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$75 if this keeps up. Where's the bottom....
Jamie has too much pull and influence.
Yeah man big shoutout to my guys riding the SAVE wave. Just like JBLU 2015.
SAVE = money machine
This is simply profit taking. Who wouldn't cash out on these gains....
FaceTime removed?
$5 imminent...
Down almost 50% from its high. What's been happening here?
Wow!
Ha...I said the dow would finish +100. I knew this morning was a market wide setup...
Yikes
Zika virus is now sexually transmitted. Some guy in Dallas, TX contracted it. Home of AAL. Getting interesting...
$616 pre-split...
Man...
Tested 16,000 again like August. In August it was at least 5 or 6 times it went back hitting that 16,000 mark.
Look at the market reversal. I bet the Dow will end up green 100+ points....
Welcome to the team Ralph. I have faced reality long ago in 2015 that the top end here is $47. We couldn't break $50 in a superb 2015...
Have to take what the defense gives in football terms. Buy the $30's, sell over $40+...
Report come out today? I missed it if so.
Looks to me they're setting stocks up for a major rebound nearing lunch. Every chart looks exactly the same....
I would not sell spirit for AAL. Play the stocks that are favored and undervalued, not just undervalued. SAVE is my top airline 2016...
If this sees $35 it'll see $34 (52 week low). Honestly buying here on down is safe to me for a flip over $40. That's what I did with SAVE. Bought all the way down to $32's (more than I intended to). Ended up with 17.5k shares...look how that turned out.
GILD used to be one of my top holdings in 2013/2014. Sold all out around $106 or something like that. Missed that big run to $120ish selling early.
You'd think oil falling below $26, inevitably, would be a good thing for airlines. Fascinating how this is playing out. Combination of low oil, Zika, and DAL traffic is just a never ending headache. $48 one year target actually may come to fruition. It's astonishing if you think about what we've been through with this stock the past 3 years to be down here at $37...
Ended 2014 at $44 which is what a 16% drop? Year over year is upwards of 30% down.
Watching the volume final hour. Seeing how much gets dumped..
Goldman and a few other analysts called this oil drop last week and reiterated it this morning. They see it below $26 this week...
10% yikes
Yes, other stocks live vicariously through us it seems...
You're right though. DAL is down only 2%....
DAL is (was) the darling. Their traffic down 3% could mean just about the same or worse for everyone else. Legacy carriers getting hosed.
Good point I did not see that release.
Record Profit Is a Bad Optic as American Air CEO Decries Profit Sharing
TED REED
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Feb 2, 2016 7:25 AM EST
Profit sharing is a controversial topic at American Airlines (AAL) for two reasons.
First, CEO Doug Parker believes strongly that profit sharing is not a reliable method for compensating employees because profits sometimes disappear for reasons that have nothing to do with employees -- such as the economy or perhaps even the Zika virus.
This may be an eminently logical argument but it has become a tough one to make at a time when airline profits are at record levels.
Secondly, Delta (DAL) , American's fierce rival, offers profit sharing, as does United (UAL) . This year, Delta will pay employees $1.5 billion in profit sharing.
Delta likes for people to know that it offers profit sharing. Profit sharing, in good years, is a sign of a healthy company where workers are rewarded for success.
Also paying profit sharing, while unionized American does not, strengthens the case that Delta employees do not need unions. While Delta pilots are unionized, most of the rest of its employees are not.
Both aspects of the profit sharing controversy came up when Parker discussed the topic on American's fourth-quarter earnings call.
Before the call, Parker wrote about American's $6.3 billion profit for 2015 in a letter to employees. "That's more than American has ever made in its history, and indeed represents the highest profits of any airline in our industry's history," he said.
During the call, during a question, Parker was told that a Delta spokesman had said that if profit sharing was included, Delta would have earned $7.4 billion and would have had the highest profit of any airline.
In his response, Parker first discussed his opposition to profit sharing. "We have made a decision to compensate our people more per month and not have them be subject to the whims of things like Zika virus and people's concerns about that," he said.
"We think people should be paid what they earn, as they earn it as opposed to waiting for the end of the year to see if indeed the airline is profitable or not," he said. "So we put more in our base wages."
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American Airlines Delivers Strong Earnings, but Skeptics Abound
The airliner's stock has been brought down by weak unit revenue trends -- but improvement is just around the corner.
Adam Levine-Weinberg (TMFGemHunter) Feb 2, 2016 at 8:50AM
Coming into its Q4 earnings report last week, American Airlines (NASDAQ:AAL) had reported a record profit in each of the eight quarters since it merged with US Airways in late 2013.
On Friday, American made it nine in a row. The company produced an adjusted pre-tax profit of $1.29 billion in Q4, up from $1.10 billion a year earlier. Adjusted earnings per share soared 32% from $1.52 to $2.00, lifted by American Airlines' heavy share buyback activity in addition to its net income growth.
Airline American Airlines Plane Aal
AMERICAN AIRLINES REPORTED ANOTHER RECORD PROFIT FOR Q4. IMAGE SOURCE: AMERICAN AIRLINES.
Even as American Airlines has continued generating strong EPS growth, investors have clearly lost confidence in the company due to its persistent unit revenue declines. However, American Airlines may be in better shape than many people realize.
Earnings and the stock price diverge
In 2013, American Airlines and US Airways earned a combined adjusted profit of $1.9 billion. Since then, the combined company's profit has soared. Adjusted net income reached $6.3 billion last year as American Airlines reaped the full benefit of lower fuel prices.
Up until early 2015, American Airlines' stock price rose along with its earnings. However, in the past year or so, American Airlines stock has started to lose ground even as the company's profit continued to rise.
AAL Chart
AMERICAN AIRLINES NET INCOME VS. STOCK PERFORMANCE. DATA BY YCHARTS.
Airline investors don't seem to treat earnings growth driven by fuel cost savings as "real" when it is accompanied by declining unit revenue. And American's passenger revenue per available seat mile (PRASM) came under severe pressure in 2015, due to the strong dollar, economic weakness in key foreign markets like Brazil and Venezuela, and rising competition from Southwest Airlines (NYSE:LUV), particularly in Dallas.
PRASM dropped 1.7% in Q1 2015 and the declines accelerated from there. For the full year, PRASM fell 5.4% year over year. As unit revenue trends headed south, so did American Airlines' share price. With PRASM expected to decline 6% to 8% in Q1, it's not surprising that the stock hasn't recovered.
Revenue trends will improve later this year
American Airlines executives told investors last week that unit revenue trends should improve throughout 2016. This guidance seems realistic for several reasons.
First, year-over-year comparisons will get much easier after this quarter. As noted above, American's PRASM fell 1.7% in Q1 2015. In Q2, the pace of decline worsened to 6.9%, and it remained at a similar level for the rest of the year.
Second, competitive dynamics will improve in the second half of 2016. Southwest Airlines operated 153 daily departures in Dallas at the beginning of 2015, but it ramped up its schedule to 180 daily departures by August.
Airline Southwest Airlines Plane Luv Boeing
SOUTHWEST AIRLINES GREW RAPIDLY IN DALLAS LAST YEAR. IMAGE SOURCE: THE MOTLEY FOOL.
As a result, American won't fully lap the impact of increased competition from Southwest until this August. However, after that, it should benefit from capacity constraints that will prevent Southwest Airlines from adding any more flights in Dallas.
Third, weakness in Brazil and Venezuela will have less of an impact on American Airlines going forward. American Airlines President Scott Kirby noted that Brazil represented more than 6% of the company's revenue in late 2013 but just 2% by last November. Additionally, the 2016 Olympic Games in Rio de Janeiro should provide a boost in travel to Brazil during Q3.
Fourth, American completed its reservation system integration in October, which will allow it to refine its flight schedules to put the right airplanes in the right markets. This should unlock about $300 million in annual revenue synergies over the next year or two.
Looking ahead
Thus, American Airlines has a number of key catalysts coming in the next two or three quarters that should improve its unit revenue performance. It also has other initiatives in the works that should bolster unit revenue beginning later in 2016.
Pe
AMERICAN WILL ADD PREMIUM ECONOMY SEATS FOR LONG-HAUL FLIGHTS. PHOTO: AMERICAN AIRLINES
For example, American will introduce the first true long-haul premium economy section among U.S. airlines in late 2016. This will offer a middle-ground for customers who are willing to pay extra for a more comfortable seat but can't afford a business class ticket.
American Airlines is also following its peers by moving from a miles-based to a spending-based loyalty program in late 2016. This could have revenue benefits because it will result in fewer award tickets for customers who buy the lowest fares.
Finally, American is working on a "basic economy" fare type to appeal to more price-sensitive travelers. This approach helped Delta Air Lines minimize its unit revenue declines last year. The new fare type should be ready for launch later this year.
With all of these catalysts ahead, American Airlines' unit revenue trajectory should improve steadily going forward. With the stock trading for less than 6 times forward earnings, there's plenty of upside if investors gain confidence that American's recent profit growth won't be swallowed up by revenue declines in the next few years.
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Adam Levine-Weinberg is long January 2017 $40 calls on Delta Air Lines, and long January 2017 $30 calls on American Airlines Group. The Motley Fool is long January 2017 $35 calls on American Airlines Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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COMMENTS
AUTHOR
Adam Levine-Weinberg (TMFGemHunter) Adam Levine-Weinberg is a senior Industrials/Consumer Goods specialist with The Motley Fool. He is an avid stock-market watcher and a value investor at heart. He primarily covers airline, auto, retail, and tech stocks. Follow him on Twitter for the latest news and commentary on the airline industry!
ARTICLE INFO
Feb 2, 2016 at 8:50AM
Industrials
STOCKS
Southwest Airlines
NYSE:LUV
$36.90 $-1.41 (-3.68%)
American Airlines Group
NASDAQ:AAL
$38.17 $-1.21 (-3.07%)
READ MORE
Expect More Buybacks at American Airlines Group, Inc.
Delta Pounces on American Airlines' Exit from Tel Aviv
Will Delta Air Lines, Inc. Raise Its Dividend in 2016?
Brazil's Economy Tumbles: How Are Airlines Responding?
Will Southwest Airlines Raise Its Dividend in 2016?
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Buying here and down is wise and recommended. Anything north of $43 sell. Maybe even $40...
Here it is..
Re: Ralph Canine Post# 31241
Just heard an "educated call" for a test of the recent oil low next week. We'll see..
Let me find my post from last week where I said 3 analysts called for oil to test its low this week....
I wouldn't be surprised to see that more funds dumped. Will be interesting to see who's been where.
Goldman and Wall Street versus Doug. They will always win.
About a what 5.5% pop?
Meanwhile Google shoots up 35 points as revenues rise...
Just wow...