurchase will take out approximately 110 million shares out of 816 million shares outstanding or about 13.4% of todays shares.
    May 13, 2015. 07:46 AM | Likes Like |Link to Comment
  • Distractions Hindering American Airlines [View article]
    Harm Elderman, Agreed that all stock pricing is subject to factors of risk that can depress stock price. But, in this case, a PE of 5X 2015 earnings and better earnings in 2016 mean that you will be getting 40-50% of your investment returns back in plain old earnings. Thanks to comments by Warren Buffett and others, the PEs in the industry are chronically depressed. Thats ok with me, but we need to recognize that there is a similarly limited downside from an investment in AAL.

    As for your comment about unstable, with six majors, there was rogue competition. Now with 3 majors, there are no longer any rogues looking to steal business, just the LCCs that offer a different style and price of service.
    May 12, 2015. 03:02 PM | 2 Likes Like |Link to Comment
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