Citigroup lifts price target for AMR stock

[Hopeful]

I do not follow your logic on this one.
FWAA

The way I figure it the average wage expenses for the last 3 years was 1.629 billion lower.

Now consider the following.

This year the company made more than 3 billion dollars.
I am doing this from memory so here we go.
Principal reduction of over 2.3 maybe 2.7 billion dollars.
Additional 700-900 million added to the cash reserves.
Plus 200+ profit.
All this is Hard cash ,there are no accounting tricks here.
When you pay down principal you do it with real money.
Be sure to notice that I am not critisizing the decisions to pay down debt or increase cash reserves,
as I believe that these are sound bussiness decisions.
Nevertheles,irregardless of accounting rules that allow corporations to claim these type
of transactions on their books,AA could not have possibly paid dept down dept,
or"put money in the bank" unless they had the cash.
Im I wrong?

In addition the company managed to put about 3.5 billion awayin the previous
years(500 mill restricted)since we had about 1 billion just before the pay cuts.
I believe they borrowed an additional 1/2 billion or so.

The profit last year is far more meaningfull if you take into account the price of oil.
If the oil had stayed 10-15 dollars lower AA's income would have increased even more dramaticaly.

Your thoughts guys?

My thoughts?

No matter what picture you paint regarding the better financial picture of AMR, you need to look at employee concessions first as the reason for improved performance. Then you need to look at the price of oil.

The bottom line is that there is no pain being shared on the part of the executive. None whatsoever.

 

[Bob Owens]

Bob asks

It's three transactions, but the fact still stands that there were 60M transactions where people bought and sold AMR shares, and either made or lost money. It really doesn't matter which exact shares traded hands how many times. The other fact of the matter is that with brokerage fees and taxes, you don't see too many people buy and sell NYSE listed shares on the same calendar day.

It matters because it was claimed that there were enough shares available below $2/share for AA employees to buy up as a means of getting their money back.

 

[Bob Owens]

I do not follow your logic on this one.

When the company approached the committee they said that they didnt care how they got the $360 million, either through concessions or headcount reductions. When the committee opted for headcount reductions the company/International withdrew that option.

The number to reach the savings figure from airctaft Maintenance was around 2200 mechanics I believe. The International pushed for the concessions instaed claiming that saving jobs was the number one priority, so maintenance got zero credit towards the Mainteance figure for headcount reduction. Well since 2003 maintenance headcount has been reduced at lot more than 2200. I would guess more than double that. So instead of getting say $360million in savings from mainteance they got closer to triple that,they got the concessions based upon maintaining the headcount plus double the equivelent number of heads needed to reach the savings figure without pay and benifit concessions.

This year the company made more than 3 billion dollars.
I am doing this from memory so here we go.
Principal reduction of over 2.3 maybe 2.7 billion dollars.
Additional 700-900 million added to the cash reserves.
Plus 200+ profit.

Exactly!

All this is Hard cash ,there are no accounting tricks here.
When you pay down principal you do it with real money.
Be sure to notice that I am not critisizing the decisions to pay down debt or increase cash reserves,
as I believe that these are sound bussiness decisions.

Exactly but if your debt goes down a couple of billion and your savings go up a few bilion dont cry poverty because you posted a loss for the year.Sure it may not be income from operations but most of the $3.5 billion in losses were not losses from operations either.

Nevertheles,regardless of accounting rules that allow corporations to claim these type
of transactions on their books,AA could not have possibly paid dept down dept,
or"put money in the bank" unless they had the cash.
Im I wrong?

Exactly!

In addition the company managed to put about 3.5 billion awayin the previous
years(500 mill restricted)since we had about 1 billion just before the pay cuts.
I believe they borrowed an additional 1/2 billion or so.

As far as can remember the company never had this much cash on hand, even during the boom times of the 90s. Covenants of conveience or not, $5.5 billion is a lot of money.

 

[FWAAA]

It matters because it was claimed that there were enough shares available below $2/share for AA employees to buy up as a means of getting their money back.

Nonsense, Mr Owens.

It was claimed that Hopeful could have easily bought enough stock to easily recoup the losses from the concessions. And while we're at it, enough for you, too.

Were there enough shares so that each and every employee could have easily bought at sub-$2 prices? Of course not, and not even you are so dense to allege that I said there were.

If I did make a post that causes you to erroneously think I said there were enough shares for everyone, please provide a link. Otherwise, stop embarrasing yourself.

You can fantasize all you want that the same few shares were traded back and forth all day during those $1.25 to $2.50 days if that helps you.

I doubt that your fantasy is correct, since the free-fall of AMR stock amidst the rumours of an impending bankruptcy filing (or at least the executives' threat of a Ch 11 filing) caused nearly everyone with any fiduciary obligations to dump their AMR holdings. And that represented nearly every share of the roughly 158 million outstanding shares (early 2003). FM already provided the data (that I was too lazy to post) showing that the volume was in the tens of millions of shares.

If you're managing someone else's money (think mutual fund or trustee or similar), you don't want to be caught holding a stock when it files for Ch 11 - trust me on that one. Lawyers have been very successful in lawsuits against fiduciaries who were too stupid to sell their holdings in such companies. It's ok to lose money in the stock market, unless it's because you rode the stock all the way to zero.

It's too bad the TULE mechanics (and others living in low-cost of living areas) didn't have enough savings (or borrowing capacity) to help themselves. Informer posted the other day that they went from about $80k - $90k or more (with the overtime and other incentive pay) to their low-pay status of about $65k today. My guess is too many RVs, boats, dually diesel pickups, etc.

For that matter, it's too bad you didn't have enough cash in the bank to take the gamble. Very common problem these days. As I've posted before, I wish you guys made more money than you do. But then again, I wish everyone who doesn't have enough had more.

 

[limit]

My thoughts?

No matter what picture you paint regarding the better financial picture of AMR, you need to look at employee concessions first as the reason for improved performance. Then you need to look at the price of oil.

The bottom line is that there is no pain being shared on the part of the executive. None whatsoever.

Ok, let me try again.
Despite the fact that the price of oil greatly suppressed profits at AA,and even if the employees had not taken a 1.629 billion in paycuts and head count reductions ,the company would have made a profit of way over 1 billion in 2006.
One more time.
If you guys were making in 2006 what you were making in 2002 and nobody had been layed off, the company would have made alot more than a billion profit in 2006.
If oil was at 2003-2005 levels they would have made hundreds of millions more over that.

If in 2007 AA comes anywhere near matching their 2006 results they would have managed (including cash reserves acumulated in 03-05)to more than erase the loses they claim to have had from 2001 to 2005.

 

[FWAAA]

Ok, let me try again.
Despite the fact that the price of oil greatly suppressed profits at AA,and even if the employees had not taken a 1.629 billion in paycuts and head count reductions ,the company would have made a profit of way over 1 billion in 2006.
One more time.
If you guys were making in 2006 what you were making in 2002 and nobody had been layed off, the company would have made alot more than a billion profit in 2006.
If oil was at 2003-2005 levels they would have made hundreds of millions more over that.

If in 2007 AA comes anywhere near matching their 2006 results they would have managed (including cash reserves acumulated in 03-05)to more than erase the loses they claim to have had from 2001 to 2005.

This entire post of yours makes no sense. AMR's 2006 profit was $231 million. Not $3 billion as you earlier posted and not over one billion as you state in the first paragraph of this post.

I think you may be confusing postive cash flow with net profits, but I'm not certain.

 

[Hopeful]

This entire post of yours makes no sense. AMR's 2006 profit was $231 million. Not $3 billion as you earlier posted and not over one billion as you state in the first paragraph of this post.

I think you may be confusing postive cash flow with net profits, but I'm not certain.

Again, never mind all the facts and figures. The bottom line is that employees sacrificed while executives have not!

 

[limit]

This entire post of yours makes no sense. AMR's 2006 profit was $231 million. Not $3 billion as you earlier posted and not over one billion as you state in the first paragraph of this post.

I think you may be confusing postive cash flow with net profits, but I'm not certain.

Please tell us where did AA find the cash to pay down debt and accoumulate cash.
Did they print it?
Positive cash flow or not, they made the profit and decided to use the profit a certain way.That is when it stopped being profit and became positive cash flow.
Please tell us,if they had decided to pay down debt by an additional 200+ million ,would the profit have changed or not.
They made more than 3 billion and chose to use it a certain way.At this point I am glad they did.

 

[FWAAA]

Again, never mind all the facts and figures. The bottom line is that employees sacrificed while executives have not!

I kinda agree with you.

Even if they took paycuts of 17.5% in 2003, those paycuts didn't have the same impact as the cuts forced on the mechanics (and other lower-paid employees). The executives didn't feel any real financial pain. That's always gonna be the case when your base is $160k or $200k instead of $80k (number posted by Informer the other day).

Still, management's pay has always been much lower than at many other Fortune 500 companies. Over the years they struck deals like the ill-conceived incentive pay plans about which you and your co-workers are now incensed in exchange for lower base pay. Ill-conceived because the AMR stock price is much too prominent in the calculation of whether their incentive plan should pay off.

Now, all of a sudden, what nobody thought would ever happen has indeed happened: The stock hit $40/share despite being around $2 (and even falling to $1.25 briefly) in March, 2003. Who the hell thought it would ever hit $40 again? At least none of your worthless union leaders did.

Anyway - those greedy bastards in management are gonna respond thusly:

Look, we provided you overpaid slugs (underpaid worker-bees) something like 38 million stock options worth (just the other day) $35 profit each ($40 - $5 = $35). Total value of $1.33 billion. Not our fault you fools sold too soon. And when AMR hits a hundred a share, you will have collectively missed out on $3.7 billion of profit. And you've got the nerve to fault us for collecting on our long-overdue incentive "bonus" payments of a couple hundred million? We've been underpaid for many years. So go to Hell, you ignorant fools.

You know - I don't work for AMR in any capacity. Not greedy management bastard nor underpaid worker-bee. But I can certainly see both sides of this one.

Please tell us where did AA find the cash to pay down debt and accoumulate cash.
Did they print it?
Positive cash flow or not, they made the profit and decided to use the profit a certain way.That is when it stopped being profit and became positive cash flow.
Please tell us,if they had decided to pay down debt by an additional 200+ million ,would the profit have changed or not.
They made more than 3 billion and chose to use it a certain way.At this point I am glad they did.

I'm having a hard time finding anything in the latest financial release supporting your claim that AMR "made more than 3 billion." All I find is $231 million of profit.

Could you help me out by pointing out the $3 billion in the document linked below?

Here's the 2006 earnings release: http://www.shareholder.com/aa/releaseDetai...eleaseID=225874

 

[limit]

So you dont know how to answer what I asked you?
Or would you rather stay as far from it as possible.
Maybe we could talk about spring training?

 

[eolesen]

Please tell us where did AA find the cash to pay down debt and accoumulate cash.

1) Higher ticket prices and higher passenger traffic... I lost track of how many fare increases there were during 2005 and 2006, and mainline load factors have climbed thru the roof, rising from 72.8% for all of 2003 to 80.1% for 2006.

You might not find that all too interesting, but coupled with a higher yield per seat mile, it has made all the difference between just breaking even and being in the black.

2) New equity. AMR has raised around $1.1B just from issuing new shares of stock, with 13M shares having been issued this week, 15M shares issued May 2006, and 13M shares issued Nov 2005. There was also a $300M convertable bond issue in February 2004.

3) Non-salary cost reductions. AMR has renegotiated a lot of contracts over the past four years, and jettisoned a lot of excess assets and real estate.

So while some of AMR's profitability does come from having lower employee expenses (both thru wage cuts and reduced headcount), it's certainly not the only source.

 

[limit]

1) Higher ticket prices and higher passenger traffic... I lost track of how many fare increases there were during 2005 and 2006, and mainline load factors have climbed thru the roof, rising from 72.8% for all of 2003 to 80.1% for 2006.

You might not find that all too interesting, but coupled with a higher yield per seat mile, it has made all the difference between just breaking even and being in the black.

2) New equity. AMR has raised around $1.1B just from issuing new shares of stock, with 13M shares having been issued this week, 15M shares issued May 2006, and 13M shares issued Nov 2005. There was also a $300M convertable bond issue in February 2004.

3) Non-salary cost reductions. AMR has renegotiated a lot of contracts over the past four years, and jettisoned a lot of excess assets and real estate.

So while some of AMR's profitability does come from having lower employee expenses (both thru wage cuts and reduced headcount), it's certainly not the only source.

I never said otherwise.
I only pointed out that the company had actually made alot more money than people think it has.
Most of it from operations, not stock issue.
This weeks issue will be 2007 money and because of stock price the largest chunk of money that was generated this way.