FlyPurdue

Kirby was US Airways - he was the president under Doug pre-merger. He left AA...mutually, that is a fact. The ULCCs have had a good run, and Spirit in particularly is going to have a tough time growing to where they want to be over the next decade. Back in 2014 - the US3 refused to price match Spirit, and the ULCC's grew huge amounts in the legacy's hubs. AA in particular lost tons of market share, as even the arguably better (at the time) AA product was not enough to attract people too AA.

Flash forward to 2018/19 - every legacy is now pricing matching the ULCC's (not necessary on all flights/days throughout the booking curve), and Spirit market share has suffered dramatically as a result. Spirit has publicly stated that they will only grow / add markets that they do not have nonstop legacy competition in. There are not that many 'dots' left to serve, and that is partly why (I speculate) they have not made a large plane order yet.

The trick is segmentation - you have to retain the the most price sensitive customers to fill the plane, without out spoiling, diluting, (and alienating) your inelastic business passengers. Delta has figured this out, and is capitalizing and executing on this strategy extremely well.

AA will be okay, it is just going to be a trying next few years. Watch for a 'grand gesture' over the next several months that says AA has heard your complaints and is pivoting.

I am a very junior captain, at the bottom of reserve, and it is brutal. Worse than I could have imagined - that is why I have applications out everywhere (only at companies that have strong financials and a positive trajectory) as making real money / 401k now, verses in 5 years is something I am not willing to compromise on.

FlyPurdue

Because their capital (as they have 7B in cash) is probably making considerably more than 5% - therefor if they just paid out of pocket - they would be missing out on that considerable opportunity. Every capital decision is stress tested against a sophisticated NPV model. At the end of the day 750M is only 1.7% of their FY 2018 revenue.

Excargodog

Indeed. APC scarcely has the bandwidth to post the complete list.

ag386

It's capital. Not capitol. Go take a look at the latest AA balance sheet instead of just pulling numbers out of the air. They have approximately 4B in cash.

If that is the reasoning for this loan then OK. I do not know. As AA only manages stock price for the current quarter, this move won't help them in that regard.

FlyPurdue

Thank you for the spelling correction. Those numbers are not out of thin air, you have to look beyond the P&L to understand the total amount of liquidity. As I said above - this was my life for 5 years.

Having done all that what we want to be certain is at least in today's environment that we have at least $7 billion of liquidity at any time, that's an enormous amount of cash for a company our size. But that is the cost to our shareholders and it being more levered.
Doug Parker - April 26, 2019

FlyPurdue

I don't want to get into a p*ssing match - I like having these debates, and questioning our employers strategy. This will make us all more well rounded employees.

I never believed that making a decision simply for the short term stock gain is the best strategy, and I am optimistic that our senior leaders agree. Wall Street does not know all, and can absolutely be destructive if the strategy is focused on short term stock verses building strong fundamentals.

buddies8

The problem with wall street they say they like long term planning but in reality all they care is for management to make the short term numbers at any cost.

Excargodog

In fairness, there was a hue and cry that execs at poorly performing companies were being overpaid and a movement to cap the fixed portion of exec salaries and incentivize them through bonuses linked to share price each quarter.

If you don’t want short term thinking you probably shouldn’t incentivize short term thinking.

ERAUAV8TR

Mutual = Fired

buddies8

Really, who other than wall street and board members would approve that.
The manner it's set up is guarantee major profits for the executive team.
What they dont get paid by the left hand but by the right hand. Same b.s..