hammerhat
Well-Known Member
Will happen when coronavirus starts infecting crops!
Furlough Estimates
- Thread starter ZapBrannigan
- Start date
Will happen when coronavirus starts infecting crops!
JordanD
Here so I don’t get fined
No. They also get paid to talk about touching each other's bases and synergizing at really high volume in airports and hotel gyms.
So when you crack open a “crispy” one, it may very well mean a Scotch?
More than likely, with the Hanna’s, BreeAnn’s and Conners of the world, it’s probably still a White Claw.
AAPalmTree
Well-Known Member
I hope we don’t have to fight a war in the future. I didn’t know there were that many scared, fragile people in this country.
Cruise
Well-Known Member
Lol, that's your takeaway from all of this??? Step back people, we've got a keyboard hero on our hands.
When we do fight the next war, because that's apparently what we do here (~93% of our history), I trust you'll be the first in line. You know, since you're so brave and all. If you're too old to do so, I'd say talk is cheap.
AAPalmTree
Well-Known Member
Yes, that’s my takeaway. This sucks. I’m worried about everyone’s job/wellbeing but this too shall pass. We get through everything.
Why piss your pants and worry about the future no one knows about anyway? It may get really bad, it may bounce back.
Your worry ain’t gonna do you one ounce of good. Faith that it will all pass, will.
chrisreedrules
Master Blaster
So how do people see an AA bankruptcy playing out? Chapter 11 seems obvious. But could Chapter 7 be a possibility if this environment of no revenue continues?
AAPalmTree
Well-Known Member
Doubt it but, who knows. I think UAL is a lot closer to problems than AA. DL MGT seems pretty pessimistic as well.. AA has access to as much if not more money than anyone else. I honestly think everyone will come out ok, non legacy too. It’s all crystal ball stuff at this point though.
SlumTodd_Millionaire
Most Hated Member
Buffett owns a big enough chunk of American that liquidation isn’t an option. He’ll find a way. He always does. But chapter 11 is pretty much a given for all airlines.
Ecl!pse
Well-Known Member
Doesn't CH 11 effectively wipe him out as well? I'm kind of surprised he hasn't made a play yet on Southwest or Delta, trying to step in ahead of the government in case the government forces restructuring and wiping out of the equity. He's also under the 10% threshold for all 4 now, so he could theoretically cash out without the whole world knowing, since the reporting requirements are different once you're under the 10% threshold. I'm hoping he's not exiting the industry altogether, but it's now a possibility.
Looking at year-end 2019 financials, American and Delta went into this with the largest working capital deficits of all the airlines, Delta in the largest hole by far. They ran cash-lean to begin with, and 2x of their cash was from future flights that had not yet been performed ("Air Traffic Liability"). In most normal circumstances, this isn't a problem. However, in a world where demand goes nearly to zero and customers are requesting refunds across the board, or you're mass-cancelling across the board, it's a huge problem. Fortunately they had an investment grade balance sheet with a large unencumbered asset base going into this, so as long as the credit markets remain open, they shouldn't have trouble raising more cash.
American, on the other hand, is already leveraged to the gills with debt and I'm not sure has that much more borrowing capacity. A little over 1.25x of their cash was from future flights not yet performed, so they were in the 2nd largest hole of the airlines in this environment.
Spirit and Allegiant went into this mess with the best working capital situation, and as long as they can survive, I expect them to come out of this in the best position because of their low cost structure. Allegiant especially because their cost structure is so variable - parking airplanes has a significantly lower impact on their unit costs than it does on Spirit, because Spirit's cost structure is heavy on fixed costs and relies in part on extremely high utilization to keep unit costs down.
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chrisreedrules
Master Blaster
UAL isn’t in a great position but nowhere near as bad as AA. With the amount of debt that AA is going to have to take on in addition to their already 30B+ in debt they’re not going to be an investable company for years to come.
drunkenbeagle
Gang Member
Buying the debt is probably better than owning equity right now. Stock can go to zero, but the bondholders will effectively have control of the company via the bankruptcy court. When the bonds get restructured, they will also likely end up with a good chunk of the new stock that is issued in the reorganization.
Ecl!pse
Well-Known Member
Right, but he [Buffett] doesn't own the debt as of right now, at least that I'm aware of - only the equity. Seems like later this year we will get close to the point where he would want to either (1) inject more equity to save his existing stake, perhaps in exchange for greater control, or (2) buy the debt, so that he is part of the restructuring. But a CH 11 right now just sends him to zero, assuming of course that he's not slowly & quietly selling his stakes as we speak.
AAPalmTree
Well-Known Member
Airlines are never good investments. Are you saying American is in the worst shape based on debt alone?
Ecl!pse
Well-Known Member
Just factually speaking, American has the highest debt level in the US industry (forget the absolute debt amount - their relative debt amount is the highest in the industry), the worst margins in the US industry (and has for the past 3 years), and had a significant working capital hole starting 2020. Based on these factors, I would say it's a reasonable assessment that they are in the worst shape going into this.
drunkenbeagle
Gang Member
Assume these bonds will change hands. When the ratings go down, lots of pension funds and ETFs, etc, aren't allowed to own them anymore and have to sell. They are selling for much less than they did 2 months ago. Whoever is buying them isn't expecting to get paid in full. They are betting on a ~15-20% yield until they fail, and then getting 40 cents on the dollar, and probably some stock when a court orders it
Once the bond is in default, it is worth even less.
typhoonpilot
Well-Known Member
I'll chime in with my two cents since this thread was started by a fellow USAir furloughee.
A little bit of historical perspective. The "first" USAir furlough from 1991-1998 started in January, 1991 with 200+ pilots furloughed. Of those 200+, 25 were hired by United in 1991 and a few others by Delta. The second group of furloughs started in July, 1991 and it eventually went to over 700 pilots furloughed. All but a little over 300 were recalled within 6-9 months. The remaining "302" stayed on furlough until October, 1998. Back to United for a moment. United interviewed in early 1991 and hired a high percentage of the furloughees. They did not interview any more until 1995 and had a very strange 5% success rate for those that interviewed.
What is the point of that? Sometimes it is better to be out the door first while other companies are still hiring. If I was in the bottom 30% of a U.S. major airline I would be looking for a job right now. Given the ease of which one can get a leave of absence, it would be the wisest course of action to start looking for a job right now.
Sadly there are not many places hiring right now so this point might be moot.
Hopefully early outs; voluntary leaves of absence; and significantly higher retirement numbers than years past will help reduce the coming pain, but make no mistake there will be massive furloughs coming before the end of this year.
A little bit of historical perspective. The "first" USAir furlough from 1991-1998 started in January, 1991 with 200+ pilots furloughed. Of those 200+, 25 were hired by United in 1991 and a few others by Delta. The second group of furloughs started in July, 1991 and it eventually went to over 700 pilots furloughed. All but a little over 300 were recalled within 6-9 months. The remaining "302" stayed on furlough until October, 1998. Back to United for a moment. United interviewed in early 1991 and hired a high percentage of the furloughees. They did not interview any more until 1995 and had a very strange 5% success rate for those that interviewed.
What is the point of that? Sometimes it is better to be out the door first while other companies are still hiring. If I was in the bottom 30% of a U.S. major airline I would be looking for a job right now. Given the ease of which one can get a leave of absence, it would be the wisest course of action to start looking for a job right now.
Sadly there are not many places hiring right now so this point might be moot.
Hopefully early outs; voluntary leaves of absence; and significantly higher retirement numbers than years past will help reduce the coming pain, but make no mistake there will be massive furloughs coming before the end of this year.
drunkenbeagle
Gang Member
Mnuchin flexes muscles on airline coronavirus aid — a taste of what other companies may face
Treasury Department requests to airlines for coronavirus aid are a preview of what's to come for other industries.
This isn't encouraging. Basically, lose 60 cents for every dollar you take.
Kingairer
'Tiger Team' Member
Theres nowhere to run right now. Not military, not asia, not middle east, not another domestic carrier.