AMR Corp

[flyingmaniac]

I have stock in the AMR Corp. (don't ask why) and I received the 2008 Annual Report. Looking through it really surprised me how much in debt the airline is.

"We incurred significant losses in 2001-2005, which materially weakened our financial condition. We lost $857 million in 2005, $751 million in 2004, $1.2 billion in 2003, $3.5 billion in 2002 and $1.8 billion in 2001. Although we earned a profit of $504 million in 2007 and $231 million in 2006, we lost $2.1 billion in 2008. Because of our weakened financial condition, we are vulnerable both to the impact of unexpected events (such as terrorist attacks or spike in jet fuel prices) and to deterioration of the operating environment (such as a deepening of the current global recession or significant increased competition)."

Now my stock has risen within the last month, but this company is in a pretty dire situation, if you ask me.

Discuss.

 

[SpiraMirabilis]

Nothing in that paragraph talks about debt, really. AMR did have a huge cash pile for a while.

 

[CoffeeIcePapers]

Sell? Take the profit and run.

 

[kiloalpha]

I used to have AMR. Bought it at $29, watched it yo-yo, sold at $25 and cut my losses. About 2 months after I sold it went to $10.

 

[wheelsup]

Somewhere I heard about an American pilot who had pretty much lost everything after 9/11. He loaded up his CC's, home equity line of credit, etc. and bought AA stock at the lowest it had been in a long long time. I guess his reasoning was that if AA went under after 9/11 he'd lose it all anyway in bankruptcy so he gambled. I guess he came out swinging because the stock did recover. Kinda funny.

I bought $XX,XXX in XJT stock right after they signed their agreement with CAL. Bought it at $2.00 or so, it rose to $2.20 that morning and then started DROPPING. Luckily I sold it for a slight loss when I saw that. It ended up around $0.15. That would've hurt.

 

[drunkenbeagle]

Now my stock has risen within the last month, but this company is in a pretty dire situation, if you ask me.

Discuss.

The airlines have all been in dire straits since deregulation.

Airline stocks are essentially trading vehicles, not investments. Over the long term, none of them make money (exception is SWA).

Traders use them because they tend to move opposite to oil prices. No one expects them to be profitable in the long run.

If AMR were to make a 10 billion dollar profit next year, what do you think would happen? Would it be paid as a dividend to shareholders? Not a chance. The unions would demand a big chunk of those profits. When the next downturn hits, the airline will still have the higher labor contract cost, and the shareholders get killed. That's the way it has worked for 25 years now.

If your livelihood is at all associated with aviation, I wouldn't put a dime into airline stocks - you already have enough exposure to them. I'd buy oil companies, they are a much better hedge for you. When you get furloghed from high fuel prices, at least you can be happy that your Exxon stock is up 100%...

 

[RICHARD5]

I think it was 2005 when I tracked AMR from <$8 to over $25 in less than one year. Nice present for me.

From the OP I got the feeling that it's best to sell before it hits rock bottom (cut your losses). My experiences have shown that it's a good time to buy when it's dropping. I guess it's because I ignore short term.