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  • United Airlines: Margins Are Inflated; $51 Fair Value [View article]
    You are predicting a 6X consensus 2016 earnings? I don't think that makes sense. For sure United is a troubled company, from an older fleet, to computer glitches and union and efficiency issues from a merger that has never been completed, this is a sick company, but can get better. Nevertheless, United has the best hubs in the country, a high loading factor and high fares. All this is positive, not negative for United. United knows what is wrong and knows what to fix. This should be a 8-10X PE stock in 2016, or a stock increase of up to $72-$90 per share. I don't see the price decline forecast by the author.
    Aug 2, 2015. 10:45 AM | Likes Like |Link to Comment
  • Delta: Unsustainable Margins; Downwardly Revising Fair Value [View article]
    While Delta's average fleet age is high, it is offset by a very low level of long term debt. Delta has the cash and borrowing ability to easily support plane replacement.

    As for the future, Delta is putting together strong bases in New York City at lga and jfk.

    As for the investigations you cite, the price gouging has to be enforced by a federal declaration of a state of emergency, which there was none. Transportation to and from Washington, DC would have to be a critical service, which it is not due to competition from other modes of transportation. Remember that Amtrak ran busses from Trenton to Philadelphia, so you could still go on your Amtrak ticket anyway! You suggest that the government will regulate pricing, which it can't since the Airline Deregulation Act of 1978 took that option away and dissolved the Civil Aeronautics Board.

    As for unions, they will always be sparring and voting against evil management. This is part of the landscape for the industry. Remember that a real strike would have to confirm to the Railroad Act and can't be done easily. Until the NLRB declares an impasse, a strike would be illegal. In No negotiations have the relations gone to that point.

    Delta is positioning itself with a few key hubs with protected routes. In the short term, they made big mistakes hedging and locking in oil prices, but when the contracts expire, and oil price purchases are lowered to market, Delta's pretax margins will improve. Also, don't forget about that $8 billion tax loss carry forward that insulates them from federal taxes for the next year or two.
    Aug 2, 2015. 09:01 AM | 5 Likes Like |Link to Comment
  • JetBlue Airways EPS in-line, misses on revenue [View news story]
    bluedriver, don't forget about the A320 seat expansion by 15 seats per plane by the end of 2016.
    Aug 1, 2015. 06:11 PM | Likes Like |Link to Comment
  • Which Airlines Are Flying Highest After Earnings? [View article]
    I totally agree with your assessment, but still point out that Spirit is the airline with the highest operating margin of any airline and not going away soon.
    Jul 31, 2015. 12:15 PM | Likes Like |Link to Comment
  • Which Airlines Are Flying Highest After Earnings? [View article]
    As usual, the place to be is with the growing LCCs and not with the 3 network carriers that are stuck without the ability to add capacity or routes..
    Jul 31, 2015. 11:21 AM | Likes Like |Link to Comment
  • American Airlines Group: The Market's Most Hated Stock? [View article]
    Yes we are in the same place. The hard thing for analysts is to reconstruct tax books, not GAAP or management presented results. There should be enough trend information as we see another quarter or two roll out. Then it may be possible to predict an end to the tax loss carry forwards.
    Jul 31, 2015. 08:08 AM | Likes Like |Link to Comment
  • American Airlines Group: The Market's Most Hated Stock? [View article]
    It should be mentioned that the Bankruptcy court has embargoed some $700 million in AAL stock pending resolution of residual pre-bankruptcy claims. American has gone to court to release the stock to old AAMRQ shareholders and unions but the court continues to prevent the distribution of the stock.
    Jul 30, 2015. 05:54 PM | Likes Like |Link to Comment
  • American Airlines Group: The Market's Most Hated Stock? [View article]
    Adam Levine-Weinberg, there must be a misunderstanding in what I wrote. I referred to the "big gap" which I meant to refer to the years until cash was paid to the IRS.

    From a GAAP perspective, the reversal causes a change in the assets of the company, as was evidenced in the Delta write-up of about $8 billion pre bankruptcy losses that were written off at a time when it looked like they couldn't use them (a GAAP decision to write off what look like worthless assets). The subsequent recognition od the tax losses as an asset was an asset write up, but has no effect on taxes, just the financial books. As both American and Delta earn money now and charge earnings against those tax losses, the tax losses will be reduced by the Tax Basis earnings of the companies, which do include accelerated depreciation on planes and other IRS regulated expenses as you suggest.

    In most of 2013, US Airways was still independent of AMR (yes, I mean AMR) until December of that year, so absent other tax losses or other considerations, had to pay taxes. (my research was on the consolidated company, so I don't have full info on pre-merger tax status of US Airways). In December it was merged into AMR that had the bulk of the tax losses. At that time, the booking of earnings was offset by the tax losses they could use (AMR and US Airways combined). I think we are in line that it will take a few years to use up all those tax losses, during which there will be no cash payments to the IRS. That was the gap I referred to.

    We can debate the exact date, which you correctly state is hard to calculate at this time without AALs internal numbers and the exact balances of the tax losses and earnings which are not knowable at this time.

    The real question is when looking forward in the longer term, where most airlines are paying 30-40% of their pretax to the IRS. What is the value of that cash flow? and have the analysts adequately built those estimates into their earnings models.
    Jul 30, 2015. 03:57 PM | Likes Like |Link to Comment
  • American Airlines: Sell-Off Created 25% Upside Opportunity [View article]
    Celine's in PRASM are taking a chunk out of the benefits of lowered oil prices. On the upside, if oil goes back up, you can count on the industry recouping the increases through higher fares and fees. Overall, I agree with your assessment, but am continually amazed at how much the markets batter American below where AAL stock should be selling. All the death scenarios that investors have are already discounted into the price of athe stock trading around 5x 2015 earnings and downside should be limited.
    Jul 30, 2015. 01:27 PM | 1 Like Like |Link to Comment
  • The New Delta Aims For Global Dominance [View article]
    Global dominance for a US flag airline? LOL
    Jul 29, 2015. 05:30 PM | Likes Like |Link to Comment
  • Heard during Jetblue's earnings call [View news story]
    jljung85, with a growth rate of 7-9% it is obviously not. I don't understand your comment.
    Jul 28, 2015. 02:54 PM | Likes Like |Link to Comment
  • Heard during Jetblue's earnings call [View news story]
    Clearly any DOJ efforts related to collusion cant apply to JBLU since their growth is in the 7-9% the obviously are not playing the "capacity discipline" game. The real question is why they are in the fuel hedging game. Fuel hedging is an expensive gamble, not a good idea for JetBlue as it defocuses its efforts from operations.
    Jul 28, 2015. 02:00 PM | Likes Like |Link to Comment
  • JetBlue Airways EPS in-line, misses on revenue [View news story]
    A revenues mix of 0.6% is not meaningful. The analysts may have gotten it wrong.
    Jul 28, 2015. 12:45 PM | Likes Like |Link to Comment
  • JetBlue doubles bottom line in Q2 [View news story]
    User9061541, you spoke too fast! LOL

    BTW, one day fluctuations within the trading range are not usually worth commenting.
    Jul 28, 2015. 12:38 PM | Likes Like |Link to Comment
  • American Airlines Group: The Market's Most Hated Stock? [View article]
    Adam Levine-Weinberg, You make it seem like the calculation of a tax loss carry forward is subjective, it is not. There is no "reversing" transaction, instead profits are charged against the prior losses until used up.

    If you follow the airlines and accounting for airlines, there was a period a few years before consolidation when it was not going to be possible for the airlines to ever use the losses in the future, and the amounts became valueless and were written off. After consolidation, with profits reasonably assured, those write offs still existed in reality and were put back on the books. This is not subjective. The amount is known and disclosed for American and Delta. The use of these loss carry forwards goes on until they are used up, not some subjective date. The divergence is probably caused by poor analysis by the analysts. Lets also remember that there are doom and gloom analysts that are outliers in any scenario and they should be discounted. Most profitable airlines pay taxes in the 30-40% range, so it is just when the tax losses run out is the question. I have previously posted on this topic and at current profitability, the loss carry forwards get used up quickly, after which you have to account for the impact of taxes on pretax profit.
    Jul 27, 2015. 11:40 PM | Likes Like |Link to Comment
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