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  • Don't Worry About American Airlines' Downgrade [View article]
    When it gets used up, after tax earnings will drop by a third. So today's 5x multiple turns into a 7.5x multiple. Somehow I think that the market has already discounted the impact in the current price. American will continue to eek out gains from more efficiencies with us airways too.
    Oct 5, 2015. 09:00 AM | Likes Like |Link to Comment
  • Delta set to cut jobs among its office workers [View news story]
    Kudos to Delta as it is hard to make tough decisions that impact the long term when the money is flowing in.
    Oct 2, 2015. 07:45 PM | 4 Likes Like |Link to Comment
  • Airline stocks lose altitude [View news story]
    i_am_seeker_2, I am reaching the realization that the people on planes do not represent the general population. If not, these statistics cant be really applied to forecast the demand for airline services.

    With only limited online references on the topic, generally, they have a higher income, more assets, are better educated and are not worried about their jobs as much at the indices indicate. The average age is in the upper 40s, 10 years older than the general population, and about 36% are over the age of 55. After 55, a lot of these people don't work anyway, but may be influenced by the ups and downs of their stock portfolios in buying tickets.
    Oct 2, 2015. 12:48 PM | 1 Like Like |Link to Comment
  • Airline stocks lose altitude [View news story]
    I am in total agreement. Real money is made calling the turn when the dagger stops falling. There are real positive fundamentals here, with an operating margin at Delta of 20-21%, there is not an unlimited downside here, so the turn can happen fast.
    Oct 2, 2015. 11:40 AM | Likes Like |Link to Comment
  • Don't Worry About American Airlines' Downgrade [View article]
    goldbaum, the pending issue for AAL is when they use up the old AMR corporation tax losses. The extremely high level of earnings experienced today will decline by a third when the tax losses are used up. So if you recalculate todays PE at the new tax rate, that would put you at a PE of about 7.5X earnings looking forward. Now you can apply your debt theory, which I don't think is a major issue in the NEW airline industry. The major difference between American and the others, is that AAL got stuck with 350 MD80's that they had to replace. They still have 105 MD80s that average 23.4 years old, some almost 30 years old. With a fleet that old, they had no choice as many were at the end of their life. AAL's investment in new planes will diminish when the replacement program is over and the last MD80 is retired in 2017.

    American already has the youngest fleet and a balance sheet with real assets in their planes.
    Oct 2, 2015. 11:01 AM | Likes Like |Link to Comment
  • Airline stocks lose altitude [View news story]
    It is necessary to read the whole Delta press release. Overall Load factors are solid, even when you consider Atlantic competition. Fuel price, after hedging reserves applied are very low. Overall, Delta does not deserve the stock drop.
    Oct 2, 2015. 10:28 AM | 5 Likes Like |Link to Comment
  • Don't Worry About American Airlines' Downgrade [View article]
    Calculus, so if you were American looking to replace 350 MD 80s a few years ago, that comes up to 350 X $100,000,000 = a list price of up to $35 BILLION. Theses planes will fly for 25 years at an average of 5-6 flights a day and 5-10% down for scheduled maintenance, means that you are buying about 52,012 flights or about $1,922 per flight excluding interest. When you see that $1,922 number, it makes sense. Interest is tougher to factor in as different airlines have a different cost of borrowing or use cash to buy planes.
    Oct 1, 2015. 07:42 PM | Likes Like |Link to Comment
  • Don't Worry About American Airlines' Downgrade [View article]
    go-4-at, I am sorry you didn't! Since some of us bought AAMRQ when it was less than $5, the big returns are definitely there! Even in the last year JBLU has tripled, and even downtrodden Spirit (down 30-40% from its highs) is still selling for about 4X their IPO price a couple of years ago.

    Where can you get returns to beat that?
    Oct 1, 2015. 07:33 PM | 2 Likes Like |Link to Comment
  • Spirit Airlines & Frontier Merger Ahead? [View article]
    At least here you admit that you don't like Spirit's model. In my work with companies on issues of customer service, market segmentation and satisfaction measurement, Spirit proves that you can navigate a very turbulent business model and make it pay sustainably.

    You talk about requirements for pilots, but, so far, there is no pilot shortage. For reasons I cited in other posts, this is not likely to happen to US airlines. The pundits have already forecasted that, by now, airlines would be canceling flights due to shortages. In official announcements on the issue, airlines are not reporting the inability to keep up with pilot hiring in the world markets. This still could happen, but it is not an immediate threat and if a shortage happens it will only ground a fraction of airliners while forcing the raining planes to fly full.

    You mix in industry trends with issues impacting Spirit. At O'hare, the issues you cite impacts all the players and therefore has to be accounted for on the revenue/profitability calculations and therefore all fare prices in and out of ORD. Airlines have historically dropped smaller airports if they cant make the financials work.

    The industry is still completing its mergers, using its clout more with suppliers and attracting a broader group of customers. It is also an industry that comes with dozens of warnings for things that can go wrong in its financials. Spirit is no different. They have a big advantage in being first into its model, and have forced the other airlines to follow parts of its high density and pay for service model, so the differences are not as great as they were a few years ago when most of the articles were written. Spirit is subject to the same kinds of start-up problems JetBlue had in its early years, where personnel and maintenance issues gained front page headlines. Even with the negative publicity, the airline stayed focused and continued to grow. I bought on those headlines as they created awareness of the airline while the stock price was still low.

    Besides this one right call, what are your future predictions?
    Oct 1, 2015. 05:56 PM | Likes Like |Link to Comment
  • Don't Worry About American Airlines' Downgrade [View article]
    This is the kind of downgrade that is made right before a company like Goldman buys in big. Today's downgrade made for an opportunity to buy AAL at about a percent cheaper than yesterday. With derivatives, a company like Goldman can make tens of millions as the stock goes back to the real value over the next few days.
    Sep 30, 2015. 09:13 PM | 9 Likes Like |Link to Comment
  • Spirit Airlines & Frontier Merger Ahead? [View article]
    Jay, You see this as an ego game and choose to twist anything anybody says on here. That is fine if you like that because you have many similar friends like that on here.

    I have never asked for "all" your research, just a rationale, supported by data, to support your pronouncements. I have never forecasted a future price on SA and never will. I see SA as a dialog to get superior investment returns. When I post to SA, I back it up with facts, not just opinion. SA is not a gambling site. You seem to think that guessing without backing up your assertions is a fun game, when in fact it is just a waste of time reading posts like that, since SA has a bunch of misinformed forecasters that don't help my returns, so I challenge them.

    You made a terrible call on your repeat business comment, which was just plain wrong from a marketing standpoint. Spirit continues to fill planes in the 85-90% range and there does not appear to be a dropping, even with the large number of developing markets. You also made the comment about repeat customers, which for an airline with a 1% market share makes no sense. The chances that the same passenger will fly Spirit more than once, given the other 99% of flights, is rare to start with. I go to Europe about 3-5 times a year and have flown a dozen airlines doing so, does that mean that I hated the first airlines offerings when my destinations are different every time?

    Your comment that the other airlines will "force" Spirit to flying to niche markets is also uninformed and shows that you are not following the financials. As I have stated in other postings here, an airline with a diverse set of routes having an operating margin lower than the new entrant with a higher margin cant force that higher margined airline out of the market. So, lets say the big 3 airline has an operation margin of 17% and Spirit has an operating margin of 22%, how far CAN the big 3 airline sustainably drop their prices against Spirit? The answer is not far enough nor long enough before sustaining hundreds of millions in losses.

    BTW, you don't know my returns, so bad mouthing my losses is just ego talking, another dataless statement.
    Sep 30, 2015. 06:03 PM | Likes Like |Link to Comment
  • Spirit Airlines & Frontier Merger Ahead? [View article]
    Hi Jay, I think you have worn your hand out by slapping yourself on the back! If accolades is what you want, then explain why the stock has dropped? There are no material changes to their operations and forecasts. Unless you have some great research that proves your call, it was just luck. I don't believe in lucky forecasters, everyone is lucky sometimes and we only hear about those kinds of calls on SA. The losing forecasters never remind us of their bad calls.

    Finally, you ring your bell on the decline, but you never called the way up? Are you smart or lucky? I think lucky.
    Sep 30, 2015. 03:58 PM | Likes Like |Link to Comment
  • Spirit Airlines & Frontier Merger Ahead? [View article]
    Jay, I don't know where you get your misinformation, but Spirit is higher than the $44 you quote here. It seems like you have sour grapes because you missed the SAVE IPO, sorry, but that is not a reason to bad mouth a company with great fundamentals. If you were ahead of the curve and bought at the IPO, you would have about quadrupled your investment at the current market price. I don't know if you have noticed that the market is down over 2,000 points too, but of course, in your analysis that does not matter, does it?

    Now, trying to talk down the stock further isn't working because the fundamentals are there, the highest margins in the industry, a company expanding rapidly and a company with no shortage of cash.

    Give it up! Get better information on here.
    Sep 30, 2015. 01:49 PM | 1 Like Like |Link to Comment
  • Spirit Airlines & Frontier Merger Ahead? [View article]
    Jay, Sorry, you can quote the DOT all you want, but you really miss the real issue about why Spirit exists and won't go away. Spirit is not interested in the whole market. They are interested in the market that wants their service levels at the price they offer. This is a market segmentation strategy.

    Your attack wrongly assumes a single market for air service. With about 1% of the planes in the US, they will be more successful in taking away more business from Greyhound and people that could not afford to fly, than the Big 3. When you start comparing service levels from that perspective, suddenly it all makes sense. Their growth plans will take them to about 2% of the US fleet, so there will be plenty of converts that will buy them. Surveying people that no longer fly them makes no sense as long as they continue to fill their planes in the upper 80% range and deliver the largest operating margins of the regularly scheduled airlines. Nobody can take that away from them, not even the pundits.

    Please do the numbers before you predict their demise! They have almost no debt, relative to other airlines and are not going away as you predict.
    Sep 30, 2015. 04:03 AM | 1 Like Like |Link to Comment
  • Southwest Airlines Will Focus On Expanding Its International Operations In 2016 [View article]
    I don't like the word focus when it comes to the big airlines. Execution has to be across a broad spectrum of routes and marketing opportunities, all synchronized and working at the same time. Anew reservations system or a new route or opportunities to lower costs or other areas all have to come together.

    At the current time, Southwest has a lot of opportunities to take away business from other airlines. Their margins support aggressive moves against the big 3, and their model is extendable, even as the ULCCs grow at a rapid speed. The real fight in the short term is getting enough planes and waiting for new routes to develop and expand.
    Sep 27, 2015. 01:51 PM | 1 Like Like |Link to Comment