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For those buying airlines right now
Posted on 4/4/20 at 11:18 am
Posted on 4/4/20 at 11:18 am
A sobering article from the WSJ. Just keep in mind:
LINK
Many (probably all) airlines are applying for Federal aid, but with the current situation that money will only last so long. These companies are burning through cash and they will most assuredly lag the rest of the economy when things get back to normal.
I'm no expert, but look at balance sheets before you buy these companies hoping for a rebound. I don't think the gov't can bail out every company, and I don't think it's out of the realm of possibility that some go out of business, especially the highly leveraged cash strapped ones (cough cough American Airlines).
This whole situation is going to (hopefully) change company financial dynamics. After 10 years of basically free money, a lot of companies are leveraged to the teeth and have been ignoring their balance sheets. That is being tested right now, and I'm willing to bet there will be winners and losers based on financial prudence.
quote:
Delta Chief Executive Ed Bastian wrote in a message to employees Friday: “We know we still haven’t seen the bottom.”
Delta said it is burning through $60 million cash a day and projected the government funds would only last until June without other spending cuts. It has asked employees to take unpaid leaves and said some 30,000 have volunteered. The airline expects second-quarter revenue to be down 90% from a year ago.
LINK
Many (probably all) airlines are applying for Federal aid, but with the current situation that money will only last so long. These companies are burning through cash and they will most assuredly lag the rest of the economy when things get back to normal.
I'm no expert, but look at balance sheets before you buy these companies hoping for a rebound. I don't think the gov't can bail out every company, and I don't think it's out of the realm of possibility that some go out of business, especially the highly leveraged cash strapped ones (cough cough American Airlines).
This whole situation is going to (hopefully) change company financial dynamics. After 10 years of basically free money, a lot of companies are leveraged to the teeth and have been ignoring their balance sheets. That is being tested right now, and I'm willing to bet there will be winners and losers based on financial prudence.
12
Posted on 4/4/20 at 11:22 am to rintintin
very very risky right now.
wouldn't touch with a 10 foot pole unless you are willing to hold for a LONG TIME...
wouldn't touch with a 10 foot pole unless you are willing to hold for a LONG TIME...
Posted on 4/4/20 at 11:31 am to boomtown143
The DOT pronouncement on Friday to hold airlines to their contracts of carriage for cancelled flight cash refunds will only accelerate the burn.
Will be interesting to watch how this all shakes out. Not sure you'll see a straight merger but possibly left with 2 of the big three (and possibly a JetBlue) picking over the scraps of the 3rd.
Will be interesting to watch how this all shakes out. Not sure you'll see a straight merger but possibly left with 2 of the big three (and possibly a JetBlue) picking over the scraps of the 3rd.
Posted on 4/4/20 at 11:42 am to rintintin
quote:
It has asked employees to take unpaid leaves and said some 30,000 have volunteered.
I don't believe for a second 30,000 people "voluntarily" took an unpaid leave.
Posted on 4/4/20 at 11:42 am to Waffle House
quote:
Will be interesting to watch how this all shakes out. Not sure you'll see a straight merger but possibly left with 2 of the big three (and possibly a JetBlue) picking over the scraps of the 3rd.
Another thing to keep in mind is many of these companies hedge fuel prices and purchase at an annual set rate. The few companies that don't are at least saving money on fuel costs right now with oil down.
I imagine the winners after this will reap the rewards. They can potentially buy fleets for cents on the dollar as others are liquidating, and premium airport slots will be available.
I would be absolutely shocked if every airline made it out alive after this. I just can't see it without even more drastic Federal aid.
This post was edited on 4/4/20 at 11:45 am
Posted on 4/4/20 at 11:56 am to rintintin
quote:
“We know we still haven’t seen the bottom.”
No wonder Buffet dumped a lot of DAL and LUV yesterday
Posted on 4/4/20 at 12:34 pm to BlindTiger7
quote:
No wonder Buffet dumped a lot of DAL and LUV yesterday
He kept a whole lot. Berkshire doesn’t like holding more than 10% of a company. That’s going to be the story if they issue anything at all. It’s a position they primarily take because of banking regulations if you own more than 10%, but it bleeds into their other holdings.
Anyone that thinks it’s only airlines that are risky right now is wrong. Blue chips are the only thing that has less risk than most should be taking, but a lot of new investors want to hit the lottery. It may end up leaving a bad taste in their mouth with investing. I wanted so bad to sell everything yesterday, so I bought some more. Doing the opposite of what I feel like and it’s tough right now.
This post was edited on 4/4/20 at 2:06 pm
Posted on 4/4/20 at 12:52 pm to rintintin
So, which ones are you shorting?
Posted on 4/4/20 at 12:57 pm to rintintin
quote:
I don't think it's out of the realm of possibility that some go out of business, especially the highly leveraged cash strapped ones (cough cough American Airlines).
Yeah, I think you're right. If you're going to buy, buy best in class, and even that may not be enough to protect you from a Ch 11 reorganization. Something like this is enough to end an outfit like American which was poorly managed in the best of times.
This post was edited on 4/4/20 at 12:58 pm
Posted on 4/4/20 at 1:00 pm to rintintin
quote:
For those buying airlines right now
Haven’t bought, but watching....
AA and SW at 52wk lows with Delta and United about 10% from there.
I’m thinking I would feel safe at buying in on SW, DAL, or UAL at 25% lower than their 52wk low. Wouldn’t touch AA, they are shite.
Posted on 4/4/20 at 1:08 pm to Lsut81
Considering the scope of loss and length of time until profitability is likely I don't think 52 week lows are going to be nearly low enough to be a good value for an investor.
Better than recent valuations would be data driven analysis. I don't say this to be a douchebag, I just think that would give you a better chance of making money.
Better than recent valuations would be data driven analysis. I don't say this to be a douchebag, I just think that would give you a better chance of making money.
Posted on 4/4/20 at 1:11 pm to rintintin
quote:
I'm no expert, but look at balance sheets before you buy these companies hoping for a rebound. I don't think the gov't can bail out every company, and I don't think it's out of the realm of possibility that some go out of business, especially the highly leveraged cash strapped ones (cough cough American Airlines).
Delta's balance sheet Q1 is not going to tell anyone on this board what is going to happen, their cash burn is going nuclear in Q2 and likely significantly longer. It's not like DAL wanted to go bankrupt in 2005, it was its only course of action ie shafting stock holders and re-capitalizing. Tried to say this 30 days ago. If people are buying this with play money so be it. Also shows great long term investors make mistakes just like retail investors. What is Buffet going to do with the 10B OXY preferred investment when OXY starts paying with additional shares instead of cash, goes bankrupt, or gets bought? I bought BRK.B this past week on second down day, but this shite probably has a long way left to go. At some point there likely needs to be US government partial ownership in airlines, maybe de-list, as there is no reason to overcomp C-suite employees, etc when no one can run these operations independently when the massive shite hits the fan as there is no way to plan/hedge/time everything that can possibly go wrong. Just talking out loud....
Posted on 4/4/20 at 1:12 pm to rintintin
quote:
a lot of companies are leveraged to the teeth and have been ignoring their balance sheets.
But don’t worry, they’re getting bailed out by the government....which is leveraged to the teeth and has been ignoring its balance sheet. What could go wrong?
Posted on 4/4/20 at 1:16 pm to rintintin
Meh. People are still going to need to fly. Airline stocks may very well likely keep going down for a bit, but long term I’m sure most will survive and become great investments (even for people who buy now). It’s easy to panic during times like this, but the sun will come out at some point.
Posted on 4/4/20 at 1:33 pm to Ingloriousbastard
I think we'll have another round of stimulus that'll include more money for the airlines.
Posted on 4/4/20 at 1:45 pm to fallguy_1978
Which airline is the safest bet to buy low and hold out long term in your opinion?
Posted on 4/4/20 at 2:00 pm to Ingloriousbastard
Seriously. Listening to some on here, the doom and gloom is too much. Everything sucks right now, we get it, but airlines will survive. I wouldn't mind seeing AA go close to bankruptcy as they've run their company like shite and treated their customers like shite. Actually, UA too 
I bought DAL and LUV multiple time over the last 2 weeks and will buy more in the next weeks. I am LOOOOONG.
I bought DAL and LUV multiple time over the last 2 weeks and will buy more in the next weeks. I am LOOOOONG.
Posted on 4/4/20 at 2:08 pm to Ingloriousbastard
quote:
Meh. People are still going to need to fly. Airline stocks may very well likely keep going down for a bit, but long term I’m sure most will survive and become great investments (even for people who buy now
Airlines are notorious for filing for bankruptcy and leaving stockholders shares worthless, see Delta 2005, United in 2002, US Airways 2002, American Airlines 2011, Frontier 2008 as an examples. Nothing indicates the same won’t happen here for at least some airlines. Better to be a bond holder and have a chance to get something.
This post was edited on 4/4/20 at 2:21 pm
Posted on 4/4/20 at 2:12 pm to Sho Nuff
quote:
Everything sucks right now, we get it, but airlines will survive. I wouldn't mind seeing AA go close to bankruptcy
Nobody is saying we won’t have airlines. People are just cautious because airlines file chapter 11 a lot and leave shareholders with zero, reorganize and keep operating when they exit bankruptcy. That seems likely for at least some of the airlines right now.
This post was edited on 4/4/20 at 2:14 pm
Posted on 4/4/20 at 3:44 pm to go ta hell ole miss
quote:
Airlines are notorious for filing for bankruptcy and leaving stockholders shares worthless,
^^^this! The ignorance that is spewed on this bored when stocks look “cheap” and everyone is looking to hit the jackpot amazes me. A company that is “not going anywhere” can leave an investor holding stock broke AF. $0.00 per share and never a penny more.
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