Category Archives: Airlines

Looks Like AMR Has Another Case of the Mondays

Posted on by
Reply
Bloomberg

AMR shares really don’t like Mondays.

The airline’s shares are getting hit again today, down 6% in an echo of their Monday decline two weeks ago that took them to their lowest levels in eight years.

They earlier today triggered a trading halt by exchange circuit-breakers, two weeks after suffering through a series of halts as their shares plunged on ill-founded bankruptcy speculation.

Talks between management and pilots on a long-stalled new contract continue Monday, according to a union statement late Sunday, with negotiators set to brief labor leaders Tuesday.

There’s no statement from AMR.

The American Airlines parent was recently off 6.6% to $2.74, after last week’s 18% jump. Other US carriers are generally down 1% to 2% today, roughly in line with the broader market.

AMR Flies Again, on the Wings of Analyst Love

Posted on by
Reply
Bloomberg

Yesterday, shares of AMR were a burning wreck, like the first scene in the first episode of “Lost.” Today they’re up in the air again, like the first scene in the first episode of the last season of “Lost.”

AMR shares are up 21% today, following a 33% plunge yesterday. Delta and other airlines are bouncing back from big declines, too.

There’s no magic in this story, though (there wasn’t much magic to the last season of “Lost,” either, for that matter): Just a couple of analyst notes calling the market’s action yesterday overblown.

First came Avondale Partners, which took the bold step of upgrading AMR to “buy” from “hold:”

Press accounts suggesting an imminent Chapter 11 filing have crushed AMR shares. Although AMR Corp may lose $1.06 Billion this year, it should have no trouble meeting its obligations. While its losses may slightly exceed $1 billion, its depreciation should also exceed $1 billion. Thus, cash burn from operations should be minimal.

Separately, American has reported 3Q11 unrestricted cash of $4.2 billion. Additionally, we doubt AMR management would choose bankruptcy to force attractive labor contracts that they could not otherwise negotiate. Management has too proudly and too often touted their success in taking care of their people. At today’s prices, even with continuing losses if there is no AMR bankruptcy, simply a more normal overall stock market environment should bring a double or more to today’s investor.

Then came J.P. Morgan, which scratched its head over yesterday’s market panic, and the attendant pain it caused for other airline shares:

We  are  unaware  of  any  analysis  to  support  the  apparent market view that  an  AMR bankruptcy is near. Furthermore, we would view a potential filing as an industry (exAMR) positive, making Monday’s sympathy sell-off all the more puzzling to us.  We remain confident in AMR’s Chapter 11 avoidance prospects in the near term, though 2012/2013  liquidity  could  prove  challenging  under  our  conservative  (we  hope,  as we’re modeling for recession) base case assumptions.

Why  Monday? We  are  unaware  of  any  analysis  or  reasonable  catalyst  for Monday’s  sell-off  in  AMR.  Granted,  October  pilot  retirements  exceeded September’s  level, though  we  believe  the  exodus  was driven  in  large  part  by  the ability of retiring pilots to lock in pre-August equity values as part of their defined contribution plan. Most importantly,  early  retirements  do  not  cause  an immediate draw  on company cash, and  should not be  considered a trigger  for bankruptcy, in our view.

But what about that recession issue? Could AMR survive another one of those? J.P. Morgan thinks so. Probably, anyway:

Assuming a mild U.S. recession and $80 oil, we expect AMR to end 2012 with just under $2 billion of unrestricted cash (<10% of LTM rev), at which point things could prove challenging.  However, this assumes that  AMR  can  only  refinance  $565  million  of  2012′s  $1.9  billion  in  maturities (along  with  80%  of  aircraft  capex),  no  progress  with labor,  and that  spot jet  fuel remains at its current $2.85/gallon (with +/-$0.10 equal to +/-$300 million liquidity variance). Less conservative financing assumptions plus labor concessions and some fuel relief could easily improve year ending liquidity by over $1 billion.

AMR Shares Hit Nasty Air Pocket

Posted on by
Reply
Bloomberg

Shares of American Airlines parent AMR Corp. declined sharply Monday to their lowest level in more than two years on renewed concerns the troubled carrier was about to file for bankruptcy.

More than 200 pilots have retired from the Fort Worth, Texas, carrier in the last two months, compared with a typical monthly dozen, according to media reports. Pilots who retired last week were able to cash in company stock at its Aug. 1 price, which was 28% above Friday’s closing price.

“We are in a down market today, but the exceptional number of American pilots retiring is a sign that they want to protect their pensions and get out before a possible filing further [depresses] the stock price,” said Ray Neidl, an analyst with Maxim Group LLC. “I still believe that AMR management wants to avoid filing.”

No one from AMR or the Airline Pilots Association was available to comment. Shares of AMR recently fell 38% to $1.83. They’ve been halted five times already today after triggering circuit breakers.

Other airline shares were down sharply, too. United Continental was down 11%, Delta was down nearly 10%, Southwest was off nearly 7%.

Tiger Rises After Australian Ban Is Lifted

Posted on by
Reply

By Chunhan Wong

Tiger Airways is up 5.3% at 1.09 Singapore dollars (90 U.S. cents) after Australia’s aviation safety regulators lifted a ban on its flights there.

Tiger says its Australian operations will gradually resume from Friday, but will undergo consolidation. The low-cost carrier will cut its Australian fleet to eight jets from 10—with two planes redeployed to Singapore—as well as shut its Adelaide crew base and temporarily suspend its Avalon crew base.

In a note written before the ban was lifted, Morgan Stanley said “the decision to downsize or exit the Australian operation might not be a negative outcome for Tiger if the aircraft resources can be deployed on the more-profitable Asean markets than at the less profitable Australian operation.” The house has an “equalweight” call on Tiger, with a S$1.15 target.

UBS, which has a “sell” call and S$0.70 target on the carrier, wrote in a note before the ban was lifted that “the problem in Australia will inevitably affect bookings at Tiger Singapore, while any plan to move the Australian capacity into Singapore may result in overcapacity.”

Airline Shares Can’t Even Enjoy Falling Oil Prices

Posted on by
Reply
AP

Airline shares are taking a beating today, unable to enjoy plunging oil prices.

United Continental Holdings offered a downbeat outlook for second-quarter passenger revenue per available seat mile. American Airlines parent AMR had a grim revenue forecast of its own.

Which is shocking, considering the prices these companies have been charging lately and oft-told tales of planes stuffed full of people. Still, the quarter was rough, with a slowing economy and high oil prices.

Anyway, United shares are down nearly 9% as the closing bell approaches, on heavy volume. AMR is off nearly 7%. Delta is down 5%. This all despite crude oil ending the week down 2.4%. That gave the airlines a nice bump yesterday, but now they’re giving that back. AMR is nearly back to its lows for the year.

Airlines are dragging down the Dow transports, which are off 1.5%, pacing the broader market.

Airlines Loving the Oil Drop

Posted on by
Reply
AP

Airlines are the big winners of the IEA decision to open the oil reserve taps.

The reason: oil accounts for 40% of their operational costs, and they’ve been recently squeezed by high oil prices.

So today airline stocks are doing a victory lap: AMR, which owns American Airlines, is up 5.7% to $6.08. United Continental Holdings is 5.5% higher at $25.30. Delta Airlines  is up 4.8% at $10.05.

The Dow transports, meanwhile, are easily outperforming the rest of the market, down just 0.6%. They’re up 3% for the year now; just a couple of weeks ago they were in the red for the year.

Falling Oil Prices Boosting Optimism for Airlines

Posted on by
Reply
AFP/Getty Images
Rising?

More folks are starting to see positives in falling oil prices for the transports, the airlines in particular.

This morning, J.P. Morgan upped its views on AMR, operator of American Airlines, and JetBlue to overweight from neutral. It cites falling jet fuel prices as giving the industry a lift, estimating a $3.5 billion “benefit” on an annualized basis.

Over at High Frequency Economics, U.S. economist Ian Shepherdson digs through the May CPI data and finds that airfares have been rising more quickly than crude oil prices. “At least some of the upward pressure on airline fares will reverse in the wake of the downshift in oil prices, but not all of it,” he says. “Fares have risen significantly faster than the pace implied by oil prices over the past year or so, suggesting that some of the increase represents margin-building by the airlines.”

Shepherdson adds that capacity is down sharply and competition has been reduced by the United-Continental merger. He sees similar dynamics at play in the car industry. May be a bit more fodder for the Great Inflation Debate.

JetBlue, AMR, Delta, United Continental all looking higher this morning.

Lower Oil Price Fuels Airline Stocks

Posted on by
Reply
Associated Press

The overnight rout in commodity prices has brought comfort to at least one sector: After what’s been a pretty ugly year so far, there’s a little respite for airline stocks.

Carriers are rallying in Hong Kong on Friday, with China Eastern Airlines and China Southern Airlines up around 6%. Weighed down by concerns over oil prices, those two stocks have suffered some serious losses in 2011—7% and 12%, respectively. China Southern was down by as much as 35% in March. Cathay Pacific Airways Ltd. is up more than 3%, hitting a three-month high.

Continue reading on Exchange.

Airlines Struggling to Get Lift in an Up Market

Posted on by
Reply
AFP/Getty Images
Turbulence.

The stock market is mostly higher, boosted by a bushel of strong earnings. But one group is notably missing out on the good times: the Airlines.

Today, three airlines reported, Southwest, United Continental and Jet Blue. And none of them had much happy to say about the situation up in the air.

Southwest reported a 55% decline in net profit, citing (what else?) nasty weather and, naturally, higher fuel costs. Southwest distinguished itself by actually making some money ($5 million), a notoriously tough thing to do in the airline industry. Its shares are off about 1.4%.

United Continental, the biggest airline in the world, reported a wider first-quarter loss even as revenue beat expectations, a relatively rare combo that was caused by merger-related costs. UAL trimmed transpacific flights and Japanese market revenue dropped $30 million. China may be hot, but Japan remains the biggest Asian air market for U.S. carriers. UAL is down 1.2%.

JetBlue, like Southwest, managed to eke out a profit ($3 million), but it also said nasty weather didn’t help its quarter. Traffic climbed 7% and its average fare price rose to $150.02, its highest ever. The industry has been pushing up prices to deal with higher fuel prices, apparently with some success. JetBlue is down a bit less than 1%.

All three are members of the Dow Jones Transportation Average. The DJTA, boosted by FedEx and UPS, is up 0.8% despite the airline woes and outperforming the Dow Jones Industrial Average, up 0.2%.

Airlines Stocks Rising, Are Fare Hikes Sticking?

Posted on by
Reply
AFP/Getty Images
Airlines poised for take-off?

Here’s a curious move on another day of energy-induced difficulty: the airlines are moving higher.

The group, as measured by the American Stock Exchange airline index, is down about 10% since the Middle East North Africa (MENA) crisis started sending energy prices higher. The airline index is down about 16% from its early November peak.

But airline bulls believe that the carriers will have better luck passing on rising costs through fare increases than most think. Earlier today, we noted that airlines have managed to raise fares for the past four months. Maxim, a research shop, says its recent meetings with carriers such as US Airways and Allegiant indicate that demand for seats remains strong.

Coming into focus is the heavy summer travel season. If pricing remains firm, airlines could rally from depressed levels despite increasing energy costs. Maxim: “We were expecting a strong spring rally for airline stocks as we headed into the heavy travel season and we still expect it to happen unless fuel costs shut down economic growth.”

As for risks emanating from MENA? “The world is always full of potential events that could cause a panic, recession, even a depression. The world is never perfectly ‘safe,’” Maxim says. “If nuclear war broke out or if Saudi Arabia got into a nasty civil war, the risks to the US economic environment and the stock market would rise immeasurably.”

So, barring such apocalyptic conflagrations, airline stocks apparently are looking decent. In a down market, Delta is up 1%, United Continental is rallying 1.5%, AMR is up about 1%, Allegiant is up 0.5% and both U.S. Airways and JetBlue are marginally higher. Not everyone is in the green, though. Southwest is off 0.2% and the Amex Airline Index is off 0.3%.

Dow Jones Transports Sharply Lower, Dow Theorists Fret

Posted on by
Reply

The Dow Jones Transportation Average is on track to close below key support at the Jan. 28 low — 4967 — something it couldn’t do in two previous intraday attempts last week.

Such a slide would open up the downside for a test of the 4650-4700 level, which includes the November low and the 200-day moving average. DJTA down 137 at 4948 with 19 of the 20 components in the red, with airlines such as Delta (-4.5%), United Continental (-4.1%) and AMR (-2.7%) weighing heavily.

Dow Theorists believe the DJTA and DJIA should move in tandem, so a DJTA breakdown could foreshadow the same for the DJIA. DJIA down 130 at 12096 vs. the Jan. 28 low of 11803 and the 200-day moving average of 10975.