Tag Archives: american airlines bankruptcy

Today’s Market Sell-Off of Airline Sector

A couple of observations on today’s black day for airline stocks.

One, the markets are in panic mode in general today — as fears of a continued economic slowdown shake the Street. This is not just an airline sector sell-off, it’s a general market fear-driven sell-off fueled by continuing concerns over the situation in Europe.

Two, the general market assumption is that if the economy goes south, so will airline revenues.

Three, in the case of AMR, the situation is particularly acute, because investors know the airline has lagged in revenue performance, and the airline is the most cash restrained of all the major airlines.

Four, fears of an impending AMR bankruptcy have been rumbling around and picking up traction for the last 30-45 days. Increasing numbers of retiring pilots do not help the situation, nor do continued analyst concerns over the airline’s long-term liquidity health.

Looking at the latest sector numbers for today, it looks as if shares of other airline stocks that were hammered earlier in the day into double-digit declines have bounced back a bit, while the volume of AMR shares traded continues to boggle the mind. Shares of AMR have climbed back a little bit since trading was resumed. Now shares are only down 30%, trading at around 2.07. Earlier in the day shares were down to 1.75.

Not 35%.

The current trend is up, not down.

AMR Bankruptcy Fears Take Shares of American Airlines Hostage


As I wrote recently in PlaneBusiness Banter, a funny thing happens when a company begins to show signs of failing. Often times, the state of the company may not be as bad as outsiders perceive, but one but one, things can begin to happen that accelerate the perception that the company is in trouble.

Once that process begins, it can be very difficult to reverse course.

I think that is what we have going on with AMR, parent of American Airlines.

Late last Friday the company announced that another 129 pilots had opted to retire, effective Oct. 1. While that data point in and of itself is not indicative of anything, other than the fact the pilots want to lock in their benefit levels at stock prices that are higher than they are now — that is not how Wall Street is interpreting the news. Wall Street thinks this much-higher-than-normal exodus is a negative “insider sentiment” as to the airline’s financial situation.

This morning, while the entire industry has taken a dive across the board, Wall Street investors have dumped shares of AMR much harder and much faster.

So hard and fast that trading had to be halted in shares of the stock.

Prior to the halt, shares had slipped down more than 20%. After trading was resumed, the sell-off continued at an even faster clip. Shares have been down as much as 38%.

As of this posting (12:48 CDT) almost three times the average daily volume of AMR shares have already been traded, and the stock is sitting at $1.92, down 35% on the day.

PlaneBusiness Banter Now Posted!

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This week’s issue of PlaneBusiness Banter is now posted. We are all over the place this week as first, I tell you what you missed at The BeatLive Conference last week. The conference usually attracts an assortment of corporate travel heavyweights. This year was no exception.

Then of course we have to talk a bit about that certain airplane that was finally delivered to its new owners in Everett, WA on Monday. You know. The one that was just a tad late and, apparently, a tad overweight.

Yes, Boeing finally delivered its first 787 to All Nippon Airways (ANA) on Monday.

We also have lots of union labor news to talk about. How many American Airlines’ pilots are now expected to retire on Oct. 1? We hear the number could be almost four times as many who retired at the beginning of September.

American Airlines was also in the news last week as Moody’s lowered its outlook on the airline’s debt to “negative.” Tuesday, the airline announced an EETC debt refinancing deal. We let you know what JP Morgan analyst Mark Streeter thinks of the debt deal.

One thing’s for sure. The airline is certainly paying more than it did back in January for the deal. Yield on this one is in the 8% range. In January the airline did a financing deal at about 5.25%. That’s what rumors of bankruptcy, impending debt bills, and a continued inability to make a profit and throw off cash does.

Meanwhile, pilots from both Continental and United Airlines picketed on Wall Street Tuesday.

We update you on the status of the pilot negotiations at United, in addition we wonder why it is that pilots think Wall Street analysts really care if they picket outside the NYSE. And why it’s really a bad idea — both for United and for the industry as a whole.

Speaking of Wall Street, airline stocks did not have a good week last week. Neither did Wall Street. We give you our take on the latest economic tea leaf reads and tell you why this Thursday is a very important day for the eurozone — and US financial markets as well.

One good side effect of continued eurozone anxiety – both crude oil and jet fuel posted large declines for the week. That is very good news for airlines.

Lots of reader mail this week — from baseball to airlines to comments on our column from last week.

All this and more — in this week’s issue of PlaneBusiness Banter .