The same was said about Pan American World Airways and Trans World Airlines at one point of time.
Has AA been backed into a corner?
- Thread starter FWAAA
- Start date
The same was said about Pan American World Airways and Trans World Airlines at one point of time.
Exactly, and where are they now???
jimntx
Veteran
Well, we are so well thought of and respected that our stock closed on Friday at $6.84/share. US Airways, the one everyone has been predicting would be gone by now, closed at $7.21/share. What does that say about investors' "respect" for us?
It reveals nothing useful, let alone anything indicating investors' respect for AA or lack thereof. Nominal stock price is meaningless; the only measure that matters is market cap, and AMR's market cap is just about double that of US.
US has 161 million shares outstanding for a market cap of $1.16 billion.
AMR has almost 333 million shares outstanding for a total market cap of $2.28 billion, or almost double that of US.
That indicates that investors see AMR as worth almost twice as much as US.
I wouldn't say that investors have much respect for either US or AMR, but investors are willing to pay about twice as much for each percentage of ownership of AMR compared to US.
And 80% of AMR is owned by Institutional Investors, it used to be 97% but they dumped a bunch of stock onto the employees at a cost to the employees of around $400 a share (and going up) in concessions, plus the $5. Concessions that were used to pay back the banks Billions in loans, pay for fuel at inflated prices, give the airports on average 30% more for landing fees, etc etc.
If the airlines are so unprofitable why would Intitutional and Mutual funds want to retain majority shares? Why would they allow the company to pay bonuses to top managers when the company shows a loss? Maybe its because they know that the airlines generate the economic activity that makes their other investments profitable and that despite not showing profits its good to retain control, besides if the airlines did show profits then the airline workers, and there are a lot of them because its a very labor intensive industry, would just demand more. By making sure that the industry remains in a permanent state of crises it keeps wages down and allows those Institutions to reap their rewards though the companies the benifit from the airlines activity. Everyone is in on it except of course the airline workers who work for reduced wages. As our wages slide the oil companies can charge more for fuel, airports can increase their fees, parts suppliers can charge $1000 for a toilet seat, banks can charge higher interest rates etc etc.
Whether the airline is profitable or not should have zero impact on what we charge for our labor. It doesnt affect what any other party charges the airlines. Market rates are not determined by the profitability of the consumer. We've given up 40% of our real earnings and total revenue has soared yet they still wont show profits, yet Banks and other Institutions still make sure the industry still moves people and goods.
And I havent found one employee of either company who feels that the concessions they gave prior to their demise was a good investment.
MCI transplant
Veteran
- Joined
- Jun 4, 2003
- Messages
- 5,311
- Reaction score
- 584
<_< ------- It's one thing to give concessions when you know you are on the brink of Chapt. 7! ------But quit another, when the top 100 Management of your Company is receiving millions of unearned $$$ in bonus, when you may be loosing your home to foreclose!!!!
jimntx
Veteran
Oh, please. That is one twisted interpretation of corporate value if I ever read one. My MBA professors would quote Mark Twain upon hearing your interpretation. "There are lies. There are damn lies. And, then there are statistics."
If I issue a million shares of Trans-Dogpatch Air, make a public statement that they are worth $100 each and award them in equal amounts to the President, and the V-Ps of T-DA, does that make T-DA worth $100 million. No, it does not. It makes T-DA worth what investors are willing to pay for those shares on the open market times 1 million--probably nothing.
A share of AMR is worth $6.84 as of close of markets on Friday. A share of LCC is worth $7.21 as of close of markets on Friday. THAT is what investors think AMR is worth. A difference of $0.37/share. LCC is selling for over 5% more than AMR.
Besides, at the rate that the BOD is issuing shares to the executives--and remember, you said that doesn't have any effect on the company financials because they are just issuing new paper--the shares will continue to be diluted in value.
The institutional investors are propping up the stock price in an attempt to show their stakeholders that buying AMR paper was not a mistake. How do you explain the fact the UAL stock (for crissakes) is selling almost 3 times what a share of AMR is selling for? That makes their market cap over $3 billion. What about DL? CO? Come on. I'm sure you've got a BOD approved explanation that it is all smoke and mirrors. That real investors still think that AMR is worth more than those other airlines. As AMR sinks slowly in the West, you are really struggling to come up with an apologia for the execs. Maybe you should lie down and rest for awhile.
eolesen
Veteran
- Joined
- Jul 23, 2003
- Messages
- 15,959
- Reaction score
- 9,375
Guess this just shows there are just as many opinions on what is an indicator of investor value as there are investors...
There are a couple other indicators that I look at vs. just share price... churn in particular. Looking at the healthier airlines (ALK & LUV), my opinion is the lower the churn, the more faith investors have in holding the stock:
Even though they've got similar institutional ownership, the percentage of LCC shares offered on the market daily are higher than shares of AMR, but there are more shares of AMR being offered daily....
There are a couple other indicators that I look at vs. just share price... churn in particular. Looking at the healthier airlines (ALK & LUV), my opinion is the lower the churn, the more faith investors have in holding the stock:
Code:
Symbol AMR LCC DAL UAUA CAL ALK LUV
Volume 19.9 13.5 11.8 16.2 7.89 0.682 10.8
Shares 332.7 161 167.9 787.4 140 35.7 744
Churn 6% 8.4% 7% 2% 5.6% 2% 1.5%
InstOwn 78% 77% 83% 95% 95% 87% 83%Even though they've got similar institutional ownership, the percentage of LCC shares offered on the market daily are higher than shares of AMR, but there are more shares of AMR being offered daily....
jimntx
Veteran
Churn also indicates how much day traders are playing with a stock making short term gains on buying and selling large blocks the same day if the stock appears to be going up in price. Is that an indication of faith, lack thereof, or just good old-fashioned profit-taking?
eolesen
Veteran
- Joined
- Jul 23, 2003
- Messages
- 15,959
- Reaction score
- 9,375
Depends on the timeframe, Jim.
On any one given day/week, profit taking is likely. Over a couple quarters, it's more likely to indicate faith in the stock.
In between is anyone's guess.
I don't see AMR as a particularly attractive stock. I sold mine years ago when I thought it had peaked. And that's the last time I considered investing in an airline stock, or any individual stock for that matter...
On any one given day/week, profit taking is likely. Over a couple quarters, it's more likely to indicate faith in the stock.
In between is anyone's guess.
I don't see AMR as a particularly attractive stock. I sold mine years ago when I thought it had peaked. And that's the last time I considered investing in an airline stock, or any individual stock for that matter...
jimntx
Veteran
Show off! I still have my 292 stock options. I am one of the greedy ones. When the stock hit $40/shr, I said "When it gets to $45, I'm going to sell." Shortly after that it began it's precipitous fall to today's price. 🙁
Twisted? Uh-huh.
You're right, jimntx, and I apologize. You do know everything about corporate finance. Can't pull anything over on you.
After all, LUV closed at $11.91 on Friday, meaning that investors value Southwest Airlines less than they do DAL, which closed at $13.34 and less than UAUA, which closed at $18.53 and even less than CAL, which closed at $19.45. Alaska Airlines, however, appears to be worth much more than all of them, since its stock closed at $44.35. In fact, since ALK stock closed at $44.35, investors obviously respect it much more than, say, Microsoft, Yes, you are right, you can tell a lot about a company and the "respect" it garners from investors by simply looking at the price of one share of stock.
How to explain that UAL and DL and CO are valued higher than AMR? Easy. Investors have bid up the price of those airlines, believing that the mergers will eventually result in profits. AMR (and LCC) are currently priced at levels that reflect substantial bankruptcy risk, and Delta isn't.
That's really beneath you.
I apologize for pointing out your ignorance on the subject of stock price and shares outstanding. You clearly are the superior intellect and it was wrong of me to point out your invisible suit.
Similar threads
