Probability of BK within the Airlines

SWAMECH

Senior
Apr 26, 2005
255
44
Holy crap guys. This is alarming, is it not? 75 Billion debt? Is this true?? If I remember correctly the last time they filed for BK they were a mere 32-35 Billion in debt. And now AA has a number (yes, more than a few) of law suits against them for many different reasons and from different entities, including the DOT, DOJ, and the suit on the NEA with JB that the Gov is suing over.
Just came across this article and was flabbergasted by how much debt AA has this time around (if all is true). Does this not put them at a 66%-75% chance of going BK again?? United at 52%, but has way more avenues they can go prior to hitting the BK button where AA does not any longer as they ate up all their options early on. I leave you all with the article below. Also don't forget the super increased pay for Pilots to keep flying at AA as well as at all the regional airlines that gets passed onto AA cost as well.
Prepare yourselves folks. It may never come to it, BUT, YOU never know, so prepare for the worse. Just like last time, NOBODY thought they would have filed for BK when they had all those BILIIONS 5-6 in cash and reserves last time, never say never, get prepared folks.


 

WeAAsles

Veteran
Oct 20, 2007
22,158
5,306
Holy crap guys. This is alarming, is it not? 75 Billion debt? Is this true?? If I remember correctly the last time they filed for BK they were a mere 32-35 Billion in debt. And now AA has a number (yes, more than a few) of law suits against them for many different reasons and from different entities, including the DOT, DOJ, and the suit on the NEA with JB that the Gov is suing over.
Just came across this article and was flabbergasted by how much debt AA has this time around (if all is true). Does this not put them at a 66%-75% chance of going BK again?? United at 52%, but has way more avenues they can go prior to hitting the BK button where AA does not any longer as they ate up all their options early on. I leave you all with the article below. Also don't forget the super increased pay for Pilots to keep flying at AA as well as at all the regional airlines that gets passed onto AA cost as well.
Prepare yourselves folks. It may never come to it, BUT, YOU never know, so prepare for the worse. Just like last time, NOBODY thought they would have filed for BK when they had all those BILIIONS 5-6 in cash and reserves last time, never say never, get prepared folks.



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WeAAsles

Veteran
Oct 20, 2007
22,158
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Although you are too deathly afraid to respond to what I present to you I’m still 100% positive that you read everything. Otherwise you wouldn’t be so angry and trying to constantly insult.

Do you know anything about Debt? Do you know there’s a difference between having good debt and bad debt? Good debt is borrowing used to generate income. Meaning in our business borrowing money to buy Airplanes. Bad debt is debt on the books that has no value. Such as old unused leases and old airplanes.

How many people do you know who have a Mortgage and a Car Loan? Is a Mortgage a good thing? Probably so if your payment is less than what you would spend to rent and you’re building equity. A car loan is also a good thing since it gets you to the place where you can get a paycheck to pay for your debt.

Many many many people in America today have more debt than what they’re worth. And most of them are in no way under any threat of Bankruptcy.

No I’m not at all concerned.

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WeAAsles

Veteran
Oct 20, 2007
22,158
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Fitch Ratings - Chicago - 03 Mar 2022: Fitch Ratings has affirmed the Issuer Default Ratings for American Airlines Group, Inc. and its main operating subsidiary, American Airlines, Inc. at 'B-'; the Rating Outlook is Stable.

The 'B-' rating is primarily driven by American's highly leveraged balance sheet. Debt burdens remain substantial due to capital raised to shore up liquidity during the pandemic along with heavy aircraft capital spending and shareholder returns prior to the pandemic.

Substantial Debt Burden: The company ended 2021 with a total debt balance (including lease obligations) of $46 billion, up nearly 40% from YE 2019 and equal to roughly 5.6x 2019 levels of EBITDAR. Fitch expects American to pare down cash on hand to de-lever its balance sheet over time. Nevertheless, Fitch expects leverage to remain at levels that constrain the rating at the current level into 2023.

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WeAAsles

Veteran
Oct 20, 2007
22,158
5,306

Comparing Liabilities and Debt​

The main difference between liability and debt is that liabilities encompass all of one’s financial obligations, while debt is only those obligations associated with outstanding loans. Thus, debt is a subset of liabilities. In addition, debt obligations require the debtor to pay back the principal on the loan plus interest, whereas there is no interest payment associated with most other types of liabilities. A third difference is that most liabilities are short-term in nature and so appear in the current liabilities section of the balance sheet, whereas debt may be reported in both the current liabilities and long-term liabilities sections of the balance sheet, depending on when loan payments are due. Finally, liabilities are measured with liquidity ratios to see if they can be paid when due, while debt is measured with leverage ratios to see if a firm is at risk of becoming insolvent.


 

eolesen

Veteran
Jul 23, 2003
15,740
9,348
Yeah, go on, you company cheerleader, you... ;)

15+ years away from AA has indeed given me a different view. AA's a financial time bomb waiting to go off.

They've got nothing of value to try and leverage aside maybe from that nifty new HDQ complex, and who wants bigger offices in a day of remote work?...

Nobody needs route authorities anymore like they did 20 years ago before Open Skies agreements, and they can't just sell off a regional to United or Delta.

Their only hope right now is to make sure there's enough cash coming in to service the existing debt service.

What will be left to do is try and get concessions from labor (And does anyone seriously think they'll cooperate?... ) and ask the banks to renegotiate the debt.

Problem is they just did all that in 2014. That's ages ago in normal life, but banks tend to remember longer than a Twitter timeline or Instagram story...
 
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SWAMECH

Senior
Apr 26, 2005
255
44
Yeah, go on, you company cheerleader, you... ;)

15+ years away from AA has indeed given me a different view. AA's a financial time bomb waiting to go off.

They've got nothing of value to try and leverage aside maybe from that nifty new HDQ complex, and who wants bigger offices in a day of remote work?...

Nobody needs route authorities anymore like they did 20 years ago before Open Skies agreements, and they can't just sell off a regional to United or Delta.

Their only hope right now is to make sure there's enough cash coming in to service the existing debt service.

What will be left to do is try and get concessions from labor (And does anyone seriously think they'll cooperate?... ) and ask the banks to renegotiate the debt.

Problem is they just did all that in 2014. That's ages ago in normal life, but banks tend to remember longer than a Twitter timeline or Instagram story...
I wasn't cheerleading here either way (positive or negative) just pointing out that the debt load is 2X plus what it was last time they filed. And yes, you are correct, they will ask for renego bank loans and reach out to unions for concessions as they force it upon the non-union folks yet again. And I am sure the twu/iam/asso will also, yet again agree with co request and give into concessions, they always have in the past instead of fighting for their members, just to still entail the very same layoffs and job losses, even after agreeing with the co to go the concessions route.
In hopes AA doesn't go the BK route again, it would just kill the unions that got back, at least some of what they loss last time...
 

WeAAsles

Veteran
Oct 20, 2007
22,158
5,306
Yeah, go on, you company cheerleader, you... ;)

15+ years away from AA has indeed given me a different view. AA's a financial time bomb waiting to go off.

They've got nothing of value to try and leverage aside maybe from that nifty new HDQ complex, and who wants bigger offices in a day of remote work?...

Nobody needs route authorities anymore like they did 20 years ago before Open Skies agreements, and they can't just sell off a regional to United or Delta.

Their only hope right now is to make sure there's enough cash coming in to service the existing debt service.

What will be left to do is try and get concessions from labor (And does anyone seriously think they'll cooperate?... ) and ask the banks to renegotiate the debt.

Problem is they just did all that in 2014. That's ages ago in normal life, but banks tend to remember longer than a Twitter timeline or Instagram story...

Airlines have always been on the precipice since deregulation. Absolutely not cheerleading for the Company although I am part of the team and have maybe another 8 years left to play.

Financial time bomb? Maybe? They certainly do need the World to come up all sunshine and rainbows for at least another decade to shore up their liabilities. I can’t argue that.

They did say in their earnings call that they own 200 of their planes fully. So they can and have been parking planes to raise prices. Not just because of the Pilot situation. Non reving today is just about ridiculous to even try.

3 mistakes they made in reinventing the Airline. (The New AA) The new campus hoping to mimic the Google and Apple set. We’re stuck with it now. The share buybacks were insane. They needed to reward shareholders but they went way overboard trying to bring up the share price. They should have done maybe about half the amount? And (I’m not complaining) they’ve been very generous with us employees. But they might have had no choice and we see that now particularly with trying to lure Pilots in. Competition (Delta, United, SWA) were raising their wages and benefits. And they’re doing it again it seems.

I agree on keeping liquidity high for awhile. How valuable is their Advantage Program and Credit Card branding? Oil is going back down? Will it stay down for awhile? Will people keep paying what they’re paying? Lots of questions.

Labor won’t cooperate. Too many left that remember “Pull Together, Win Together” And if employees were wise they would have spent the last few years trying to learn to live comfortably below their means just in case. Mortgage rates were very low and properties were still cheap 6 to 10 years ago. But we know the average person isn’t smart. So BK future? Maybe?

BTW only an idiot still in this industry would revel in that idea since if AA cuts those costs (Labor) the other Airlines will have no other choice but to eventually follow. 2003 concessions led to 2005 Bankruptcies and AA having Labor costs that were higher than their competitors.

Basically don’t know what else the Company could gain out of Bankruptcy? Their current debt is all for new things. They got rid of all their old debt in 2014. Their debt is also all pretty much low interest. They already renegotiated any higher interest debt. So do they go back to mortgaging their wholly owned planes?

What about too big to fail? Airlines, Railroads, and Trucking are a necessary commodity for a thriving economy. The Taxpayers have bailed out these industries now consistently. Is Capitalism really just an illusion? Should the Airlines and Railroads be re-regulated?

BTW E I was screaming it on here years ago during our negotiations. Take the higher pay and let the Company keep their profit. We had the opportunity to have wages 7% above what we have without any PS formulas. But our coworkers and especially the FA’s who were screaming that they wanted it were/are morons. Have to call it as I see it. (I told you so)
 
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WeAAsles

Veteran
Oct 20, 2007
22,158
5,306
Yeah, go on, you company cheerleader, you... ;)

15+ years away from AA has indeed given me a different view. AA's a financial time bomb waiting to go off.

They've got nothing of value to try and leverage aside maybe from that nifty new HDQ complex, and who wants bigger offices in a day of remote work?...

Nobody needs route authorities anymore like they did 20 years ago before Open Skies agreements, and they can't just sell off a regional to United or Delta.

Their only hope right now is to make sure there's enough cash coming in to service the existing debt service.

What will be left to do is try and get concessions from labor (And does anyone seriously think they'll cooperate?... ) and ask the banks to renegotiate the debt.

Problem is they just did all that in 2014. That's ages ago in normal life, but banks tend to remember longer than a Twitter timeline or Instagram story...

And sorry for the long Swamp/Swamech like response (with paragraphs though) but you gave me lots to chew on. 😁
 

eolesen

Veteran
Jul 23, 2003
15,740
9,348
200 unencumbered aircraft as a single data point is meaningless. Are these older 737s or A320's? Tapped out 767 and 777's? Newer A330 or 787s?

Unencumbered airplanes tend to be older airframes that may not have the same commercial value...

There also needs to be a market for those airplanes for that to be of any value, either in terms of someone willing to buy them and operate, or someone willing to take a chance on a sale/leaseback and not have AA come back in 12-36 months asking to renegotiate the lease rate or risk having the airplane returned outright.