Why Investors Should Avoid American Airlines

john john

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http://seekingalpha.com/article/3784726-why-investors-should-avoid-american-airlines?app=1&auth_param=61qop%3A1b8a6vl%3A352b015c89b18b3fa956ea3dec1f3f64

Why Investors Should Avoid American Airlines

American Airlines ended the last quarter with a debt of over $20 billion as opposed to total cash of $8.9 billion. Although American is reporting record profits, the company's management has taken no step to reduce its large debt. Instead, the company has used the money to buy back shares, revamp its fleet, and compete against carriers like Spirit on price.
The carrier has already spent billions on buying new planes, share repurchases, and competing against Spirit. However, it is still not too late for the company to rectify its mistake. Given the volatility in oil prices, the company should start paying off its debt sooner rather than later.
Conclusion ???????Akshansh Gandhi
An engineering student who has an interest in stock market.
 
With interesst rates so low, there are just better uses of ones money than paying off debt right now, l;eet modirnization was an must. And they want to sit on lots of cash to weather the inevitable next down turn. But that said I expect they may start paying some off if the profits remain high.
 
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I follow and read Seeking Alpha and many that comment on AAL have a problem with the amount of debt carried.  I can see from an MBA perspective it would be better to refinance debt at historically low interest rates rather retire it.  Most on Seeking Alpha seem to fail to realize AAL is following a different strategy than Delta, the airline with which they love to compare AAL.  AAL's strategy appears to be: 1. Not hedging, but putting more efficient equipment in place.  2. Not retiring debt, but refinancing at record low rates.   3. Not coexisting with low fare carriers but taking advantage of low fuel input costs to match fares on overlapping routes.  Time will tell if this is the correct strategy or that of Delta and United.  
 
As long as interest on debt is tax deductible as a business expense, why should any company eliminate all debt.   Autofixer, I agree with you.  Let's wait and see.  Either the strategy pays off in the long run or it doesn't.  So far, we seem to be doing pretty well.
 
MetalMover said:
Gee, I thought bankruptcy was to reduce and restructure debt.
How cute!  I find that level of naivete refreshing in someone your age.  :lol: Bankruptcy (at least for most airlines) is to eliminate your benefits and trash your contract.  The only debt the company wanted to reduce or restructure (actually, think eliminate) was our pensions, and our retiree health benefits.
 
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Parker William Douglas
Chairman & Chief Executive Officer


Sale

12/16/2015

262,875

$43.20

$11.4M

 

Kirby J Scott
President


Sale

12/16/2015

187,768

$43.20

$8.1M

 

Kirby J Scott
President


Sale

4/29/2015

127,889

$50.05

$6.4M

 

Kerr Derek J
Chief Financial Officer & Executive Vice President


Sale

5/01/2015

119,200

$49.42

$5.9M

 

Johnson Stephen L


Sale

5/07/2015

119,200

$49.07

$5.8M

 

Isom Robert D Jr
Chief Operating Officer & EVP


Sale

12/16/2015

131,437

$43.20

$5.7M

 

Johnson Stephen L


Sale

12/16/2015

112,661

$43.20

$4.9M

 

Eberwein Elise R


Sale

12/16/2015

112,661

$43.20

$4.9M

 

Kerr Derek J
Chief Financial Officer & Executive Vice President


Sale

12/16/2015

112,661

$43.20

$4.9M

 

Isom Robert D Jr
Chief Operating Officer & EVP


Sale

5/01/2015

94,765

$49.18

$4.7M
Most get 1 meal they get millions! Stock price down 20% for the year! 4 billion dollar stock repurchase! Doug's other stock sales for December 2.5 million dollars and 1.8 million on December 1st! 15.7 million dollars for Doug in December!
 
I pulled this off Jetnet from comments under "Christmas Day meals"
How accurate, not sure. But if it is, someone had a VERY MERRY CHRISTMAS.
 
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And 700UW is now an expert in finance? Good to know.
 
The refinancing of debt instead of paying it down has been brought up by analysts often as potentially risky decision.
 
The other issue that a lot of analysts have questioned is the buying back of stock. The word from management was it was done to bring the AAL stock price up through the buy back but that hasn't happened. Here's a thought. The buy back puts more stock in the AAL coffers, stock is what is awarded to senior execs as compensation. Is the buy back just restocking the exec cash machine? Shown above by AANOTOK, they all sell stock so they can get paid whihc is normal but when they buy back stock and then issue it to themselves instead of paying down debt they aren't givin the apperance of running a finanicially healthy company. It sounds more like they are refilling the AAL ATM machine for their next withdrawal.
 
Parker doesn't want profit sharing because it would take about $1.5B away from his stock buy back fund that he is using to fund he and his buddies cash machine.
 
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The stock Parker is selling is rights he was given several years ago that were getting ready to expire.
 
And of course he wants the stock price as high as possible, he is now paid in stock.
 
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700UW said:
The stock Parker is selling is rights he was given several years ago that were getting ready to expire.
 
And of course he wants the stock price as high as possible, he is now paid in stock.
And as such pays no income tax, only Capital Gains Tax.  
 
let's see - everyone wants new planes, wants very high pay, wants debt paid down, increased benefits and low fares
 
where is all the cash coming from to do everything simultaneously
 
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jcw said:
let's see - everyone wants new planes, wants very high pay, wants debt paid down, increased benefits and low fares
 
where is all the cash coming from to do everything simultaneously
My pockets?
 
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