| From: Moonray | 7/13/2021 11:09:42 AM | | | | | | Boeing cuts 787 Dreamliner production, delivery target after new flaw found
* Boeing has already paused delivery of its 787 Dreamliners as the
FAA evaluates how the company inspects the planes.
* Further delivery delays would deprive Boeing of cash since most
of an aircraft’s price is paid when they’re handed over to customers.
* The FAA said the issue “poses no immediate threat to flight safety.”
More at: cnbc.com
__Symbol Current Change Chg %|
UAL
| 49.10 | -1.52 | -3.00% | | | SKYW
| 41.54 | -1.12 | -2.63% | | | SAVE
| 28.64 | -0.78 | -2.65% | | | LUV
| 52.00 | -0.98 | -1.85% | | | JBLU
| 16.03 | -0.47 | -2.85% | | | HA
| 22.30 | -0.59 | -2.58% | | | DAL
| 41.97 | -0.88 | -2.04% | | | ALK
| 58.15 | -1.52 | -2.56% | | | AAL
| 20.30 | -0.54 | -2.59% | | | JETS
| 23.45 | -0.44 | -1.84% | | |
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| From: Sam | 7/14/2021 10:01:50 AM | | | | | | How CEOs Think the Covid Crisis Will Shape Flying
DOW JONES & COMPANY, INC. 9:00 AM ET 7/14/2021
Symbol Last Price Change | LUV | 52.03 | +0.46 (+0.892%) | | QUOTES AS OF 10:00:51 AM ET 07/14/2021 |
To run an airline is to manage crisis. And for two of the longest-serving CEOs in the airline business, lessons learned after the 2001 terrorist attacks guided decisions during the current pandemic.
Gary Kelly and Doug Parker, chief executives of Southwest(LUV) and American airlines, respectively, have found their businesses turned upside down repeatedly. Each time they've found ways to grow out of the disruption. Mr. Kelly will have been CEO for 18 years when he retires early next year; Mr. Parker will have been a major airline CEO for 20 years come September.
Both sat for interviews to discuss the toll that multiple crises take and what's ahead for airlines and their customers.
"I did find myself harkening back to the 9-11 experience. I think that gave me as much confidence as anything -- I know we are going to get through this," says Mr. Parker, who had become CEO of America West Airlines days before the Sept. 11 terrorist attacks and fought to save that small airline.
He merged America West into US Airways and then into American to create the world's largest carrier. He's the only person to have been a major U.S. airline CEO for both 9-11 and the pandemic.
The lesson he's learned from past crises: "What's going to matter when this passes is how we treated our team, how we treated our customers."
To Mr. Parker, that meant paying refunds to customers when competitors changed ticket rules, fudged schedules and illegally denied refunds to conserve cash, and not cutting hours of employees when airlines received federal funds to pay workers.
Customers have had plenty of issues with American's operation this summer and in prior years. Many other carriers, including Southwest(LUV), have had a rocky restart coping with a travel surge.
For millions of travelers, the complex rush to add flights has been key to pandemic recovery and reconnection. At the same time, the pain points are prominent: delays and cancellations from severe weather, staffing problems and limited capacity to fly customers on holiday weekends. There has been poor service from a lack of workers in areas ranging from reservations to wheelchair pushers, and tension in the cabin with disruptive passengers and uncomfortable masks.
American posted 2020 losses of $8.9 billion; Southwest(LUV) had losses last year of $3.1 billion.
Mr. Kelly hopes he's managed through his final airline crisis: He announced in June that he'll retire as CEO early next year but remain executive chairman at least until 2026.
His may be one of several significant executive departures in the airline business in the coming months. (Mr. Parker hasn't announced any plans.) There are rumblings that several No. 1s and No. 2s at airlines may depart within the next year. Some airlines have already seen CFOs and others resign for more lucrative tech gigs.
Mr. Parker notes that severe crises can test even the best executives. "I think there are some people who are built for this and some people aren't. You'll see people join the business and go through something like this and then say, 'This business isn't for me.' Those of us who have been through several of them, this is what we do," he says.
Mr. Kelly, 66 years old, says the restructuring of the airline industry with bankruptcies and mergers at other airlines following 9-11 created opportunity for Southwest(LUV) that he pounced on when he took the CEO reins in 2004.
Southwest (LUV) found creative ways to expand its footprint in Chicago and Dallas, enabling huge expansion and a much stronger route network. His move to buy up 10 years' worth of jet fuel at low prices helped keep fares down and powered one of its most rapid periods of growth.
The pandemic means a big airline-industry reset and the opportunity to remake networks that will change travel for years to come. With hourly trips between key business destinations not needed, Southwest(LUV) had airplanes available to add 18 new destinations during the pandemic. Mr. Kelly says they'll stay.
"We've accelerated a lot of dots on the map here during the pandemic that might have taken us 20 years before we would have ultimately had the airplanes to add all these markets," he says.
Through its history, Southwest(LUV) has made its biggest moves in a crisis. "Scenarios like this create awesome opportunities," Mr. Kelly says.
Mr. Kelly says the pandemic probably delayed his retirement announcement. He wasn't going to leave during a crisis. But now the company's finances have stabilized -- it was losing $20 million a day or more during the worst days of the pandemic -- and though he says he has "plenty of gas left in the tank," the timing seemed right.
March 2020 was "the longest month of my life," he says. "Every day was substantially worse than the previous day. And you just couldn't come to grips with how can this happen and where is it going to end?"
When he went to his annual physical, Mr. Kelly says he admitted to his doctor for the first time that his stress level was high.
The airline business is tougher to manage than most. There are very high fixed costs -- airplanes are expensive -- and very high labor costs with a skilled workforce and enormous safety concerns and responsibilities. Airlines depend on energy prices. They can't inventory their product, they are subject to weather daily and pricing is highly competitive.
"And we're making the product as our customers are experiencing it," Mr. Kelly says.
On Mr. Kelly's first day as CEO, "I remember very vividly how responsible I felt and how dependent I felt on all of our people. They're the ones that do the real work every day," he says. "I never quite felt it that way before in other jobs."
American's Mr. Parker, 59, says one big difference between 9-11 and the pandemic is that at the time of the terrorist attacks, his industry was in bad shape. The downturn in travel forced struggling carriers into bankruptcy and led to huge consolidation. That's led to higher fees and many complaints from travelers, but a run of profitable years for remaining airlines.
"This one, the industry was functioning well, certainly relative to our past," Mr. Parker says. As a result, he doesn't expect major structural changes in the U.S. With more than $50 billion in government assistance, airlines aren't running to bankruptcy court or closing hubs and leaving communities without air service.
But changes will come. Typically, airlines tweak their route structure as they add a few more planes each year. Now they have an opportunity to remake their networks as never before and increase efficiency. For executives who stay, Mr. Parker says, the next few years, no matter how turbulent, should also be exciting.
"I think these are the best times when you come out of the hard times," he says. "They're fun."
Write to Scott McCartney at middleseat@wsj.com |
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| To: Sam who wrote (1605) | 7/14/2021 11:48:23 AM | | From: Art Bechhoefer | | | | The WSJ article overlooks the key variable in airline profits – number of gates, landing and takeoff spots for a given airport at a given time. United controls most of the space at Newark airport. American Airlines dominates Charlotte. Delta has a somewhat dominant position in Atlanta. Fixed costs are not entirely tied to aircraft ownership, since many airlines lease their aircraft. It is definitely tied to the cost of airport terminals and gates, which should have been mentioned in the article. Cost cutting should also have been noted, as expressed in cutting number of flights, creating fewer non-stop flights in favor of more stops and connections, and cutting food and other amenities to the bone. So much for customer satisfaction.
Art |
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| From: Sam | 7/23/2021 1:42:44 PM | | | | | | American Is the Year's Best Airline Stock. Wall Street Is Getting More Bullish. -- Barrons.com
DOW JONES & COMPANY, INC. 12:46 PM ET 7/23/2021
American has been the year's best airline stock, but it's winning more backing on Wall Street with several analysts upgrading the stock after a relatively strong earnings report.
Seaport Global Securities'Daniel McKenzie upgraded American (ticker: AAL) stock to a Buy rating with a $27 target on Friday. While it's still early in the recovery, he wrote, "increased comfort" around corporate and trans-Atlantic revenue, combined with the carrier's plans to strengthen its balance sheet, are driving "increased conviction" in earnings for 2022.
American is expecting a robust recovery in domestic business revenue, McKenzie noted, and its international routes offer exposure to pent-up business demand in the U.K., Europe, and Brazil; American has a new code-sharing agreement with the Brazilian domestic carrier GOL Linhas Aereas Inteligentes (GOL).
American has cut labor and operating costs, partly by removing 157 planes from its fleet and improving operating efficiencies with only four major aircraft models. The carrier has also developed strategic partnerships with JetBlue Airways (JBLU) and Alaska Air (ALK), deals that could add $1 billion in 2022 revenue, McKenzie estimated.
The carrier could lift margins as well by winnowing its massive debt, including $36 billion of long-term debt and leasing liabilities on its balance sheet. American said this week that it aims to cut its debt by $15 billion over the next four years, taking a big chunk of liabilities off its books.
McKenzie estimated that American will post earnings per share of $3.50 in 2023, potentially hitting $4 to $4.50 if partnerships with JetBlue and Alaska pan out. At his target of $27, the stock would still trade at merely 6 times EPS of $3.50.
All that said, American's common equity is now worth just $14 billion -- or 39% of its long-term debt. And there are no guarantees that American won't continue to dilute its shares, as it's done throughout the pandemic, as it aims to ramp up capacity and compete for more revenue in a recovery.
American's high-volume strategy could also run into headwinds if the demand climate doesn't cooperate.
New coronavirus cases are soaring, again with the Delta variant taking root in the U.S., Europe, and other regions. Australia and New Zealand has suspended their travel corridor, and the U.S. has yet to allow travel from Europe, Brazil, India, and China for noncitizens.
Airline stocks have been grounded for months, moreover, consolidating gains from late 2020 as vaccinations became widespread and travel demand started to rise. The sector is down 10% in the last three months against a 4.5% return for the S&P 500.
Nonetheless, analysts are raising earnings estimates across the sector after a slew of relatively upbeat earnings reports from carriers such as Delta Air Lines (DAL), United Airlines Holdings (UAL) and Southwest Airlines (LUV).
Along those lines, Cowen's Helane Becker raised her target on American to $23 while maintaining a Market Perform rating. Her 2023 EPS estimate is well below McKenzie's, at $2.55, though. At her $23 target, the stock would trade at 9 times earnings.
Bernstein analyst David Vernon also liked American's report, writing that, "if anything, the guidance is more bullish than we expected." He maintained an Outperform rating and $28 target.
JP Morgan's Jamie Baker also lifted estimates on American, though he's staying bearish. While he hiked his target to $17 from $14 and lifted his 2022 EPS target to $1.95 from $1.65, he maintained an Underweight rating.
"We do not believe the company's balance sheet strategy has been prudent, especially given the current turbulent environment, and we see better value elsewhere in our coverage," Baker wrote.
Betting against American has been the wrong call this year, though. The stock is up 35% this year, trouncing the 13.5% gain for the NYSE Arca Airline Index. In fact, no other airline stock has comes close -- the next best performer has been Spirit Airlines (SAVE) at 14.3%.
Investors appear to have viewed American as a fixer-upper that's managed to renovate its house enough to compete as demand recovers. Whether the stock lives up to those expectations is the bet investors are making now.
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| To: Sam who wrote (1609) | 7/23/2021 2:16:38 PM | | From: Art Bechhoefer | | | | I doubt that American Airlines is anxious to reduce its debt, especially if the debt carries fixed interest rates. We are entering into a period of inflation that will most likely result in higher interest rates on any new debt. They'd be wise to hold onto their existing debt, especially if the interest rate on that debt is comparatively low.
In my latest flight (on American from Rochester, NY to San Francisco), I noted that the Chicago – SFO of the flight was listed jointly under several airlines, indicating that American had effectively leased seating to other airlines to fill all the seats. The entire flight to and from was filled to capacity. Given that they provided only pretzels and soft drinks and no other amenities, I can't see how they possibly could NOT make money on these flights.
Art |
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