You know, Wall Street really doesn't like the American Airlines business plan
American Airlines executives have said the carrier plans to increase departures from its five cornerstone cities by 20 percent over the next five years.
Some ailrine analysts don't like this idea, if the words "cancerous," "destabilize" and "toxic" would indicate such. The reason, simply, is that anything that adds capacity to the industry could hurt pricing and profits.
"We view AMR's restructuring plan, founded on the idea of 'growth and renewal,' as unlikely to succeed and worse yet, potentially a cancerous presence to an industry that has reformed itself to respectability on the premise of one key theme: capacity control," airline analyst Hunter Keay of Wolfe Trahan wrote in a report Friday.
In a March 6 report that pondered a possible US Airways-AMR merger, airline analyst Daniel McKenzie of Rodman & Renshaw had unkind words about AMR's plans.
"Naturally, we haven't seen AMR's complete restructuring plan, but based on what we have seen, we're concluding AMR's growth of 20% over 5 years is enough to destabilize industry pricing (e.g. capacity drives pricing; and growth + highly unstable & presumably higher fuel prices = toxic combination)," McKenzie wrote.
The 20 percent number came out Feb. 1 when American Airlines outlined all the changes it wants to reorganize its affairs.
Another new factoid emerged in passing on March 16 when AMR/American chairman and CEO Tom Horton spoke on the pilots' hotline. In talking about American's airplane orders, Horton mentioned AMR's order for 16 Boeing 777-300ERs.
Sixteen? The last public disclosure in AMR's 2011 10-K, released Feb. 15, was that American had ordered 10 of those aircraft, not 16.
When those airplanes begin arriving in late 2012, they'll be the biggest aircraft in American's fleet.
Hunter Keay also caught that update on the 777-300s. He followed up his above comment about the importance of capacity control for airlines with this:
"AMR's plan flies in the face of this basic principle, and stubborn adherence to it represents a serious threat to slowly improving industry fundamentals, in our view.
"Despite rising fuel prices AMR is now increasing its capital commitments even further (note AMR is taking its first B777-300ER this year, and we believe AMR does not have financing in place).
"Though airlines have historically been susceptible to non-free market forces (too many people willing to give airlines money), the U.S. airline industry is still a deregulated one. Without a rational business plan in place, suboptimal business plans will still fail.
"But we fear what might happen in the interim while AMR fights an uphill battle and claws for market share."
American Airlines executives have said the carrier plans to increase departures from its five cornerstone cities by 20 percent over the next five years.
Some ailrine analysts don't like this idea, if the words "cancerous," "destabilize" and "toxic" would indicate such. The reason, simply, is that anything that adds capacity to the industry could hurt pricing and profits.
"We view AMR's restructuring plan, founded on the idea of 'growth and renewal,' as unlikely to succeed and worse yet, potentially a cancerous presence to an industry that has reformed itself to respectability on the premise of one key theme: capacity control," airline analyst Hunter Keay of Wolfe Trahan wrote in a report Friday.
In a March 6 report that pondered a possible US Airways-AMR merger, airline analyst Daniel McKenzie of Rodman & Renshaw had unkind words about AMR's plans.
"Naturally, we haven't seen AMR's complete restructuring plan, but based on what we have seen, we're concluding AMR's growth of 20% over 5 years is enough to destabilize industry pricing (e.g. capacity drives pricing; and growth + highly unstable & presumably higher fuel prices = toxic combination)," McKenzie wrote.
The 20 percent number came out Feb. 1 when American Airlines outlined all the changes it wants to reorganize its affairs.
Another new factoid emerged in passing on March 16 when AMR/American chairman and CEO Tom Horton spoke on the pilots' hotline. In talking about American's airplane orders, Horton mentioned AMR's order for 16 Boeing 777-300ERs.
Sixteen? The last public disclosure in AMR's 2011 10-K, released Feb. 15, was that American had ordered 10 of those aircraft, not 16.
When those airplanes begin arriving in late 2012, they'll be the biggest aircraft in American's fleet.
Hunter Keay also caught that update on the 777-300s. He followed up his above comment about the importance of capacity control for airlines with this:
"AMR's plan flies in the face of this basic principle, and stubborn adherence to it represents a serious threat to slowly improving industry fundamentals, in our view.
"Despite rising fuel prices AMR is now increasing its capital commitments even further (note AMR is taking its first B777-300ER this year, and we believe AMR does not have financing in place).
"Though airlines have historically been susceptible to non-free market forces (too many people willing to give airlines money), the U.S. airline industry is still a deregulated one. Without a rational business plan in place, suboptimal business plans will still fail.
"But we fear what might happen in the interim while AMR fights an uphill battle and claws for market share."
