American Airlines Group Reports Record Fourth Quarter and Full Year Profit

[WeAAsles]

 
 
Than Delta. United is doing the same thing AA is doing. 
So far the market prefers Delta's methods. 
 

I agree with this. Pretty much everyone expect PRASM to flatten out and start going up and expecting fuel to stay low or go lower. 
 
Of course he thinks the market is crazy. They aren't buying into the AA/UA way of adding a bunch of new planes and refinancing debt. I don't blame them, over the long term out look(as I have said before) I believe DL is going to be a more nimble company. they won't have a brand new fleet that if the market goes bad they have to park (and pay payments or leases while they are parked) and will still have a huge debt load. 

Thanks for the congrats and insights Dawg. I was wondering your thoughts on this? AA is acquiring all of these new planes. I remember when the order was placed the benefits they were touting were in fuel savings because of the lightweight composite materials. They averaged the savings at about 30% per aircraft. Aside from that there also (sorry) will be a maintenance savings on each of those new aircraft. 

If the economy does go south eventually (of course it will) isn't Delta possibly at a disadvantage for not taking advantage of low interest rates now if those go up? Delta is eventually going to have to get new airplanes. 

AA did pay off all of their high interest debt. And I'm not saying what Delta is doing is wrong. Just seems like a different approach. Which company in your opinion is thinking more long term over the other?

 

[WeAAsles]

So far forward looking bookings are very strong. So for now it looks like you are wrong. 
 
Also if fuel stays this low a little dip in the economy isn't going hurt airlines like it would have a few years ago.

Two items the Market hasn't seemed to figure out yet. They're still scared witless against overcapacity.

 

[topDawg]

Thanks for the congrats and insights Dawg.

anytime
 

I was wondering your thoughts on this? AA is acquiring all of these new planes.

I am not a fan. I agree with Richard Anderson, airplanes are a 30 year investment. I don't like replacing things just to replace them. 
It made more sense when fuel was really high, but now that its down and looking to stay down I would prefer AA defer some of these airplanes and focus that capex on paying off debt and its pension obligations 
 

I remember when the order was placed the benefits they were touting were in fuel savings because of the lightweight composite materials. They averaged the savings at about 30% per aircraft. Aside from that there also (sorry) will be a maintenance savings on each of those new aircraft.

Meh you get a maintenance holiday for sure but it takes about 18 months for an airplane to start to lose that holiday. So its really not anything to be sorry about because for the most part you are going to end up with planes in the bays pretty quickly. Sure it might be fore 5 day check but once the first one starts they will keep rolling in after that. On the engine side you start to see them come in for hospital checks pretty quickly, and the way Delta does some of its engines they come in for de-ratings as they age. (example, a lot of our PW2000s (757 motor) start the TBO cycle as a 2040 then 2/3s of the way in the cycle they come in and become 2037s to extend the cycle a little bit.) The LRUs and such will also start coming in for visits and overhauls somewhat quickly, and of course stuff breaks even on new planes and that keeps volume up.
 
 On top of that you are paying lease payments or paying off the aircraft. IMO it ends up being about a wash, but as I said before, DL can cut capacity quickly by parking, for example, about 50 M88s that are owned and paid for. AA will have to park newer Airbuses and 737s that they are still paying for.  
Not a fan of paying for an airplane to sit out at VCV.

If the economy does go south eventually (of course it will) isn't Delta possibly at a disadvantage for not taking advantage of low interest rates now if those go up? Delta is eventually going to have to get new airplanes.

I think you have to find a balance. I feel like Delta has found that balance, remember while we will have an older fleet we are also taking 737s 333s and A321s to park the oldest of the planes. (and soon, A350s, A339s and 787s)
We are also going after reliability, that is one reason they are dumping 747s as fast as they can, the fleet reliability is complete crap. (and FWIW it is the most outsourced plane in the fleet)
So yes, DL will miss out on lower interest rates in theory but are you going out and buying a new car just because rates are low? probably not. 
 

AA did pay off all of their high interest debt. And I'm not saying what Delta is doing is wrong. Just seems like a different approach. Which company in your opinion is thinking more long term over the other?

AA has more or less just be refinancing all of its debt to lower rates. Thats fine and well, but my thoughts on it is very simple. In my life what do I want when my cash flow gets restricted, to be paying of the credit card that has a "great and low" interest rate or to simply not pay any credit card bills? We played the refinance game before but at the end of the day when PRASM falls and revenue drops, I feel like Delta will be able to handle more than AA.  
 
In the long term outlook from today I like Delta more. They are setting the fleet up so that they wont have to go out and buy 300 narrow bodies at one time, paying off debt and now paying off the pension. I would like for DL to put a little more cash on the books (1-2B) however.   
Now one thing that is a key to remember, Delta is almost 10 years "ahead" of AA. AA just exited BK and still hasn't finished it's merger. DL left BK in 2008. So they have had a big time head start on making these moves. 
One other thing I would like to see from American is try to find revenue outside of the true "airline" side. As I have said before, TechOps adds nearly 1 billion in revenue to the bottom line for Delta. There is no reason that one of the largest 737 operators, A32S operators, 777 operators can't be bringing in money for other airlines. I don't expect Parker to do work in-house for other airlines that he doesn't have the volume to support, I don't think that can be done in this industry, but IMO he is a fool for not trying to do CFM56-5B, V2500, GEnX and even GE90 work in-house and for other airlines. In the engine market especially airlines still pay for quality. Engine and component margins at Delta are very high, I have heard double digit for some of it. High single digit for the rest. Stupid to walk away from that kind of revenue. (just a note, I think between DL/AA/UA the fact that V2500s have to go to Europe or Asia/Australia for overhaul is crazy and sad.)     
 

Two items the Market hasn't seemed to figure out yet. They're still scared witless against overcapacity.

and they should be. This industry hasn't proven anything to anyone yet. 2-3 years of great profits isn't something new to the industry, the key is going to be how do they handle the long term.  
 

 

[Black Magic]

History making profits coming in from left and right. Too bad for the workers they can just read about but not touch any of that money. Don't blame me I told my workgroup to vote NO!! It truly is a tragedy how dumb these union contract negotiators are. They took the first offer on the table without even trying to counter. Doug and gang would have certainly paid more to the labor groups to get the merger done. You really can't fix stupid!