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6100.0
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2020-04-05 00:00:00 UTC
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American joins United, others in suspending more NYC flights on coronavirus spike
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AAL
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https://www.nasdaq.com/articles/american-joins-united-others-in-suspending-more-nyc-flights-on-coronavirus-spike-2020-04
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By Tracy Rucinski
April 5 (Reuters) - American Airlines Group Inc AAL.O said late Sunday it would suspend more flights in and out of New York City's three main airports for about a month, joining other airlines that have cut flights to the area following a spike in coronavirus cases.
Between April 9 and May 6, American will operate a total of 13 daily flights from New York's JFK and LaGuardia airports and New Jersey's Newark, it said, down from an average of 271 daily flights across all three airports in April 2019.
David Seymour, American's senior vice president of Operations, told employees that demand for flights to the New York area "is rapidly evaporating" following an increase in COVID-19 cases and a recent advisory from the Centers for Disease Control and Prevention warning against all non-essential travel to and from New York, Connecticut and New Jersey.
New York has been the hardest-hit U.S. state by the coronavirus pandemic.
United Airlines Holdings Inc UAL.O said on Saturday that it was reducing its daily New York City area flights to 17 from 157, while JetBlue Airways Corp JBLU.O is cutting its schedule by as much as 80% and Spirit Airlines Inc SAVE.N is canceling all of its flights to the area.
U.S. carriers have drastically reduced their flying schedules around the world as air travel demand has plummeted due to the coronavirus, but the reductions to New York - one of the business capitals of the world - underscore the depth of the health and financial crises.
American said it will only operate flights between 10 a.m. ET and 6 p.m. ET as turn-only operations so that no aircraft or crews remain overnight at the airports, and so that fewer New York crew will be required on the ground.
Facing what they call an unprecedented crisis, airlines around the world are seeking government aid to help them avoid employee layoffs with the hope that travel demand will eventually recover.
In the United States, top Democrats in Congress on Sunday urged the U.S. Treasury to move quickly to award $32 billion in cash assistance to airlines and airport contractors without setting onerous requirements that could lead to bankruptcies.
Interactive graphic tracking global spread of coronavirus: open https://tmsnrt.rs/3aIRuz7 in an external browser.
(Reporting by Tracy Rucinski in Chicago and Bhargav Acharya in Bengaluru; Editing by Sherry Jacob-Phillips and Stephen Coates)
((Bhargav.Acharya@thomsonreuters.com; Outside U.S. +918061822589; Reuters Messaging: Bhargav.Acharya.thomsonreuters.com@reuters.net))
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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By Tracy Rucinski April 5 (Reuters) - American Airlines Group Inc AAL.O said late Sunday it would suspend more flights in and out of New York City's three main airports for about a month, joining other airlines that have cut flights to the area following a spike in coronavirus cases. David Seymour, American's senior vice president of Operations, told employees that demand for flights to the New York area "is rapidly evaporating" following an increase in COVID-19 cases and a recent advisory from the Centers for Disease Control and Prevention warning against all non-essential travel to and from New York, Connecticut and New Jersey. Facing what they call an unprecedented crisis, airlines around the world are seeking government aid to help them avoid employee layoffs with the hope that travel demand will eventually recover.
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By Tracy Rucinski April 5 (Reuters) - American Airlines Group Inc AAL.O said late Sunday it would suspend more flights in and out of New York City's three main airports for about a month, joining other airlines that have cut flights to the area following a spike in coronavirus cases. Between April 9 and May 6, American will operate a total of 13 daily flights from New York's JFK and LaGuardia airports and New Jersey's Newark, it said, down from an average of 271 daily flights across all three airports in April 2019. United Airlines Holdings Inc UAL.O said on Saturday that it was reducing its daily New York City area flights to 17 from 157, while JetBlue Airways Corp JBLU.O is cutting its schedule by as much as 80% and Spirit Airlines Inc SAVE.N is canceling all of its flights to the area.
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By Tracy Rucinski April 5 (Reuters) - American Airlines Group Inc AAL.O said late Sunday it would suspend more flights in and out of New York City's three main airports for about a month, joining other airlines that have cut flights to the area following a spike in coronavirus cases. Between April 9 and May 6, American will operate a total of 13 daily flights from New York's JFK and LaGuardia airports and New Jersey's Newark, it said, down from an average of 271 daily flights across all three airports in April 2019. United Airlines Holdings Inc UAL.O said on Saturday that it was reducing its daily New York City area flights to 17 from 157, while JetBlue Airways Corp JBLU.O is cutting its schedule by as much as 80% and Spirit Airlines Inc SAVE.N is canceling all of its flights to the area.
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By Tracy Rucinski April 5 (Reuters) - American Airlines Group Inc AAL.O said late Sunday it would suspend more flights in and out of New York City's three main airports for about a month, joining other airlines that have cut flights to the area following a spike in coronavirus cases. New York has been the hardest-hit U.S. state by the coronavirus pandemic. U.S. carriers have drastically reduced their flying schedules around the world as air travel demand has plummeted due to the coronavirus, but the reductions to New York - one of the business capitals of the world - underscore the depth of the health and financial crises.
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6101.0
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2020-04-05 00:00:00 UTC
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Democrats press U.S. Treasury to move quickly on $32 billion aviation grants
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AAL
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https://www.nasdaq.com/articles/democrats-press-u.s.-treasury-to-move-quickly-on-%2432-billion-aviation-grants-2020-04-05
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nan
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nan
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By David Shepardson
WASHINGTON, April 5 (Reuters) - Top Democrats in Congress on Sunday urged the U.S. Treasury not to set "unreasonable conditions" in awarding $32 billion in cash assistance to airlines and airport contractors and warned that they could be forced to file for bankruptcy if the requirements are too onerous.
Airline unions have raised concerns that Treasury Secretary Steven Mnuchin will demand too much in equity, warrants or other financial instruments in exchange for the government assistance meant to cover some payroll costs approved by Congress last month.
In a letter Sunday, House Speaker Nancy Pelosi, Senate Democratic Leader Chuck Schumer, House Transportation Committee chairman Peter DeFazio and Senator Sherrod Brown urged Treasury "to quickly and fairly enter in to direct payroll assistance agreements."
Some officials have raised concerns that if Treasury demands too much, airlines could opt to file for bankruptcy instead.
The lawmakers' letter said the goal was to provide payroll help for airlines and contractors "recognizing that bankruptcy is in neither those companies' nor their employees' interest.... Assistance must not come with unreasonable conditions that would force an employer to choose bankruptcy instead of providing payroll grants to its workers."
The bill provides for $25 billion in payroll assistance grants to passenger airlines, $4 billion for cargo carriers and $3 billion to contractors like caterers and airplane cleaners.
Delta Air Lines IncDAL.N, American Airlines Group Inc AAL.O, Spirit Airlines IncSAVE.N, Southwest Airlines Co LUV.N, United Airlines Holdings Inc UAL.O and JetBlue Airways Corp JBLU.O are among the airlines that confirmed they filed before a Friday deadline set by Treasury to get speedy consideration.
Others like FedEx Corp FDX.N said they were eligible, but declined to say if they applied.
Congress gave Mnuchin discretion to ask airlines and contractors for equity or other compensation on grants. He is required to seek compensation for up to $29 billion in loans for airlines.
Treasury told airlines to propose potential compensation as part of their applications.
Treasury did not immediately respond to a request for comment. Mnuchin said Thursday the government would move quickly and said he would "strike the right balance -- not a bailout out -- taxpayers get compensated... We want to keep our airlines intact."
Mnuchin confirmed PJT Partners Inc PJT.N will advise the Treasury on passenger airline negotiations, while Moelis & Co MC.N will advise the Treasury on its negotiations with cargo carriers.
(Reporting by David Shepardson; Editing by Lisa Shumaker)
((David.Shepardson@thomsonreuters.com; 2028988324;))
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Delta Air Lines IncDAL.N, American Airlines Group Inc AAL.O, Spirit Airlines IncSAVE.N, Southwest Airlines Co LUV.N, United Airlines Holdings Inc UAL.O and JetBlue Airways Corp JBLU.O are among the airlines that confirmed they filed before a Friday deadline set by Treasury to get speedy consideration. By David Shepardson WASHINGTON, April 5 (Reuters) - Top Democrats in Congress on Sunday urged the U.S. Treasury not to set "unreasonable conditions" in awarding $32 billion in cash assistance to airlines and airport contractors and warned that they could be forced to file for bankruptcy if the requirements are too onerous. Airline unions have raised concerns that Treasury Secretary Steven Mnuchin will demand too much in equity, warrants or other financial instruments in exchange for the government assistance meant to cover some payroll costs approved by Congress last month.
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Delta Air Lines IncDAL.N, American Airlines Group Inc AAL.O, Spirit Airlines IncSAVE.N, Southwest Airlines Co LUV.N, United Airlines Holdings Inc UAL.O and JetBlue Airways Corp JBLU.O are among the airlines that confirmed they filed before a Friday deadline set by Treasury to get speedy consideration. By David Shepardson WASHINGTON, April 5 (Reuters) - Top Democrats in Congress on Sunday urged the U.S. Treasury not to set "unreasonable conditions" in awarding $32 billion in cash assistance to airlines and airport contractors and warned that they could be forced to file for bankruptcy if the requirements are too onerous. The bill provides for $25 billion in payroll assistance grants to passenger airlines, $4 billion for cargo carriers and $3 billion to contractors like caterers and airplane cleaners.
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Delta Air Lines IncDAL.N, American Airlines Group Inc AAL.O, Spirit Airlines IncSAVE.N, Southwest Airlines Co LUV.N, United Airlines Holdings Inc UAL.O and JetBlue Airways Corp JBLU.O are among the airlines that confirmed they filed before a Friday deadline set by Treasury to get speedy consideration. By David Shepardson WASHINGTON, April 5 (Reuters) - Top Democrats in Congress on Sunday urged the U.S. Treasury not to set "unreasonable conditions" in awarding $32 billion in cash assistance to airlines and airport contractors and warned that they could be forced to file for bankruptcy if the requirements are too onerous. Airline unions have raised concerns that Treasury Secretary Steven Mnuchin will demand too much in equity, warrants or other financial instruments in exchange for the government assistance meant to cover some payroll costs approved by Congress last month.
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Delta Air Lines IncDAL.N, American Airlines Group Inc AAL.O, Spirit Airlines IncSAVE.N, Southwest Airlines Co LUV.N, United Airlines Holdings Inc UAL.O and JetBlue Airways Corp JBLU.O are among the airlines that confirmed they filed before a Friday deadline set by Treasury to get speedy consideration. By David Shepardson WASHINGTON, April 5 (Reuters) - Top Democrats in Congress on Sunday urged the U.S. Treasury not to set "unreasonable conditions" in awarding $32 billion in cash assistance to airlines and airport contractors and warned that they could be forced to file for bankruptcy if the requirements are too onerous. In a letter Sunday, House Speaker Nancy Pelosi, Senate Democratic Leader Chuck Schumer, House Transportation Committee chairman Peter DeFazio and Senator Sherrod Brown urged Treasury "to quickly and fairly enter in to direct payroll assistance agreements."
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6102.0
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2020-04-05 00:00:00 UTC
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The Department of Transportation Just Gave Airline Stocks 3 Huge Wins
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AAL
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https://www.nasdaq.com/articles/the-department-of-transportation-just-gave-airline-stocks-3-huge-wins-2020-04-05
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After President Trump signed the $2 trillion coronavirus relief package into law on March 27, executives from the top passenger airlines like Southwest Airlines (NYSE: LUV), Delta Air Lines (NYSE: DAL), and American Airlines Group (NASDAQ: AAL) probably breathed sighs of relief. After all, the new law gave them $25 billion in bailout funds to help maintain payroll and another $25 billion in loans earmarked for the industry.
But three days later, they likely got nervous again, as the Treasury Department issued guidelines for companies that receive that money. In particular, a rule requiring recipients to maintain existing levels of service had some industry insiders worried that they'd have to continue operating expensive empty or near-empty flights to qualify.
Luckily, on March 28, the U.S. Department of Transportation weighed in with new guidelines, which ought to make the airlines -- and their investors -- relieved again (well, as much as possible in the current economic environment)! Specifically, the guidelines contained three big wins for the industry. Here's what they were and why they're important.
Image source: Getty Images.
Win No. 1: Route consolidation lite
Many airlines have been hoping to get the green light to consolidate routes without penalty. True route consolidation involves removing most of the flights on a particular route -- say, Boston to New York City -- and allowing multiple carriers to book seats on the remaining flight or flights, which are operated by just one carrier.
So, for example, if every carrier normally operates three flights a day (morning, afternoon, and evening) from Boston to New York, but there's only enough demand for two flights total per day, maybe Southwest operates a morning flight, Delta operates an evening flight, and any other carrier that used to operate that route could sell tickets through its website on one of those two flights.
The guidelines don't go quite that far, but they do allow carriers to consolidate flights to a single airport in each city they serve. So in the above example, if American Airlines flew into LaGuardia, Kennedy, and Newark airports -- all of which serve New York -- it could cut down its flights to just one of those airports and still satisfy the Treasury Department's "existing levels of service" requirement.
Win No. 2: Spreading out the schedule
The Transportation Department is generously interpreting "service to" a city as any flight from anywhere into that city. It has also imposed the following "tiers" of service obligations:
IF, AT THE END OF FEBRUARY, AN AIRLINE SERVED A CITY: TO MAINTAIN ITS SERVICE OBLIGATION, IT MUST NOW OFFER AT LEAST:
With at least one flight on at least five days per week, One flight per day, five days per week.
Less than five days per week One flight per week.
Data source: Department of Transportation.
So, as the DOT says in a footnote, "For example, if a carrier operated seven flights per day, seven days per week to a given point, it would only be required to operate one flight per day, five days per week."
And since, remember, those flights could come from anywhere and still count, an airline that previously flew 60 flights a day into all three New York airports from cities up and down the Eastern Seaboard could operate a single flight from Boston to LaGuardia on weekdays only and it would be considered to be operating at the same "level of service" as before. Similarly, the airline could offer a lone flight from Boston on Monday, one from Atlanta on Tuesday, one from Chicago on Wednesday, etc.
This change will go a long way toward helping airlines trim unnecessary flights.
Win No. 3: Challenging the guidelines
But what if, like Delta, your airline had previously served tiny Brainerd, Minnesota (estimated population: 13,465), and now literally nobody at all is flying there? Do you still have to fly an empty plane up there once a week for no apparent reason?
Not necessarily, says the DOT. Instead, it "recognizes that even with these reduced service levels, it may not be practicable for covered carriers to serve all points previously served in the prevailing operating environment. Likewise, points that may make practical sense to serve now, may not at a later date."
Transportation Secretary Elaine Chao, the DOT asserts, has the authority to determine whether a particular service obligation is "reasonable or practicable," and airlines are encouraged to submit a list of destinations from which they believe they should be exempted from serving. The DOT will get back to them "in a timely manner."
The big win: Reason
Maintaining air service is essential for cities in normal times. But when international flights have been canceled and more than 90% of Americans have been instructed to stay at home except for essential travel, the rationale for maintaining a particular level of service pales. The Department of Transportation realizes there isn't much point in forcing an airline to pay for fuel, maintenance, and crew to fly an empty plane around.
Of course, mass layoffs of pilots and crew members isn't a good solution, either, which is why $25 billion in the original bill was earmarked for maintaining payroll. The main message being sent to the airlines by Secretary Chao is that the DOT is going to be flexible and reasonable when enforcing the service mandate.
It may not save airlines from a recession, but it should at least help reassure an industry that's already been hammered by the coronavirus.
10 stocks we like better than Southwest Airlines
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Southwest Airlines wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of March 18, 2020
John Bromels has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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After President Trump signed the $2 trillion coronavirus relief package into law on March 27, executives from the top passenger airlines like Southwest Airlines (NYSE: LUV), Delta Air Lines (NYSE: DAL), and American Airlines Group (NASDAQ: AAL) probably breathed sighs of relief. In particular, a rule requiring recipients to maintain existing levels of service had some industry insiders worried that they'd have to continue operating expensive empty or near-empty flights to qualify. Transportation Secretary Elaine Chao, the DOT asserts, has the authority to determine whether a particular service obligation is "reasonable or practicable," and airlines are encouraged to submit a list of destinations from which they believe they should be exempted from serving.
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After President Trump signed the $2 trillion coronavirus relief package into law on March 27, executives from the top passenger airlines like Southwest Airlines (NYSE: LUV), Delta Air Lines (NYSE: DAL), and American Airlines Group (NASDAQ: AAL) probably breathed sighs of relief. So, for example, if every carrier normally operates three flights a day (morning, afternoon, and evening) from Boston to New York, but there's only enough demand for two flights total per day, maybe Southwest operates a morning flight, Delta operates an evening flight, and any other carrier that used to operate that route could sell tickets through its website on one of those two flights. The big win: Reason Maintaining air service is essential for cities in normal times.
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After President Trump signed the $2 trillion coronavirus relief package into law on March 27, executives from the top passenger airlines like Southwest Airlines (NYSE: LUV), Delta Air Lines (NYSE: DAL), and American Airlines Group (NASDAQ: AAL) probably breathed sighs of relief. So, for example, if every carrier normally operates three flights a day (morning, afternoon, and evening) from Boston to New York, but there's only enough demand for two flights total per day, maybe Southwest operates a morning flight, Delta operates an evening flight, and any other carrier that used to operate that route could sell tickets through its website on one of those two flights. So, as the DOT says in a footnote, "For example, if a carrier operated seven flights per day, seven days per week to a given point, it would only be required to operate one flight per day, five days per week."
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After President Trump signed the $2 trillion coronavirus relief package into law on March 27, executives from the top passenger airlines like Southwest Airlines (NYSE: LUV), Delta Air Lines (NYSE: DAL), and American Airlines Group (NASDAQ: AAL) probably breathed sighs of relief. The guidelines don't go quite that far, but they do allow carriers to consolidate flights to a single airport in each city they serve. So, as the DOT says in a footnote, "For example, if a carrier operated seven flights per day, seven days per week to a given point, it would only be required to operate one flight per day, five days per week."
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6103.0
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2020-04-05 00:00:00 UTC
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Why I’m Not Surprised Warren Buffett Is Selling His Airline Stocks
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AAL
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https://www.nasdaq.com/articles/why-im-not-surprised-warren-buffett-is-selling-his-airline-stocks-2020-04-05
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After market close on Friday, April 3, Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) filed two disclosure forms with the U.S. Securities and Exchange Commission saying the company had sold off 2.3 million shares of Southwest Airlines (NYSE: LUV) for $74 million and nearly 13 million shares of Delta (NYSE: DAL) for $314 million.
Buffett and Co. had to disclose these sales because Berkshire had owned over 10% of each company. Normally, public equity trades don't have to be disclosed until a company files its 13-F statements in the middle of the next quarter. It's unclear if Berkshire has also sold its smaller stakes in United Airlines (NASDAQ: UAL) or American Airlines (NASDAQ: AAL).
Some may have been surprised that Buffett, who is famous for coining the phrase, "Be greedy when others are fearful," would begin selling off stocks that are now trading at low-single-digit P/E ratios and are off by much more than 50% since the year began.
However, these sales don't surprise me at all. In fact, I wouldn't be shocked to learn Berkshire has already sold off its United and American stakes before making the above trades and thus the mandatory disclosures, which is sure to make airline stocks fall further on Monday. Here's why.
Image source: Getty Images.
Don't ignore these other Buffett-isms
While many know the Buffett-ism, "be greedy when others are fearful," and "our favorite holding period is forever," investors should know that those aren't blanket statements by any means. For the second statement, the real quote is, "when we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever."
While all airlines still have their same managements, it's quite possible Buffett has changed his mind when it comes to airlines being outstanding businesses. If Buffett now believes COVID-19 has changed the intrinsic value of America's airlines, it shows a lot of objectivity and internal fortitude to sell and cut losses. In that sense, these other, lesser-known Buffett-isms would apply to the current situation:
"Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks."
"The most important thing to do if you find yourself in a hole is to stop digging."
While Buffett usually holds firm to his long-term-oriented, buy-and-hold value investing approach, he has also shown no hesitation to sell when his mind changes about a company's long-term prospects. Buffett completely sold out of IBM (NYSE: IBM) in 2018 after holding the stock for seven years, and has also been selling off longtime holding Wells Fargo (NYSE: WFC) after a series of scandals since 2016 sullied the bank's brand and reputation.
How the intrinsic value of the airlines changed in a month
Investors may be wondering how it's possible that the intrinsic value of airlines changed so much so quickly, especially when most were already trading at relatively cheap valuations to start the year. The answer can be summed up in one word: leverage.
First off, there's financial leverage. As you can see, all four airlines use debt on their balance sheets, which most had used to grow routes and return profits to shareholders in the form of buybacks and dividends.
DAL Financial Debt to EBITDA (TTM) data by YCharts
From the above charts, you can see why Berkshire owned more Delta and Southwest -- these were the least-leveraged of the four major airlines.
Second, there's significant leverage in airlines' business models. All airlines have relatively high fixed costs, because of the maintenance of planes, a unionized workforce, and other overhead costs. That's why Buffett had previously thought airlines were terrible investments, before industry consolidation in the last financial crisis made the industry much more attractive in his eyes.
As a result of recent shutdowns, airlines are now burning through a stunning amount of cash per day. United Airlines recently said it was losing $100 million in revenue per day. Delta's CEO Ed Bastian said Delta is burning $60 million in cash per day, and that that number is going to get worse. Even the smaller JetBlue (NASDAQ: JBLU) is burning $10 million per day. At the end of March, the International Air Transport Association (IATA) published a report predicting the global airline industry will burn $61 billion in cash during the second quarter alone. This incorporates about $39 billion of losses in the second quarter and another $35 billion or so resulting from cancellations and refunds.
But you may retort, "But the government is going to come in and bail the airlines out." That is true, but these bailouts will add a third form of leverage to airlines in the form of government loans or guarantees. As a condition of the bailouts, any company that receives government assistance will have to suspend buybacks and dividends through 2021, and will also be prohibited from buying back stock for as long as the company is "on" government assistance -- likely until the loan is paid off -- and then for an additional year thereafter.
Buffett has long been a fan of stock buybacks, especially for companies with undervalued stock. Therefore, since it appears there won't be capital returns in airline stocks for some time to come, Buffett thought it best to leave this leaking boat for now.
We still don't know
Of course, I could be blowing things out of proportion. It's quite possible that Berkshire has only sold the minimal amount of Delta and Southwest that we know about and still retains stakes in the other two airlines.
However, instead of clinging to hope on airlines, I still think investors should follow Buffett and cut bait. We aren't going to know how much airlines will require in government bailouts, and thus how much debt they will have to pay down in the upcoming years. In addition, we don't know how quickly things will normalize. With a COVID-19 vaccine still likely 18 months to two years away, it's quite possible it could be years before air travel is fully back to normal, even when quarantines are lifted.
In addition, Berkshire has several other fully owned operating businesses that may need internal "bailouts" from headquarters over the next few months. Thus, with internal cash needs abounding and with other stocks with better prospects than airlines also falling with the market, it's not surprising to see Buffett backing off his airline bets in order to put cash to use elsewhere. You should do the same.
10 stocks we like better than Berkshire Hathaway (A shares)
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Berkshire Hathaway (A shares) wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of March 18, 2020
Billy Duberstein owns shares of Berkshire Hathaway (B shares) and IBM. His clients may own shares of the companies mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares), Delta Air Lines, and Southwest Airlines. The Motley Fool recommends JetBlue Airways and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short June 2020 $205 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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It's unclear if Berkshire has also sold its smaller stakes in United Airlines (NASDAQ: UAL) or American Airlines (NASDAQ: AAL). Some may have been surprised that Buffett, who is famous for coining the phrase, "Be greedy when others are fearful," would begin selling off stocks that are now trading at low-single-digit P/E ratios and are off by much more than 50% since the year began. DAL Financial Debt to EBITDA (TTM) data by YCharts From the above charts, you can see why Berkshire owned more Delta and Southwest -- these were the least-leveraged of the four major airlines.
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It's unclear if Berkshire has also sold its smaller stakes in United Airlines (NASDAQ: UAL) or American Airlines (NASDAQ: AAL). After market close on Friday, April 3, Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) filed two disclosure forms with the U.S. Securities and Exchange Commission saying the company had sold off 2.3 million shares of Southwest Airlines (NYSE: LUV) for $74 million and nearly 13 million shares of Delta (NYSE: DAL) for $314 million. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares), Delta Air Lines, and Southwest Airlines.
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It's unclear if Berkshire has also sold its smaller stakes in United Airlines (NASDAQ: UAL) or American Airlines (NASDAQ: AAL). After market close on Friday, April 3, Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) filed two disclosure forms with the U.S. Securities and Exchange Commission saying the company had sold off 2.3 million shares of Southwest Airlines (NYSE: LUV) for $74 million and nearly 13 million shares of Delta (NYSE: DAL) for $314 million. Thus, with internal cash needs abounding and with other stocks with better prospects than airlines also falling with the market, it's not surprising to see Buffett backing off his airline bets in order to put cash to use elsewhere.
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It's unclear if Berkshire has also sold its smaller stakes in United Airlines (NASDAQ: UAL) or American Airlines (NASDAQ: AAL). Buffett and Co. had to disclose these sales because Berkshire had owned over 10% of each company. See the 10 stocks *Stock Advisor returns as of March 18, 2020 Billy Duberstein owns shares of Berkshire Hathaway (B shares) and IBM.
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6104.0
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2020-04-04 00:00:00 UTC
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Coronavirus Forces American Airlines to Accelerate Fleet Retirements
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AAL
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https://www.nasdaq.com/articles/coronavirus-forces-american-airlines-to-accelerate-fleet-retirements-2020-04-04
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nan
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The rapid spread of the COVID-19 pandemic over the past several weeks has dealt a massive blow to airlines around the world. In the U.S., traveler throughput at TSA checkpoints has been down more than 90% year over year for more than a week.
As the most heavily indebted airline in the country -- and one of the least profitable, to boot -- American Airlines (NASDAQ: AAL) has been particularly hard hit. The company is depending on up to $12 billion of government-sponsored payroll protection grants and loans to provide the liquidity it needs to get through the current crisis.
To make matters worse, American Airlines executives don't expect demand to bounce back very quickly. As a result, the airline is accelerating plans to simplify its fleet and retire many of its oldest jets.
Phasing out two old stalwarts
The first fleet simplification announcement came out several weeks ago. In a memo to staff on March 12, management said that American would retire all of its Boeing (NYSE: BA) 767s by the end of May. The airline's remaining Boeing 757s will follow the 767s out the door, with the last ones being retired by the end of the 2021 summer season.
Boeing 787 Dreamliners will eventually replace American's retiring 767 fleet. Image source: American Airlines.
At the beginning of this year, American Airlines had 34 757s and 17 767s in its fleet, with an average age of 20 years: old, but not that old by commercial airline standards. These two models were developed by Boeing at the same time and share a type rating, meaning that the same pilots can fly either one. Three of American's 757s are leased, while the other 48 planes are owned by the company.
Entering 2020, American Airlines had already planned to retire 11 of its 767s by year-end, with the last six exiting the fleet in 2021. This made it a no-brainer to permanently ground the 767s this spring. Air travel demand isn't likely to recover to 2019 levels until 2022 or later, so there's no need for these aircraft until after they were already scheduled to retire.
Meanwhile, 10 of the 757s were set to be retired soon after American's fleet of 737 MAX 8s was ungrounded, with the other 24 likely to be replaced by new Airbus A321XLRs in 2023 and 2024. The combined 757 fleet is already undersized from an efficiency perspective. (There are more than 900 planes in American's mainline fleet.) Phasing out the 757s earlier than planned will simplify the fleet, which should improve productivity. It will also allow the carrier to avoid rising maintenance costs for these aircraft.
The early retirement of the 757s does create one thorny problem. Until A321XLRs start arriving in late 2023, American Airlines won't have a narrow-body plane capable of flying between the East Coast and Europe. However, management may figure that there won't be adequate demand to justify flying many of the lower-traffic routes served by the 757s over the next few years. Other former 757 routes will presumably be covered by larger planes like the Boeing 787-8 until the A321XLR becomes available.
Airbus' A321XLR will eventually replace American Airlines' Boeing 757s on international routes. Image source: Airbus.
More aircraft on the way out
Last Sunday, American Airlines revealed additional steps to shrink and simplify its fleet. It will retire all 20 of its Embraer E190s and all nine of its A330-300s over the next year or so.
The E190 retirements had already been planned for this year, as those planes have high unit costs and are expensive to maintain. Management has also been batting around the idea of retiring the A330-300s for years. (Back in mid-2016, the plan was to retire them all by the end of 2018.) Like the 757 and 767 fleets, American's A330-300s are about 20 years old. While that's not especially old for a commercial jet, simplification is again the goal: these planes use an engine type that is unique in American's fleet and therefore costly to maintain.
Additionally, American Airlines plans to retire its 76 oldest Boeing 737s. While the airline's 737 fleet is just 10 years old on average, the planes it will retire were built between 1999 and 2001. A couple of years ago, management had said that 45 of these older 737s would be retired by the end of 2020, but the carrier later backtracked and extended the lives of those planes. Now, the early retirement plan is back on track (and enlarged).
Previously, I wasn't a fan of retiring these 737s early, but doing so makes more sense now. American Airlines will likely need a smaller domestic fleet for the next couple of years, and it may be impractical to halt all new aircraft deliveries from Boeing and Airbus for that long. Furthermore, American is in the midst of refurbishing its 737s and converting them to a new 172-seat configuration. Retiring the older ones in the near term will allow the airline to reduce its spending on that reconfiguration project.
It's just a waiting game
Together, these initiatives to shrink and simplify American Airlines' fleet will retire 156 aircraft and remove four different models (the 757-200, 767-300, A330-300, and E190) and two aircraft types (the 757/767 and the E190) from service. These are all sensible moves to better match future capacity to expected demand and cut costs by reducing complexity and phasing out older, less-reliable jets.
That said, the potential benefits of these efforts are modest compared to the amount of revenue American Airlines is losing right now due to COVID-19 crushing demand. Until demand recovers to at least 70%-80% of its pre-coronavirus level, even the most aggressive cost-cutting efforts will only slow (not stop) American's losses. In short, the company's future depends in large part on matters outside its control, which is an unenviable position to be in.
The cash infusions being offered by the government and American's own efforts to raise cash will probably (but not definitely) enable the company to survive the next few quarters. However, it will exit 2020 with far more debt than the $33.4 billion it had at the beginning of the year, leaving the airline giant with little flexibility to withstand any further setbacks in the years ahead.
10 stocks we like better than American Airlines Group
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Adam Levine-Weinberg owns shares of American Airlines Group and Embraer. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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As the most heavily indebted airline in the country -- and one of the least profitable, to boot -- American Airlines (NASDAQ: AAL) has been particularly hard hit. Until A321XLRs start arriving in late 2023, American Airlines won't have a narrow-body plane capable of flying between the East Coast and Europe. American Airlines will likely need a smaller domestic fleet for the next couple of years, and it may be impractical to halt all new aircraft deliveries from Boeing and Airbus for that long.
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As the most heavily indebted airline in the country -- and one of the least profitable, to boot -- American Airlines (NASDAQ: AAL) has been particularly hard hit. Additionally, American Airlines plans to retire its 76 oldest Boeing 737s. It's just a waiting game Together, these initiatives to shrink and simplify American Airlines' fleet will retire 156 aircraft and remove four different models (the 757-200, 767-300, A330-300, and E190) and two aircraft types (the 757/767 and the E190) from service.
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As the most heavily indebted airline in the country -- and one of the least profitable, to boot -- American Airlines (NASDAQ: AAL) has been particularly hard hit. At the beginning of this year, American Airlines had 34 757s and 17 767s in its fleet, with an average age of 20 years: old, but not that old by commercial airline standards. Entering 2020, American Airlines had already planned to retire 11 of its 767s by year-end, with the last six exiting the fleet in 2021.
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As the most heavily indebted airline in the country -- and one of the least profitable, to boot -- American Airlines (NASDAQ: AAL) has been particularly hard hit. Like the 757 and 767 fleets, American's A330-300s are about 20 years old. Additionally, American Airlines plans to retire its 76 oldest Boeing 737s.
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6105.0
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2020-04-04 00:00:00 UTC
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Delta Extends eCredits for Canceled Flights for 2 Years
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AAL
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https://www.nasdaq.com/articles/delta-extends-ecredits-for-canceled-flights-for-2-years-2020-04-04
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The novel coronavirus has infected nearly 1.1 million people worldwide and claimed more than 58,000 lives. It's a pandemic of tragic proportions; next to the toll it's taken on human health, the damage coronavirus has wreaked on travel plans probably pales in comparison.
That still doesn't make unraveling the mess COVID-19 has made of our travel plans a whole lot of fun.
Image source: Delta Air Lines.
Airlines seem to be modifying plans for compensating travelers for canceled flight plans on a nearly daily basis. Up until recently, though, the three major legacy carriers, Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), and United Airlines Holdings (NASDAQ: UAL) had all settled upon roughly the same policy:
So long as you purchased your tickets in March or April 2019, and planned to travel sometime between March and May, it would be possible to cancel your flight, receive a travel credit, and use that credit to book a different flight departing no later than December 31, 2020.
On Friday, Delta Air Lines broke from this consensus -- in a good way.
Explaining that "in these times of rapid change," it understands that "you want the value of your ticket to be secure and redeemable for a longer period" than just through the end of this year, Delta is "now extending your eCredit for up to two years."
In fact, explains Delta, "all applicable eCredits will be automatically extended for travel to be completed through May 31, 2022, so there's no action needed" from the ticket holder, other than simply canceling a currently booked flight.
This policy is still new, and so far limited to Delta. The company is "working on a solution to display the new expiration dates on Delta.com, so [that customers can see that their] flight value is secure ."
10 stocks we like better than Delta Air Lines
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*Stock Advisor returns as of March 18, 2020
Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Delta Air Lines. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Up until recently, though, the three major legacy carriers, Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), and United Airlines Holdings (NASDAQ: UAL) had all settled upon roughly the same policy: So long as you purchased your tickets in March or April 2019, and planned to travel sometime between March and May, it would be possible to cancel your flight, receive a travel credit, and use that credit to book a different flight departing no later than December 31, 2020. It's a pandemic of tragic proportions; next to the toll it's taken on human health, the damage coronavirus has wreaked on travel plans probably pales in comparison. In fact, explains Delta, "all applicable eCredits will be automatically extended for travel to be completed through May 31, 2022, so there's no action needed" from the ticket holder, other than simply canceling a currently booked flight.
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Up until recently, though, the three major legacy carriers, Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), and United Airlines Holdings (NASDAQ: UAL) had all settled upon roughly the same policy: So long as you purchased your tickets in March or April 2019, and planned to travel sometime between March and May, it would be possible to cancel your flight, receive a travel credit, and use that credit to book a different flight departing no later than December 31, 2020. Airlines seem to be modifying plans for compensating travelers for canceled flight plans on a nearly daily basis. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.
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Up until recently, though, the three major legacy carriers, Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), and United Airlines Holdings (NASDAQ: UAL) had all settled upon roughly the same policy: So long as you purchased your tickets in March or April 2019, and planned to travel sometime between March and May, it would be possible to cancel your flight, receive a travel credit, and use that credit to book a different flight departing no later than December 31, 2020. 10 stocks we like better than Delta Air Lines When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. * David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Delta Air Lines wasn't one of them!
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Up until recently, though, the three major legacy carriers, Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), and United Airlines Holdings (NASDAQ: UAL) had all settled upon roughly the same policy: So long as you purchased your tickets in March or April 2019, and planned to travel sometime between March and May, it would be possible to cancel your flight, receive a travel credit, and use that credit to book a different flight departing no later than December 31, 2020. Airlines seem to be modifying plans for compensating travelers for canceled flight plans on a nearly daily basis. In fact, explains Delta, "all applicable eCredits will be automatically extended for travel to be completed through May 31, 2022, so there's no action needed" from the ticket holder, other than simply canceling a currently booked flight.
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6106.0
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2020-04-03 00:00:00 UTC
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Look at American Airlines Stock Through a Wider Lens
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AAL
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https://www.nasdaq.com/articles/look-at-american-airlines-stock-through-a-wider-lens-2020-04-03
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips
American Airlines (NASDAQ:AAL) stock is down over 65% in 2020. But quite frankly every airline in the world is facing the same issue. Demand for their services is essentially zero. And it will be for the foreseeable future. That’s not the headline story for AAL stock.
Source: GagliardiPhotography / Shutterstock.com
In no way do I mean to imply that the pandemic is not a serious event. But like other “Black Swan” events, it has put the entire industry on pause. And because all airlines face the same short-term consequences, it can be easy to think that every airline will benefit from a resurgence of consumer demand.
However the real problem for AAL stock is one of math. Unlike many of its counterparts, the company was not showing robust growth before the novel coronavirus pandemic. And that was in the middle of an unparalleled economic expansion.
The prudent investor knows that the industry will come back. And that’s why you have to look at the health of the company before the outbreak. Those companies will be in the best position to recover quickly. Unfortunately, American cannot make that claim.
American’s Balance Sheet Was Already Sick
American Airlines came into 2020 with $29.6 billion of adjusted net debt. That was 65% of the company’s 2019 revenue. Of the major airlines, including Delta Air Lines (NYSE:DAL) and United Airlines (NASDAQ:UAL), American is the one that can least afford to go further into debt. Yet, that’s exactly what is likely to happen. And that’s why you have to think twice before investing in AAL stock.
7 Telecom Stocks That Are Worth a Close Look
Thanks in part to a lobbying effort by Airlines for America, an industry trade group, AAL is likely to receive a portion of the $50 billion loan package requested from the U.S. government. And, as InvestorPlace’s Tom Taulli points out, American has friends in the right places. Warren Buffett’s Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B) owns a 10% stake in the company and is unlikely to let it fail.
But it is clear that the electorate is not in the mood for bailouts. If American Airlines receives a loan, it is going to be expected to pay it back. However, it is in the worst position to do it. For an investor, that means it may take AAL stock longer to turn a profit than airlines with less pre-pandemic debt.
American has responded to critics, pointing out that it has $7.3 billion in liquidity, more than any other airline in the world. However, that cash is more than offset by the company’s debt burden.
The Audacity of Hope
A lot has been made about our country’s state of preparedness for the pandemic. For whatever reason, American Airlines made a tactical error in that regard. In early March the company issued guidance that seriously underestimated the lack of demand for its flights. On March 10, CEO Doug Parker stated the airline would reduce domestic capacity by 7.5% in April and international flights by at least 10% through the summer.
But less than a week later, the company was forced to provide a revised estimate. At that time, AAL announced it would institute a 30% cut in domestic flights and a 75% reduction in international flights in April. The airline also said those reductions will likely become deeper during May.
Investors don’t take kindly to downward revisions to begin with. But American was on a short leash with its history of share buybacks that are drawing the ire of investors and Congressional leaders. From July 2014 through 2019, American bought $12.4 billion of its own stock.
Would You Buy AAL Stock if There Was no Coronavirus?
Right now, AAL stock is a hard pass. It has to be. This is not an alarmist statement that suggests American Airlines will become insolvent. The airline will be ready and able to fly passengers after the travel guidelines are rescinded.
But when that will be and how soon consumers will come back are unanswerable questions, at least for now. Our world’s response to the virus is a science experiment being played out in real time. Our world’s response after the threat recedes will be the subject of doctoral theses for decades.
InvestorPlace contributor Nicolas Chahine makes a case that American Airlines may be too much of a bargain to pass up at this price. He may be right, but if you’re an investor who is looking at AAL stock, you have to know the consumer response before you consider investing.
Starting from an equal playing field, there are other airline stocks that are more attractive.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019. As of this writing Chris Markoch did not hold a position in any of the aforementioned securities.
The post Look at American Airlines Stock Through a Wider Lens appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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7 Telecom Stocks That Are Worth a Close Look Thanks in part to a lobbying effort by Airlines for America, an industry trade group, AAL is likely to receive a portion of the $50 billion loan package requested from the U.S. government. InvestorPlace - Stock Market News, Stock Advice & Trading Tips American Airlines (NASDAQ:AAL) stock is down over 65% in 2020. That’s not the headline story for AAL stock.
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips American Airlines (NASDAQ:AAL) stock is down over 65% in 2020. At that time, AAL announced it would institute a 30% cut in domestic flights and a 75% reduction in international flights in April. That’s not the headline story for AAL stock.
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips American Airlines (NASDAQ:AAL) stock is down over 65% in 2020. That’s not the headline story for AAL stock. However the real problem for AAL stock is one of math.
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips American Airlines (NASDAQ:AAL) stock is down over 65% in 2020. He may be right, but if you’re an investor who is looking at AAL stock, you have to know the consumer response before you consider investing. That’s not the headline story for AAL stock.
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6107.0
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2020-04-03 00:00:00 UTC
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Why Airline Shares Are Falling Today
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AAL
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https://www.nasdaq.com/articles/why-airline-shares-are-falling-today-2020-04-04
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What happened
Shares of major airlines continued to be under pressure on Friday as fresh details leaked out about how the COVID-19 coronavirus pandemic has impacted travel demand. The airlines are bleeding cash and looking for ways to cut costs, and increasingly it appears there will be no quick turnaround.
Shares of American Airlines Group (NASDAQ: AAL) were down 8% as of 3 p.m. EDT, while shares of United Airlines Holdings (NASDAQ: UAL) and Southwest Airlines (NYSE: LUV) were down more than 5%.
So what
Airlines have been hard hit by the pandemic, with travel demand all but evaporating overnight. The airlines have cut flights and grounded planes to try to trim costs, but no amount of cutting can offset no revenue coming in the door.
Airline executives in the last 24 hours have given an indication about how dire the situation is, with United president Scott Kirby saying during an employee town hall meeting that revenue is down $100 million per day. Southwest meanwhile operated 56 flights last Monday with zero passengers onboard, according to a memo obtained by the Dallas Business Journal.
Image source: Getty Images.
The U.S. government came through with $50 billion to support the industry last week, but that cash will only last for so long. United management warned employees last Friday that, "if the recovery is as slow as we fear, it means our airline and our workforce will have to be smaller than it is today."
Unfortunately, the airlines see little evidence that the downturn will be quick. In a regulatory filing Friday, American said it was suspending more than 60% of total international capacity for the summer, due to a drop in demand, and has pushed back the start date for planned new international service from October 2020 to the winter of 2021.
Now what
There's no easy answer for the airlines, and their share-price declines reflect that. Shares of United, American, and Delta Air Lines are all down more than 60% year to date, and shares of Southwest have lost nearly half of their value.
Thanks in part to the government bailout, the companies have a cash runway and are not a bankruptcy risk. But until there's some sign that the pandemic is under control, and at least a hint that U.S. travel is recovering to at least normal recessionary levels, it's going to be hard for these stocks to get a lift.
I still believe the airlines can navigate through this, but investors interested in exploring the sector would be wise to focus on the top operators that should be able to withstand the slowdown longer.
10 stocks we like better than Southwest Airlines
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Southwest Airlines wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of March 18, 2020
Lou Whiteman owns shares of Delta Air Lines. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Shares of American Airlines Group (NASDAQ: AAL) were down 8% as of 3 p.m. EDT, while shares of United Airlines Holdings (NASDAQ: UAL) and Southwest Airlines (NYSE: LUV) were down more than 5%. What happened Shares of major airlines continued to be under pressure on Friday as fresh details leaked out about how the COVID-19 coronavirus pandemic has impacted travel demand. Airline executives in the last 24 hours have given an indication about how dire the situation is, with United president Scott Kirby saying during an employee town hall meeting that revenue is down $100 million per day.
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Shares of American Airlines Group (NASDAQ: AAL) were down 8% as of 3 p.m. EDT, while shares of United Airlines Holdings (NASDAQ: UAL) and Southwest Airlines (NYSE: LUV) were down more than 5%. Shares of United, American, and Delta Air Lines are all down more than 60% year to date, and shares of Southwest have lost nearly half of their value. See the 10 stocks *Stock Advisor returns as of March 18, 2020 Lou Whiteman owns shares of Delta Air Lines.
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Shares of American Airlines Group (NASDAQ: AAL) were down 8% as of 3 p.m. EDT, while shares of United Airlines Holdings (NASDAQ: UAL) and Southwest Airlines (NYSE: LUV) were down more than 5%. 10 stocks we like better than Southwest Airlines When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines.
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Shares of American Airlines Group (NASDAQ: AAL) were down 8% as of 3 p.m. EDT, while shares of United Airlines Holdings (NASDAQ: UAL) and Southwest Airlines (NYSE: LUV) were down more than 5%. The airlines are bleeding cash and looking for ways to cut costs, and increasingly it appears there will be no quick turnaround. So what Airlines have been hard hit by the pandemic, with travel demand all but evaporating overnight.
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6108.0
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2020-04-03 00:00:00 UTC
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Berkshire Hathaway sells part of Delta, Southwest airline stakes
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AAL
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https://www.nasdaq.com/articles/berkshire-hathaway-sells-part-of-delta-southwest-airline-stakes-2020-04-03
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Adds details of stock sales, background
April 3 (Reuters) - Warren Buffett's Berkshire Hathaway Inc BRKa.N said on Friday it sold about 18% of its stake in Delta Air Lines Inc DAL.N and 4% of its holdings in Southwest Airlines Co LUV.N this week, as the coronavirus pandemic drives the airline industry into perhaps its biggest crisis ever.
According to regulatory filings, Berkshire sold nearly 13 million Delta shares for about $314 million and roughly 2.3 million Southwest shares for about $74 million.
The sales were conducted on Wednesday and Thursday, the filings show. Berkshire previously owned about 11.1% of Delta stock and 10.4% of Southwest stock, according to Refinitiv data. No reasons for the sales were given.
Berkshire did not immediately respond to a request for comment sent to Buffett's assistant.
The Omaha, Nebraska-based conglomerate is among the biggest shareholders of the four largest U.S. carriers - Delta, Southwest, American Airlines Group Inc AAL.O and United Airlines Holdings Inc UAL.O.
Buffett has said three of the airline stakes are overseen by him, while one of his portfolio managers, Todd Combs and Ted Weschler, oversees the fourth.
Berkshire's sales were disclosed after major U.S. airlines applied on Friday for payroll grants from the U.S. Treasury to help keep workers employed.
The pandemic has punished the industry, as passengers stay home and carriers worldwide slash their schedules and ground planes. Delta projected on Friday that its second-quarter revenue would fall 90%.
(Reporting by Jonathan Stempel in New York and Rachit Vats in Bengaluru; Editing by Aditya Soni and Leslie Adler)
((jon.stempel@thomsonreuters.com; +1 646 223 6317; Reuters Messaging: jon.stempel.thomsonreuters.com@reuters.net))
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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The Omaha, Nebraska-based conglomerate is among the biggest shareholders of the four largest U.S. carriers - Delta, Southwest, American Airlines Group Inc AAL.O and United Airlines Holdings Inc UAL.O. Buffett has said three of the airline stakes are overseen by him, while one of his portfolio managers, Todd Combs and Ted Weschler, oversees the fourth. Berkshire's sales were disclosed after major U.S. airlines applied on Friday for payroll grants from the U.S. Treasury to help keep workers employed.
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The Omaha, Nebraska-based conglomerate is among the biggest shareholders of the four largest U.S. carriers - Delta, Southwest, American Airlines Group Inc AAL.O and United Airlines Holdings Inc UAL.O. Adds details of stock sales, background April 3 (Reuters) - Warren Buffett's Berkshire Hathaway Inc BRKa.N said on Friday it sold about 18% of its stake in Delta Air Lines Inc DAL.N and 4% of its holdings in Southwest Airlines Co LUV.N this week, as the coronavirus pandemic drives the airline industry into perhaps its biggest crisis ever. According to regulatory filings, Berkshire sold nearly 13 million Delta shares for about $314 million and roughly 2.3 million Southwest shares for about $74 million.
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The Omaha, Nebraska-based conglomerate is among the biggest shareholders of the four largest U.S. carriers - Delta, Southwest, American Airlines Group Inc AAL.O and United Airlines Holdings Inc UAL.O. Adds details of stock sales, background April 3 (Reuters) - Warren Buffett's Berkshire Hathaway Inc BRKa.N said on Friday it sold about 18% of its stake in Delta Air Lines Inc DAL.N and 4% of its holdings in Southwest Airlines Co LUV.N this week, as the coronavirus pandemic drives the airline industry into perhaps its biggest crisis ever. According to regulatory filings, Berkshire sold nearly 13 million Delta shares for about $314 million and roughly 2.3 million Southwest shares for about $74 million.
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The Omaha, Nebraska-based conglomerate is among the biggest shareholders of the four largest U.S. carriers - Delta, Southwest, American Airlines Group Inc AAL.O and United Airlines Holdings Inc UAL.O. Adds details of stock sales, background April 3 (Reuters) - Warren Buffett's Berkshire Hathaway Inc BRKa.N said on Friday it sold about 18% of its stake in Delta Air Lines Inc DAL.N and 4% of its holdings in Southwest Airlines Co LUV.N this week, as the coronavirus pandemic drives the airline industry into perhaps its biggest crisis ever. According to regulatory filings, Berkshire sold nearly 13 million Delta shares for about $314 million and roughly 2.3 million Southwest shares for about $74 million.
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6109.0
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2020-04-03 00:00:00 UTC
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Delta and JetBlue Apply for Bailout Funds
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AAL
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https://www.nasdaq.com/articles/delta-and-jetblue-apply-for-bailout-funds-2020-04-03
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nan
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Delta Air Lines (NYSE: DAL) and JetBlue Airways (NASDAQ: JBLU) both said Friday they are applying for federal assistance under the Coronavirus Aid, Relief and Economic Security (CARES) Act, emphasizing the precarious state the airlines are in.
Airlines have been hard hit by the COVID-19 pandemic, losing a huge share of their customers as travel demand all but evaporated overnight. They have drastically cut back on flights and grounded planes to trim their costs, but no amount of cutting can offset their falling revenues.
Delta CEO Ed Bastian said in a memo to staff the airline is burning through more than $60 million a day, and that he expects second-quarter revenue will be down 90% year over year. The airline had 38,000 passengers on its planes last Saturday. On a normal late-March Saturday, it carries 600,000.
Image source: Delta Air Lines.
Bastian said that while he appreciates the government's support, "without the self-help actions we are taking to save costs and raise new financing, that money would be gone by June." Delta's flight schedule is 80% below original projections, he said.
Meanwhile, JetBlue said that it expects about 7,000 customers daily this month, down from the 120,000 it would expect during a normal April. On a typical April day in 2019, the airline took in about $22 million in bookings and fees. It's currently bringing about $1 million daily and issuing about $2 million a day in cash refunds.
CEO Robin Hayes told employees JetBlue is burning through its cash cushion at a rate of about $10 million a day, even after parking more than 100 aircraft and reducing its schedule by 70%.
"Today we submitted our application for payroll support funds to the Treasury Department and we now enter negotiations with the U.S. Government," Hayes said in a press release. "I hope things can move quickly, and we are available this weekend so we can conclude an agreement next week, as time is of the essence."
In order to qualify for that federal aid, airlines will be required to maintain minimum service levels and avoid layoffs through Sept. 30, among other conditions, but all the U.S. carriers are expected to apply. American Airlines Group has said it will seek $12 billion in government funding, and Southwest Airlines management has indicated the airline intends to request funds as well.
10 stocks we like better than JetBlue Airways
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See the 10 stocks
*Stock Advisor returns as of March 18, 2020
Lou Whiteman owns shares of Delta Air Lines. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines. The Motley Fool recommends JetBlue Airways. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Delta Air Lines (NYSE: DAL) and JetBlue Airways (NASDAQ: JBLU) both said Friday they are applying for federal assistance under the Coronavirus Aid, Relief and Economic Security (CARES) Act, emphasizing the precarious state the airlines are in. CEO Robin Hayes told employees JetBlue is burning through its cash cushion at a rate of about $10 million a day, even after parking more than 100 aircraft and reducing its schedule by 70%. In order to qualify for that federal aid, airlines will be required to maintain minimum service levels and avoid layoffs through Sept. 30, among other conditions, but all the U.S. carriers are expected to apply.
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See the 10 stocks *Stock Advisor returns as of March 18, 2020 Lou Whiteman owns shares of Delta Air Lines. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines. The Motley Fool recommends JetBlue Airways.
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Delta Air Lines (NYSE: DAL) and JetBlue Airways (NASDAQ: JBLU) both said Friday they are applying for federal assistance under the Coronavirus Aid, Relief and Economic Security (CARES) Act, emphasizing the precarious state the airlines are in. American Airlines Group has said it will seek $12 billion in government funding, and Southwest Airlines management has indicated the airline intends to request funds as well. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines.
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Meanwhile, JetBlue said that it expects about 7,000 customers daily this month, down from the 120,000 it would expect during a normal April. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines. The Motley Fool recommends JetBlue Airways.
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6110.0
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2020-04-03 00:00:00 UTC
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Warren Buffett's Berkshire Hathaway sells some stake in Delta Air Lines
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AAL
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https://www.nasdaq.com/articles/warren-buffetts-berkshire-hathaway-sells-some-stake-in-delta-air-lines-2020-04-03
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April 3 (Reuters) - Warren Buffett's Berkshire Hathaway Inc said on Friday it has sold some of its stake in Delta Air Lines Inc .
Berkshire is among the largest investors in the carrier. It is also among the largest shareholders in American Airlines Group Inc , Southwest Airlines Co and United Airlines Holdings Inc . (Reporting by Rachit Vats in Bengaluru; Editing by Aditya Soni) ((Rachit.Vats@tr.com; within U.S. +1 646 223 8780, outside U.S. +91 80 61822828; Reuters Messaging: rachit.vats.thomsonreuters.com@reuters.net)) Keywords: BERKSHIRE STAKE/AIRLINES (URGENT)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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April 3 (Reuters) - Warren Buffett's Berkshire Hathaway Inc said on Friday it has sold some of its stake in Delta Air Lines Inc . Berkshire is among the largest investors in the carrier. (Reporting by Rachit Vats in Bengaluru; Editing by Aditya Soni) ((Rachit.Vats@tr.com; within U.S. +1 646 223 8780, outside U.S. +91 80 61822828; Reuters Messaging: rachit.vats.thomsonreuters.com@reuters.net)) Keywords: BERKSHIRE STAKE/AIRLINES (URGENT) The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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April 3 (Reuters) - Warren Buffett's Berkshire Hathaway Inc said on Friday it has sold some of its stake in Delta Air Lines Inc . It is also among the largest shareholders in American Airlines Group Inc , Southwest Airlines Co and United Airlines Holdings Inc . (Reporting by Rachit Vats in Bengaluru; Editing by Aditya Soni) ((Rachit.Vats@tr.com; within U.S. +1 646 223 8780, outside U.S. +91 80 61822828; Reuters Messaging: rachit.vats.thomsonreuters.com@reuters.net)) Keywords: BERKSHIRE STAKE/AIRLINES (URGENT) The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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April 3 (Reuters) - Warren Buffett's Berkshire Hathaway Inc said on Friday it has sold some of its stake in Delta Air Lines Inc . It is also among the largest shareholders in American Airlines Group Inc , Southwest Airlines Co and United Airlines Holdings Inc . (Reporting by Rachit Vats in Bengaluru; Editing by Aditya Soni) ((Rachit.Vats@tr.com; within U.S. +1 646 223 8780, outside U.S. +91 80 61822828; Reuters Messaging: rachit.vats.thomsonreuters.com@reuters.net)) Keywords: BERKSHIRE STAKE/AIRLINES (URGENT) The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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April 3 (Reuters) - Warren Buffett's Berkshire Hathaway Inc said on Friday it has sold some of its stake in Delta Air Lines Inc . Berkshire is among the largest investors in the carrier. It is also among the largest shareholders in American Airlines Group Inc , Southwest Airlines Co and United Airlines Holdings Inc .
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6111.0
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2020-04-03 00:00:00 UTC
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Stock Market Wrap-Up: Will Coronavirus Aid Crush Airline Stocks?
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AAL
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https://www.nasdaq.com/articles/stock-market-wrap-up%3A-will-coronavirus-aid-crush-airline-stocks-2020-04-03
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nan
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The stock market suffered significant losses on Friday, as coronavirus concerns continued to hurt investor confidence. The Dow Jones Industrial Average (DJINDICES: ^DJI) didn't quite give back all of its gains from Thursday, but market participants seemed reluctant to show much optimism heading into the weekend. Losses for the Dow, S&P 500 (SNPINDEX: ^GSPC), and Nasdaq Composite (NASDAQINDEX: ^IXIC) were between 1% and 2%.
Today's stock market
INDEX
PERCENTAGE CHANGE (DECLINE)
POINT CHANGE
Dow
(1.69%)
(361)
S&P 500
(1.51%)
(38)
Nasdaq Composite
(1.53%)
(114)
Data source: Yahoo! Finance.
The coronavirus pandemic has hit the entire global economy hard, but few industries have taken it on the chin harder than airlines. Lawmakers made federal aid available through the stimulus bill, and American Airlines Group (NASDAQ: AAL) and Southwest Airlines (NYSE: LUV) officially stated earlier that they'll file applications for grants by the 5 p.m. EDT deadline today. Delta Air Lines (NYSE: DAL) and United Airlines Holdings (NASDAQ: UAL) are likely to follow suit. Yet even with that help, some airline stocks have continued to fall as the full ramifications of taking government help aren't entirely clear.
Losing altitude
American shares fell 7% Friday, slipping below the $10 mark as investors weighed the airline's latest moves. American is cutting its international flight schedule by 90% in April and May, with expectations that it will reduce peak summer capacity by 60%. Domestic flight schedules will take big hits, too, including 70% to 75% of flights in April and 80% in May. The moves follow extensions of stay-at-home orders throughout an increasing number of states.
Image source: American Airlines Group.
To help it keep workers on its payroll, American has filed for its share of $25 billion that the federal government set aside in the coronavirus stimulus bill. Hoping to get about $6 billion, American likely faces draconian moves with its workforce without the assistance.
Southwest also said earlier this week that it would file an application before the deadline to discuss federal assistance grants. The Texas-based carrier, whose shares dropped 3% Friday, is one of several airlines that have turned to transporting cargo in what would otherwise be empty flights.
The price airlines could pay
Yet it's clear from the tone of the airlines that they're less than excited about having to ask for help. As Southwest put it, it's filing an application "to discuss the specific details regarding possible grants that could boost liquidity and provide job security." That signals that whether it actually accepts the assistance could depend on the terms that the Treasury Department sets.
For its part, the Treasury hasn't yet clarified exactly what it'll be seeking from airlines. Yet some groups are nervous about the potential impacts of the government driving a hard bargain. Flight attendant union groups have argued that if the Treasury seeks to take equity stakes in airlines (either directly through preferred stock or indirectly via warrants), then airlines will refuse assistance. Instead, they'll just lay off flight attendants and other employees, which will effectively put the resulting unemployment insurance burden on the government anyway and increase the odds of a broader economic recession.
Until the Treasury shows its hand, investors won't know whether airlines are likely to come to a final agreement with the federal government for help. With billions of dollars at stake, that uncertainty is making airline shareholders more nervous than ever.
10 stocks we like better than American Airlines Group
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and American Airlines Group wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of March 18, 2020
Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Lawmakers made federal aid available through the stimulus bill, and American Airlines Group (NASDAQ: AAL) and Southwest Airlines (NYSE: LUV) officially stated earlier that they'll file applications for grants by the 5 p.m. EDT deadline today. The Dow Jones Industrial Average (DJINDICES: ^DJI) didn't quite give back all of its gains from Thursday, but market participants seemed reluctant to show much optimism heading into the weekend. Losing altitude American shares fell 7% Friday, slipping below the $10 mark as investors weighed the airline's latest moves.
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Lawmakers made federal aid available through the stimulus bill, and American Airlines Group (NASDAQ: AAL) and Southwest Airlines (NYSE: LUV) officially stated earlier that they'll file applications for grants by the 5 p.m. EDT deadline today. To help it keep workers on its payroll, American has filed for its share of $25 billion that the federal government set aside in the coronavirus stimulus bill. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines.
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Lawmakers made federal aid available through the stimulus bill, and American Airlines Group (NASDAQ: AAL) and Southwest Airlines (NYSE: LUV) officially stated earlier that they'll file applications for grants by the 5 p.m. EDT deadline today. Flight attendant union groups have argued that if the Treasury seeks to take equity stakes in airlines (either directly through preferred stock or indirectly via warrants), then airlines will refuse assistance. 10 stocks we like better than American Airlines Group When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen.
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Lawmakers made federal aid available through the stimulus bill, and American Airlines Group (NASDAQ: AAL) and Southwest Airlines (NYSE: LUV) officially stated earlier that they'll file applications for grants by the 5 p.m. EDT deadline today. Today's stock market * David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and American Airlines Group wasn't one of them!
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6112.0
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2020-04-03 00:00:00 UTC
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Friday Sector Laggards: Utilities, Industrial
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AAL
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https://www.nasdaq.com/articles/friday-sector-laggards%3A-utilities-industrial-2020-04-03
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nan
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Looking at the sectors faring worst as of midday Friday, shares of Utilities companies are underperforming other sectors, showing a 4.3% loss. Within that group, American Electric Power Co Inc (Symbol: AEP) and NRG Energy Inc (Symbol: NRG) are two large stocks that are lagging, showing a loss of 7.0% and 6.4%, respectively. Among utilities ETFs, one ETF following the sector is the Utilities Select Sector SPDR ETF (Symbol: XLU), which is down 4.2% on the day, and down 19.60% year-to-date. American Electric Power Co Inc, meanwhile, is down 23.67% year-to-date, and NRG Energy Inc, is down 33.79% year-to-date. Combined, AEP and NRG make up approximately 6.4% of the underlying holdings of XLU.
The next worst performing sector is the Industrial sector, showing a 4.0% loss. Among large Industrial stocks, Raytheon Co. (Symbol: RTN) and American Airlines Group Inc (Symbol: AAL) are the most notable, showing a loss of 94.7% and 8.8%, respectively. One ETF closely tracking Industrial stocks is the Industrial Select Sector SPDR ETF (XLI), which is down 2.3% in midday trading, and down 31.01% on a year-to-date basis. Raytheon Co., meanwhile, is down 46.34% year-to-date, and American Airlines Group Inc, is down 67.66% year-to-date. Combined, RTN and AAL make up approximately 3.1% of the underlying holdings of XLI.
Comparing these stocks and ETFs on a trailing twelve month basis, below is a relative stock price performance chart, with each of the symbols shown in a different color as labeled in the legend at the bottom:
Here's a snapshot of how the S&P 500 components within the various sectors are faring in afternoon trading on Friday. As you can see, none of the sectors are up on the day, while nine sectors are down.
SECTOR % CHANGE
Energy -1.5%
Consumer Products -1.6%
Materials -1.9%
Technology & Communications -2.5%
Healthcare -2.9%
Financial -3.0%
Services -3.3%
Industrial -4.0%
Utilities -4.3%
10 ETFs With Stocks That Insiders Are Buying »
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Among large Industrial stocks, Raytheon Co. (Symbol: RTN) and American Airlines Group Inc (Symbol: AAL) are the most notable, showing a loss of 94.7% and 8.8%, respectively. Combined, RTN and AAL make up approximately 3.1% of the underlying holdings of XLI. Combined, AEP and NRG make up approximately 6.4% of the underlying holdings of XLU.
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Among large Industrial stocks, Raytheon Co. (Symbol: RTN) and American Airlines Group Inc (Symbol: AAL) are the most notable, showing a loss of 94.7% and 8.8%, respectively. Combined, RTN and AAL make up approximately 3.1% of the underlying holdings of XLI. Within that group, American Electric Power Co Inc (Symbol: AEP) and NRG Energy Inc (Symbol: NRG) are two large stocks that are lagging, showing a loss of 7.0% and 6.4%, respectively.
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Among large Industrial stocks, Raytheon Co. (Symbol: RTN) and American Airlines Group Inc (Symbol: AAL) are the most notable, showing a loss of 94.7% and 8.8%, respectively. Combined, RTN and AAL make up approximately 3.1% of the underlying holdings of XLI. Within that group, American Electric Power Co Inc (Symbol: AEP) and NRG Energy Inc (Symbol: NRG) are two large stocks that are lagging, showing a loss of 7.0% and 6.4%, respectively.
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Among large Industrial stocks, Raytheon Co. (Symbol: RTN) and American Airlines Group Inc (Symbol: AAL) are the most notable, showing a loss of 94.7% and 8.8%, respectively. Combined, RTN and AAL make up approximately 3.1% of the underlying holdings of XLI. Within that group, American Electric Power Co Inc (Symbol: AEP) and NRG Energy Inc (Symbol: NRG) are two large stocks that are lagging, showing a loss of 7.0% and 6.4%, respectively.
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6113.0
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2020-04-03 00:00:00 UTC
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First Week of May 22nd Options Trading For American Airlines Group (AAL)
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AAL
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https://www.nasdaq.com/articles/first-week-of-may-22nd-options-trading-for-american-airlines-group-aal-2020-04-03
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Investors in American Airlines Group Inc (Symbol: AAL) saw new options become available this week, for the May 22nd expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the AAL options chain for the new May 22nd contracts and identified one put and one call contract of particular interest.
The put contract at the $4.00 strike price has a current bid of 5 cents. If an investor was to sell-to-open that put contract, they are committing to purchase the stock at $4.00, but will also collect the premium, putting the cost basis of the shares at $3.95 (before broker commissions). To an investor already interested in purchasing shares of AAL, that could represent an attractive alternative to paying $10.03/share today.
Because the $4.00 strike represents an approximate 60% discount to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the put contract would expire worthless. The current analytical data (including greeks and implied greeks) suggest the current odds of that happening are 100%. Stock Options Channel will track those odds over time to see how they change, publishing a chart of those numbers on our website under the contract detail page for this contract. Should the contract expire worthless, the premium would represent a 1.25% return on the cash commitment, or 9.31% annualized — at Stock Options Channel we call this the YieldBoost.
Below is a chart showing the trailing twelve month trading history for American Airlines Group Inc, and highlighting in green where the $4.00 strike is located relative to that history:
Turning to the calls side of the option chain, the call contract at the $10.50 strike price has a current bid of 30 cents. If an investor was to purchase shares of AAL stock at the current price level of $10.03/share, and then sell-to-open that call contract as a "covered call," they are committing to sell the stock at $10.50. Considering the call seller will also collect the premium, that would drive a total return (excluding dividends, if any) of 7.68% if the stock gets called away at the May 22nd expiration (before broker commissions). Of course, a lot of upside could potentially be left on the table if AAL shares really soar, which is why looking at the trailing twelve month trading history for American Airlines Group Inc, as well as studying the business fundamentals becomes important. Below is a chart showing AAL's trailing twelve month trading history, with the $10.50 strike highlighted in red:
Considering the fact that the $10.50 strike represents an approximate 5% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. The current analytical data (including greeks and implied greeks) suggest the current odds of that happening are 49%. On our website under the contract detail page for this contract, Stock Options Channel will track those odds over time to see how they change and publish a chart of those numbers (the trading history of the option contract will also be charted). Should the covered call contract expire worthless, the premium would represent a 2.99% boost of extra return to the investor, or 22.28% annualized, which we refer to as the YieldBoost.
The implied volatility in the put contract example is 508%, while the implied volatility in the call contract example is 352%.
Meanwhile, we calculate the actual trailing twelve month volatility (considering the last 252 trading day closing values as well as today's price of $10.03) to be 71%. For more put and call options contract ideas worth looking at, visit StockOptionsChannel.com.
Top YieldBoost Calls of the Nasdaq 100 »
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Of course, a lot of upside could potentially be left on the table if AAL shares really soar, which is why looking at the trailing twelve month trading history for American Airlines Group Inc, as well as studying the business fundamentals becomes important. Below is a chart showing AAL's trailing twelve month trading history, with the $10.50 strike highlighted in red: Considering the fact that the $10.50 strike represents an approximate 5% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. Investors in American Airlines Group Inc (Symbol: AAL) saw new options become available this week, for the May 22nd expiration.
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Below is a chart showing AAL's trailing twelve month trading history, with the $10.50 strike highlighted in red: Considering the fact that the $10.50 strike represents an approximate 5% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. Investors in American Airlines Group Inc (Symbol: AAL) saw new options become available this week, for the May 22nd expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the AAL options chain for the new May 22nd contracts and identified one put and one call contract of particular interest.
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Below is a chart showing AAL's trailing twelve month trading history, with the $10.50 strike highlighted in red: Considering the fact that the $10.50 strike represents an approximate 5% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. Investors in American Airlines Group Inc (Symbol: AAL) saw new options become available this week, for the May 22nd expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the AAL options chain for the new May 22nd contracts and identified one put and one call contract of particular interest.
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At Stock Options Channel, our YieldBoost formula has looked up and down the AAL options chain for the new May 22nd contracts and identified one put and one call contract of particular interest. Below is a chart showing AAL's trailing twelve month trading history, with the $10.50 strike highlighted in red: Considering the fact that the $10.50 strike represents an approximate 5% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. Investors in American Airlines Group Inc (Symbol: AAL) saw new options become available this week, for the May 22nd expiration.
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6114.0
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2020-04-03 00:00:00 UTC
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U.S. airlines face deadline to apply for U.S. payroll grants
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AAL
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https://www.nasdaq.com/articles/u.s.-airlines-face-deadline-to-apply-for-u.s.-payroll-grants-2020-04-03
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nan
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By Tracy Rucinski and David Shepardson
CHICAGO/WASHINGTON, April 3 (Reuters) - U.S. airlines and contractors faced a deadline of 5 p.m. on Friday to tap the federal government for up to $32 billion in payroll grants to help them ride out a dramatic drop in air travel demand due to the new coronavirus outbreak.
The U.S. Treasury set that deadline for the airline sector to receive funds as soon as possible and to propose financial instruments such as warrants or equity options to compensate taxpayers for the money.
Congress last week approved $25 billion in cash grants for passenger airlines, $4 billion for cargo carriers and $3 billion for airport contractors like caterers and airplane cleaners under a massive $2.3 trillion coronavirus relief package.
Many Democrats and airline labor unions have urged U.S. Treasury Secretary Steven Mnuchin not to demand equity or warrants in return for the grants because they are meant to ensure carriers take the funds and pay workers until Sept. 30, by which time many hope travel demand will have started to recover.
Companies can request the amount they paid in salaries and benefits in the second and third quarters of 2019.
American Airlines Group Inc AAL.O, with the largest number of full-time employees among U.S. airlines at 133,700 in 2019, has said it will be seeking up to $6 billion in grants.
United Airlines Holdings Inc UAL.O, Delta Air Lines DAL.N and Southwest Airlines Co LUV.N have also signaled they would apply for the grants. The sector is also eligible for up to $32 billion in loans, though there is no immediate deadline for those requests.
Facing what they call an unprecedented crisis, airlines across the world are seeking government aid. International seat capacity has dropped by almost 80% from a year ago and half the world's airplanes are in storage, suggesting the aviation industry may take years to recover from the pandemic.
Reuters reported that Air France-KLM AIRF.PA is in talks with banks to receive up to 6 billion euros ($6.5 billion) in loans guaranteed by the French and Dutch governments.
As airlines scramble to save cash, planemakers are bracing for a drop in demand for new planes. Airbus SE AIR.PA is studying a sharp cut in output of its top-selling A320 jet series, sources told Reuters, while Boeing Co BA.N has outlined a plan for voluntary layoffs.
(Reporting by Tracy Rucinski and David Shepardson; Editing by David Gregorio)
((tracy.rucinski@thomsonreuters.com; 1-312-408-8575; Reuters Messaging: tracy.rucinski.thomsonreuters.com@reuters.net))
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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American Airlines Group Inc AAL.O, with the largest number of full-time employees among U.S. airlines at 133,700 in 2019, has said it will be seeking up to $6 billion in grants. By Tracy Rucinski and David Shepardson CHICAGO/WASHINGTON, April 3 (Reuters) - U.S. airlines and contractors faced a deadline of 5 p.m. on Friday to tap the federal government for up to $32 billion in payroll grants to help them ride out a dramatic drop in air travel demand due to the new coronavirus outbreak. The U.S. Treasury set that deadline for the airline sector to receive funds as soon as possible and to propose financial instruments such as warrants or equity options to compensate taxpayers for the money.
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American Airlines Group Inc AAL.O, with the largest number of full-time employees among U.S. airlines at 133,700 in 2019, has said it will be seeking up to $6 billion in grants. By Tracy Rucinski and David Shepardson CHICAGO/WASHINGTON, April 3 (Reuters) - U.S. airlines and contractors faced a deadline of 5 p.m. on Friday to tap the federal government for up to $32 billion in payroll grants to help them ride out a dramatic drop in air travel demand due to the new coronavirus outbreak. Congress last week approved $25 billion in cash grants for passenger airlines, $4 billion for cargo carriers and $3 billion for airport contractors like caterers and airplane cleaners under a massive $2.3 trillion coronavirus relief package.
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American Airlines Group Inc AAL.O, with the largest number of full-time employees among U.S. airlines at 133,700 in 2019, has said it will be seeking up to $6 billion in grants. By Tracy Rucinski and David Shepardson CHICAGO/WASHINGTON, April 3 (Reuters) - U.S. airlines and contractors faced a deadline of 5 p.m. on Friday to tap the federal government for up to $32 billion in payroll grants to help them ride out a dramatic drop in air travel demand due to the new coronavirus outbreak. Congress last week approved $25 billion in cash grants for passenger airlines, $4 billion for cargo carriers and $3 billion for airport contractors like caterers and airplane cleaners under a massive $2.3 trillion coronavirus relief package.
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American Airlines Group Inc AAL.O, with the largest number of full-time employees among U.S. airlines at 133,700 in 2019, has said it will be seeking up to $6 billion in grants. By Tracy Rucinski and David Shepardson CHICAGO/WASHINGTON, April 3 (Reuters) - U.S. airlines and contractors faced a deadline of 5 p.m. on Friday to tap the federal government for up to $32 billion in payroll grants to help them ride out a dramatic drop in air travel demand due to the new coronavirus outbreak. The U.S. Treasury set that deadline for the airline sector to receive funds as soon as possible and to propose financial instruments such as warrants or equity options to compensate taxpayers for the money.
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6115.0
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2020-04-03 00:00:00 UTC
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As the Warmer Months Approach, It’s Time to Buy AAL Stock
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AAL
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https://www.nasdaq.com/articles/as-the-warmer-months-approach-its-time-to-buy-aal-stock-2020-04-03
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips
American Airlines (NASDAQ:AAL) hasn’t had a great couple months, but I believe there’s reason to take a closer look at AAL stock.
Source: GagliardiPhotography / Shutterstock.com
As American deaths from the coronavirus tragically rise and many in the media seek to make the news about the virus as negative as possible, it’s easy to believe that the world will have trouble emerging anytime soon from a near-apocalyptic situation.
But recent developments leave me hopeful that much of the world will, sooner than later, return to living near-normal lives. Those developments, along with the government’s bailout of the airlines, leave me upbeat on all of the shares of America’s airlines.
Positive Developments and AAL Stock
For many weeks, I’ve been writing that data showed that the coronavirus was spreading very slowly in warm countries. As a result, I theorized that the spread of the virus would greatly slow when the weather gets warmer in the U.S. and Europe.
30 Stocks on a Deathwatch
But until very recently, most of the media cast doubt on that view, and the federal government’s top experts did not confirm it.
That’s changed recently, as the government’s top infectious disease expert, Dr. Anthony Fauci, has started to tentatively admit that the coronavirus will indeed spread much more slowly in the warm weather. Meanwhile, perhaps not coincidentally, Fauci and the other top expert coordinating the government’s response, Dr. Deborah Birx, by the end of March were projecting much lower fatality totals than at least one prominent estimate that was made earlier in the month.
Specifically, as of March 30, Fauci and Birx estimated that, if the current mass closure strategy continues, 80,000 to 200,000 Americans would die from coronavirus. That is a high number of fatalities. But, at the midpoint, it’s well over 50% below the 475,000 Americans that, on March 12, The New York Times estimated could die, even if mass closures were instituted.
Also worth noting is that the bottom end of the government’s estimate range is 80,000, while about the same number of Americans died from flu during the 2017-2018 flu season.
Meanwhile, the White House and experts now estimate that coronavirus’ spread will peak in the U.S. in the second week of April, not far off from my previous estimate of the first week of April. And some analysts recently predicted that, sometime around June, antibody tests will likely clear 60% of the American workforce to return to their jobs.
The Implications for American Airlines
In my previous article on American Airlines, I wrote that “the stock could become attractive around the beginning of April, ahead of the likely lifting of travel restrictions and the deceleration of the coronavirus.”
I also advised investors to wait until Congress had approved a bailout for the airlines before buying the shares, and I contended that “by mid-May, as the weather really heats up, fears of air travel are also likely to ease.”
After the recent developments I outlined above, I largely stand by my previous views. The experts now believe that the U.S. will not have many hundreds of thousands of fatalities. Such a large number of fatalities, in my opinion, would have left a real, permanent scar on the nation and could have crippled demand for flying for many years to come.
Further, the experts now also apparently think that the virus’ spread will start decelerating in mid-April and that its spread will continue to decline as the weather warms. Finally, the antibody test will help ease many Americans’ fears of the disease in general and flying in particular. Given these points, I continue to believe that air travel will begin to rebound meaningfully at some point in May before accelerating greatly in June.
Finally, I believe that American Airlines and other airlines can ease the fear of flying by emphasizing, through advertisements, the strong filtration systems on airplanes and the extra cleaning that they will undoubtedly perform on their planes.
The Bottom Line on AAL Stock
I believe that the federal bailout will take bankruptcy off the table for American Airlines and its peers for at least the next six months. Clearly, Congress wanted to prevent the airlines from going under due to coronavirus, and the $60 billion it appropriated for that purpose, matching the sector’s request, is almost definitely enough money to accomplish that task.
Meanwhile, the temporary restrictions on dividends, stock buybacks, and executive pay shouldn’t weigh much on the shares of American Airlines and its peers. As the well-known expression goes, “profit is the mother’s milk of stocks,” and none of those restrictions should interfere with the companies’ profitability.
As a result, I expect AAL stock and the shares of the other U.S. airlines to lift off once the demand for flights starts surging in May, and I recommend buying the airlines’ shares at their current levels.
Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks and Snap. You can reach him on StockTwits at @larryramer. As of this writing, he did not hold a position in any of the aforementioned securities.
The post As the Warmer Months Approach, It’s Time to Buy AAL Stock appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips American Airlines (NASDAQ:AAL) hasn’t had a great couple months, but I believe there’s reason to take a closer look at AAL stock. Positive Developments and AAL Stock For many weeks, I’ve been writing that data showed that the coronavirus was spreading very slowly in warm countries. The Bottom Line on AAL Stock I believe that the federal bailout will take bankruptcy off the table for American Airlines and its peers for at least the next six months.
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips American Airlines (NASDAQ:AAL) hasn’t had a great couple months, but I believe there’s reason to take a closer look at AAL stock. Positive Developments and AAL Stock For many weeks, I’ve been writing that data showed that the coronavirus was spreading very slowly in warm countries. The Bottom Line on AAL Stock I believe that the federal bailout will take bankruptcy off the table for American Airlines and its peers for at least the next six months.
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips American Airlines (NASDAQ:AAL) hasn’t had a great couple months, but I believe there’s reason to take a closer look at AAL stock. As a result, I expect AAL stock and the shares of the other U.S. airlines to lift off once the demand for flights starts surging in May, and I recommend buying the airlines’ shares at their current levels. Positive Developments and AAL Stock For many weeks, I’ve been writing that data showed that the coronavirus was spreading very slowly in warm countries.
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The post As the Warmer Months Approach, It’s Time to Buy AAL Stock appeared first on InvestorPlace. InvestorPlace - Stock Market News, Stock Advice & Trading Tips American Airlines (NASDAQ:AAL) hasn’t had a great couple months, but I believe there’s reason to take a closer look at AAL stock. Positive Developments and AAL Stock For many weeks, I’ve been writing that data showed that the coronavirus was spreading very slowly in warm countries.
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6116.0
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2020-04-03 00:00:00 UTC
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EXCLUSIVE-Chilean copper miners 'considering production cuts' -industry association
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AAL
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https://www.nasdaq.com/articles/exclusive-chilean-copper-miners-considering-production-cuts-industry-association-2020-04
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nan
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nan
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By Fabian Cambero
SANTIAGO, April 3 (Reuters) - Copper miners in Chile are considering cutting production amid strict measures to contain the spread of the new coronavirus, an association of companies in the sector has told Reuters.
A report by the National Mining Society (Sonami), which represents all miners of the red metal across Chile, the world's largest producer, said the realities of coronavirus were forcing the companies it represents to weigh tough decisions.
"Over the days, we have seen miners go from providing information about the disease and taking preventive measures to halting projects already underway," the association said in a statement sent to Reuters. "A decrease in production is already being contemplated in some companies."
Large companies have reduced manpower at their mines by up to 25% to 30% in a bid to cut contagion risks while others, such as state-run giant Codelco CODEL.UL, the world's largest copper miner, have suspended expansion and improvement projects.
Sonami said the small and medium-sized companies it represents had been particularly hard-hit since they do not have the financial resources behind them of the multinational giants such as such as BHP BHP.AX, Anglo American AAL.L, Glencore GLEN.L and Antofagasta ANTO.L, which operate in the country.
Sonami said that some medium-sized miners, already hard hit by softening global prices of the metal, had already started temporarily closing operations.
On Thursday the government said there were now 3,404 cases, 18 deaths and 335 people who had recovered from COVID-19.
(Reporting by Fabian Cambero, writing by Aislinn Laing Editing by Chizu Nomiyama)
((Aislinn.Laing@thomsonreuters.com; +56 223704250;))
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Sonami said the small and medium-sized companies it represents had been particularly hard-hit since they do not have the financial resources behind them of the multinational giants such as such as BHP BHP.AX, Anglo American AAL.L, Glencore GLEN.L and Antofagasta ANTO.L, which operate in the country. "Over the days, we have seen miners go from providing information about the disease and taking preventive measures to halting projects already underway," the association said in a statement sent to Reuters. Large companies have reduced manpower at their mines by up to 25% to 30% in a bid to cut contagion risks while others, such as state-run giant Codelco CODEL.UL, the world's largest copper miner, have suspended expansion and improvement projects.
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Sonami said the small and medium-sized companies it represents had been particularly hard-hit since they do not have the financial resources behind them of the multinational giants such as such as BHP BHP.AX, Anglo American AAL.L, Glencore GLEN.L and Antofagasta ANTO.L, which operate in the country. By Fabian Cambero SANTIAGO, April 3 (Reuters) - Copper miners in Chile are considering cutting production amid strict measures to contain the spread of the new coronavirus, an association of companies in the sector has told Reuters. A report by the National Mining Society (Sonami), which represents all miners of the red metal across Chile, the world's largest producer, said the realities of coronavirus were forcing the companies it represents to weigh tough decisions.
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Sonami said the small and medium-sized companies it represents had been particularly hard-hit since they do not have the financial resources behind them of the multinational giants such as such as BHP BHP.AX, Anglo American AAL.L, Glencore GLEN.L and Antofagasta ANTO.L, which operate in the country. By Fabian Cambero SANTIAGO, April 3 (Reuters) - Copper miners in Chile are considering cutting production amid strict measures to contain the spread of the new coronavirus, an association of companies in the sector has told Reuters. A report by the National Mining Society (Sonami), which represents all miners of the red metal across Chile, the world's largest producer, said the realities of coronavirus were forcing the companies it represents to weigh tough decisions.
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Sonami said the small and medium-sized companies it represents had been particularly hard-hit since they do not have the financial resources behind them of the multinational giants such as such as BHP BHP.AX, Anglo American AAL.L, Glencore GLEN.L and Antofagasta ANTO.L, which operate in the country. By Fabian Cambero SANTIAGO, April 3 (Reuters) - Copper miners in Chile are considering cutting production amid strict measures to contain the spread of the new coronavirus, an association of companies in the sector has told Reuters. A report by the National Mining Society (Sonami), which represents all miners of the red metal across Chile, the world's largest producer, said the realities of coronavirus were forcing the companies it represents to weigh tough decisions.
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6117.0
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2020-04-03 00:00:00 UTC
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Chilean copper miners "considering production cuts" - industry association
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AAL
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https://www.nasdaq.com/articles/chilean-copper-miners-considering-production-cuts-industry-association-2020-04-03
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nan
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nan
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By Fabian Cambero
SANTIAGO, April 3 (Reuters) - Copper miners in Chile are considering cutting production amid strict measures to contain the spread of the new coronavirus, an association of companies in the sector has told Reuters.
A report by the National Mining Society (Sonami), which represents all miners of the red metal across Chile, the world's largest producer, said the realities of coronavirus were forcing the companies it represented to weigh tough decisions.
"Over the days, we have seen miners go from providing information about the disease and taking preventive measures to halting projects already underway," the association said in a statement sent to Reuters. "A decrease in production is already being contemplated in some companies."
(Reporting by Fabian Cambero, writing by Aislinn Laing Editing by Chizu Nomiyama)
((Aislinn.Laing@thomsonreuters.com; +56 223704250;))
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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By Fabian Cambero SANTIAGO, April 3 (Reuters) - Copper miners in Chile are considering cutting production amid strict measures to contain the spread of the new coronavirus, an association of companies in the sector has told Reuters. A report by the National Mining Society (Sonami), which represents all miners of the red metal across Chile, the world's largest producer, said the realities of coronavirus were forcing the companies it represented to weigh tough decisions. "Over the days, we have seen miners go from providing information about the disease and taking preventive measures to halting projects already underway," the association said in a statement sent to Reuters.
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By Fabian Cambero SANTIAGO, April 3 (Reuters) - Copper miners in Chile are considering cutting production amid strict measures to contain the spread of the new coronavirus, an association of companies in the sector has told Reuters. A report by the National Mining Society (Sonami), which represents all miners of the red metal across Chile, the world's largest producer, said the realities of coronavirus were forcing the companies it represented to weigh tough decisions. (Reporting by Fabian Cambero, writing by Aislinn Laing Editing by Chizu Nomiyama) ((Aislinn.Laing@thomsonreuters.com; +56 223704250;)) The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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By Fabian Cambero SANTIAGO, April 3 (Reuters) - Copper miners in Chile are considering cutting production amid strict measures to contain the spread of the new coronavirus, an association of companies in the sector has told Reuters. A report by the National Mining Society (Sonami), which represents all miners of the red metal across Chile, the world's largest producer, said the realities of coronavirus were forcing the companies it represented to weigh tough decisions. (Reporting by Fabian Cambero, writing by Aislinn Laing Editing by Chizu Nomiyama) ((Aislinn.Laing@thomsonreuters.com; +56 223704250;)) The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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By Fabian Cambero SANTIAGO, April 3 (Reuters) - Copper miners in Chile are considering cutting production amid strict measures to contain the spread of the new coronavirus, an association of companies in the sector has told Reuters. A report by the National Mining Society (Sonami), which represents all miners of the red metal across Chile, the world's largest producer, said the realities of coronavirus were forcing the companies it represented to weigh tough decisions. "Over the days, we have seen miners go from providing information about the disease and taking preventive measures to halting projects already underway," the association said in a statement sent to Reuters.
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6118.0
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2020-04-03 00:00:00 UTC
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3 Extremely Popular Stocks to Avoid Like the Plague in April
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AAL
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https://www.nasdaq.com/articles/3-extremely-popular-stocks-to-avoid-like-the-plague-in-april-2020-04-03
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nan
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nan
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To be blunt, the past six weeks haven't been pretty for investors. Fear and uncertainty surrounding the spread of the coronavirus disease 2019 (COVID-19) has squashed equities and sent the stock market tumbling into bear market territory faster than at any point in its long history. With the scope of the economic damage caused by mitigation measures to slow the spread of COVID-19 still unknown, there could be further downside to come.
Then again, bear markets are historically a good thing. That's because they've always represented an opportune time for long-term investors to buy into sound businesses for the long run. Eventually, all bear markets have been completely erased by a bull-market rally.
Image source: Getty Images.
Unfortunately, not every company can be a winner. And when it comes to investing, it's important to remember that popular stocks aren't always profitable stocks.
With this being said, here are three extremely popular stocks with investors that should be avoided like the plague in April (and beyond).
Aurora Cannabis
Marijuana stock Aurora Cannabis (NYSE: ACB) isn't just a popular stock -- it's by far the most popular stock held by millennials on online investing app Robinhood. According to a forecast at the midpoint of 2019, this Canadian licensed pot producer was on track to produce 625,000 kilos of weed on an annual run-rate basis by the end of June 2020. Plus, billionaire Nelson Peltz was hired as a strategic advisor in March 2019, and a brand-name partnership was expected.
However, neither of these prognostications have come true or mattered for Aurora Cannabis, which has been nothing short of a dumpster fire. The company has halted production at two of its largest grow farms (Aurora Sun and Aurora Nordic 2) and plans to sell the 1 million-square-foot Exeter greenhouse that it acquired with the $2 billion MedReleaf acquisition. Exeter was expected to generate 105,000 kilos per year when retrofit to cannabis production.
All told, Aurora's peak output has been slashed by more than 400,000 kilos per year (at least for now), and the company has landed no major partners.
Image source: Getty Images.
What's even worse than sales forecasts badly missing the mark is the company's balance sheet. Aurora Cannabis ended 2019 with $156.3 million Canadian in cash and cash equivalents and CA$26.1 million in marketable securities, but outlined CA$373.6 million in expected liabilities over the next year in its management discussion and analysis filing with SEDAR. In other words, there could be a serious cash crunch brewing, even with the outlined reduction in production.
Also, Aurora's overzealous expansion efforts led it to grossly overpay for its acquisitions. Even after a monstrous CA$762.2 million goodwill writedown in the fiscal second quarter, the company is still lugging around CA$2.41 billion in goodwill, accounting for 52% of total assets.
Aurora Cannabis' operating losses are expected to continue and it has an abysmal balance sheet. Investors would be wise to steer clear.
American Airlines Group
Another popular stock among investors that's gained a lot of interest of late is American Airlines Group (NASDAQ: AAL).
American Airlines has been pulverized by the COVID-19 outbreak, as has the entire airline industry. However, the passage of the CARES Act -- that's the Coronavirus Aid, Relief, and Economic Security (CARES) Act -- apportions up to $50 billion to passenger airline companies as a form of bailout to keep them afloat and keep their staffs from being laid off.
This $50 billion parachute from the federal government has investors feeling a lot better about the airline industry, and American in particular. But this optimism is likely misplaced.
Image source: American Airlines.
I'll admit that, with very few exceptions, I'm not a fan of the airline industry. It's an exceptionally capital-intensive industry that often yields mind-numbingly thin margins and has shown time and time again that it doesn't fare well during recessions. And almost every airline dips deeply into debt to broaden and modernize their fleets.
In American Airlines' case, the company absolutely ballooned its debt load to modernize its fleet and wound up retiring planes that my Foolish colleague Adam Levine-Weinberg noted were far from needing replacement. The end result is that American is the most debt-burdened major of the group, with close to $30 billion in net debt. This is a deep hole from which I'm not certain it can dig itself out.
Furthermore, as one of the conditions of the CARES Act airline bailout, airlines will be prevented from buying back their own stock. The $11.9 billion American Airlines spent on buybacks over the past five years might be the only positive thing going for this company. Without buybacks and with dividends on the chopping block, major airlines are giving investors no reason to buy them -- especially the worst of the bunch.
Tesla
Lastly, hold the hate mail, but despite Tesla's (NASDAQ: TSLA) popularity, I believe it's worth avoiding the electric-vehicle (EV) manufacturer like the plague in April and for the foreseeable future.
On one hand, Tesla has a pretty long list of people it's proved wrong over the past decade. Clearly, CEO Elon Musk is a genuine asset for the company, and he's done something that hasn't been done in about five decades -- namely, build a brand new, mass-produced auto company from the ground up. But I don't believe Musk being a visionary is going to be enough to justify a $93 billion valuation in this economic environment.
A Tesla Model S plugged in to charge. Image source: Tesla.
Putting aside the fact that the company has shut down production at its Fremont factory per California's mandated shelter-in-place order, one of the bigger concerns I have following the coronavirus crash is how Tesla is going to compete with plunging prices at the pump. Crude oil recently hit 18-year lows, which'll soon make it cheaper than it's been in a long time to fuel up trucks, SUVs, and sedans.
The comparative advantage on price over fossil fuels has arguably been Tesla's biggest edge for the past decade, but in one fell swoop it's disappeared. This isn't to say that there won't be buyers who prefer greener options so much as to say that at least some percentage of the customer pool will now be lost due to much lower gasoline prices.
This is notable because Tesla very much needs rapid growth to produce an income statement that justifies a $93 billion valuation. Only recently did Tesla cross the 1 million-vehicle mark since the release of its first EV in 2008, which is a production figure that many of its gas-powered competitors can produce in less than two months. Although Tesla has benefited frequently from zero-emission vehicle credits, the fact is that the company still hasn't produced a generally accepted accounting principles (GAAP) profit on an annual basis.
Other factors to consider here are Elon Musk's poor track record of meeting timelines when introducing new vehicles, as well as Tesla's awful acquisition of SolarCity, which has been losing money hand over fist.
Tesla has remained irrational longer than the naysayers have been able to stay solvent, but a recession just might be what opens investors' eyes.
10 stocks we like better than Tesla
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Tesla wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of March 18, 2020
Sean Williams has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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American Airlines Group Another popular stock among investors that's gained a lot of interest of late is American Airlines Group (NASDAQ: AAL). In American Airlines' case, the company absolutely ballooned its debt load to modernize its fleet and wound up retiring planes that my Foolish colleague Adam Levine-Weinberg noted were far from needing replacement. Putting aside the fact that the company has shut down production at its Fremont factory per California's mandated shelter-in-place order, one of the bigger concerns I have following the coronavirus crash is how Tesla is going to compete with plunging prices at the pump.
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American Airlines Group Another popular stock among investors that's gained a lot of interest of late is American Airlines Group (NASDAQ: AAL). Aurora Cannabis ended 2019 with $156.3 million Canadian in cash and cash equivalents and CA$26.1 million in marketable securities, but outlined CA$373.6 million in expected liabilities over the next year in its management discussion and analysis filing with SEDAR. However, the passage of the CARES Act -- that's the Coronavirus Aid, Relief, and Economic Security (CARES) Act -- apportions up to $50 billion to passenger airline companies as a form of bailout to keep them afloat and keep their staffs from being laid off.
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American Airlines Group Another popular stock among investors that's gained a lot of interest of late is American Airlines Group (NASDAQ: AAL). Aurora Cannabis Marijuana stock Aurora Cannabis (NYSE: ACB) isn't just a popular stock -- it's by far the most popular stock held by millennials on online investing app Robinhood. * David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Tesla wasn't one of them!
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American Airlines Group Another popular stock among investors that's gained a lot of interest of late is American Airlines Group (NASDAQ: AAL). Image source: American Airlines. The $11.9 billion American Airlines spent on buybacks over the past five years might be the only positive thing going for this company.
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6119.0
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2020-04-03 00:00:00 UTC
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U.S. airlines face deadline to apply for federal payroll grants
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AAL
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https://www.nasdaq.com/articles/u.s.-airlines-face-deadline-to-apply-for-federal-payroll-grants-2020-04-03
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nan
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nan
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By Tracy Rucinski and David Shepardson
CHICAGO/WASHINGTON, April 3 (Reuters) - U.S. airlines and airport contractors faced a deadline of 5 p.m. EDT (2100 GMT) on Friday to tap the federal government for up to $32 billion in payroll grants to keep workers employed while they ride out the economic toll of the coronavirus on their business.
The funds are part of a $2.3 trillion coronavirus relief package approved last week which included a special carve-out for the badly bruised air industry.
Passenger airlines are weathering a dramatic drop in travel demand, while cargo carriers are suffering from disruption to global supply chains and high-margin business-to-business demand, even as ground-package delivery services increase.
The U.S. Treasury set the Friday deadline for the airline sector to receive funds as soon as possible. In their applications the airlines must propose financial instruments such as warrants or equity options to compensate taxpayers for the money.
Many Democrats and airline labor unions have pushed back on Treasury's demand for equity or warrants in return for the grants, arguing that the condition could dissuade airlines from taking money that is meant to protect workers.
Companies can request the amount they paid in salaries and benefits in the second and third quarters of 2019.
American Airlines Group Inc AAL.O, with the largest number of full-time employees among U.S. airlines at 133,700 in 2019, has said it will be seeking up to $6 billion in grants.
United Airlines Holdings Inc UAL.O, Delta Air Lines DAL.N and Southwest Airlines Co LUV.N have also signaled they would apply.
Among cargo carriers, FedEx Corp FDX.N said it was eligible for the government money after outlining steps it is taking to save cash and boost liquidity, including slashing its chief executive officer's pay and drawing down $1.5 billion from a credit facility.
Passenger airlines are eligible for $25 billion in cash grants, cargo carriers $4 billion and airport contractors like caterers and airplane cleaners $3 billion.
They can also apply for up to $32 billion in federal loans, if they do not have alternative sources of funding. U.S. carriers have raised billions of dollars in new loans in recent weeks.
Bracing for a prolonged downturn in demand, airlines across the world are seeking government aid, with Air France-KLM AIRF.PA in talks with banks to receive up to 6 billion euros ($6.5 billion) in loans guaranteed by the French and Dutch governments, sources told Reuters.
Planemakers are also preparing for a slump in demand, with Reuters reporting on Friday that Airbus SE AIR.PA is studying a sharp cut in output of its top-selling A320 jet series.
(Reporting by Tracy Rucinski in Chicago and David Shepardson in Washington Additional reporting by Lisa Baertlein in Los Angeles Editing by David Gregorio and Matthew Lewis)
((tracy.rucinski@thomsonreuters.com; 1-312-408-8575; Reuters Messaging: tracy.rucinski.thomsonreuters.com@reuters.net))
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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American Airlines Group Inc AAL.O, with the largest number of full-time employees among U.S. airlines at 133,700 in 2019, has said it will be seeking up to $6 billion in grants. By Tracy Rucinski and David Shepardson CHICAGO/WASHINGTON, April 3 (Reuters) - U.S. airlines and airport contractors faced a deadline of 5 p.m. EDT (2100 GMT) on Friday to tap the federal government for up to $32 billion in payroll grants to keep workers employed while they ride out the economic toll of the coronavirus on their business. Among cargo carriers, FedEx Corp FDX.N said it was eligible for the government money after outlining steps it is taking to save cash and boost liquidity, including slashing its chief executive officer's pay and drawing down $1.5 billion from a credit facility.
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American Airlines Group Inc AAL.O, with the largest number of full-time employees among U.S. airlines at 133,700 in 2019, has said it will be seeking up to $6 billion in grants. By Tracy Rucinski and David Shepardson CHICAGO/WASHINGTON, April 3 (Reuters) - U.S. airlines and airport contractors faced a deadline of 5 p.m. EDT (2100 GMT) on Friday to tap the federal government for up to $32 billion in payroll grants to keep workers employed while they ride out the economic toll of the coronavirus on their business. The U.S. Treasury set the Friday deadline for the airline sector to receive funds as soon as possible.
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American Airlines Group Inc AAL.O, with the largest number of full-time employees among U.S. airlines at 133,700 in 2019, has said it will be seeking up to $6 billion in grants. By Tracy Rucinski and David Shepardson CHICAGO/WASHINGTON, April 3 (Reuters) - U.S. airlines and airport contractors faced a deadline of 5 p.m. EDT (2100 GMT) on Friday to tap the federal government for up to $32 billion in payroll grants to keep workers employed while they ride out the economic toll of the coronavirus on their business. Passenger airlines are eligible for $25 billion in cash grants, cargo carriers $4 billion and airport contractors like caterers and airplane cleaners $3 billion.
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American Airlines Group Inc AAL.O, with the largest number of full-time employees among U.S. airlines at 133,700 in 2019, has said it will be seeking up to $6 billion in grants. By Tracy Rucinski and David Shepardson CHICAGO/WASHINGTON, April 3 (Reuters) - U.S. airlines and airport contractors faced a deadline of 5 p.m. EDT (2100 GMT) on Friday to tap the federal government for up to $32 billion in payroll grants to keep workers employed while they ride out the economic toll of the coronavirus on their business. Passenger airlines are eligible for $25 billion in cash grants, cargo carriers $4 billion and airport contractors like caterers and airplane cleaners $3 billion.
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6120.0
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2020-04-02 00:00:00 UTC
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Why Airline Shares Are Falling Today
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AAL
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https://www.nasdaq.com/articles/why-airline-shares-are-falling-today-2020-04-02
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nan
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nan
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What happened
Airline shares remained under pressure on Thursday, continuing a downward spiral that saw many large companies lose more than one-third of their value in March. Spirit Airlines (NYSE: SAVE) led the march downward on Thursday, falling nearly 10% early in the day, while shares of American Airlines Group (NASDAQ: AAL) and United Airlines Holdings (NASDAQ: UAL) were both down more than 6%.
So what
The airlines have been among the sectors hardest hit by the COVID-19 pandemic, with demand for travel all but evaporating overnight. The carriers have responded by cutting flights and grounding airplanes, but no amount of cost reductions can offset a steep decline in revenue.
The industry got some help late in March when the government came through with $50 billion in support, but that capital only buys time and will not be enough if demand does not quickly return.
Image source: Getty Images.
American, United, and Spirit are all seen as particularly vulnerable to a downturn, but for different reasons.
American has the highest debt load in the industry, which in past cycles has been a recipe for disaster heading into a recession. United has more Asian operations than most of its U.S. rivals, and with hubs in Houston and San Francisco is exposed to falling crude prices and the potential deflation of a Silicon Valley bubble. Spirit is a fringe carrier with total debt more than four times EBITDA, and might not be top of mind for lawmakers if Washington is required to provide further assistance to the industry.
For now, the airlines are doing all they can to build their cash reserves. American said in a regulatory filing late Wednesday that it had tapped three different revolving credit facilities to add a total of $2.73 billion in fresh cash to its balance sheet.
Now what
There's no easy way out for the airlines right now, and at the very least the next few quarters are going to be ugly. I remain hopeful that the pandemic will be contained in the months to come and air traffic will rebound to at least normal recessionary levels. But even if that happens, it is going to take until 2021 at least for these stocks to really take off.
Of the three stocks listed above, Spirit is the one with the highest risk (and the highest potential reward) for investors, but the risk should not be underestimated. For those not quite so bold but still intrigued by airline stocks at their current (depressed) levels, I'd recommend sticking with the best operators in the industry.
10 stocks we like better than United Airlines Holdings
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and United Airlines Holdings wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of March 18, 2020
Lou Whiteman owns shares of Spirit Airlines. The Motley Fool owns shares of and recommends Spirit Airlines. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Spirit Airlines (NYSE: SAVE) led the march downward on Thursday, falling nearly 10% early in the day, while shares of American Airlines Group (NASDAQ: AAL) and United Airlines Holdings (NASDAQ: UAL) were both down more than 6%. United has more Asian operations than most of its U.S. rivals, and with hubs in Houston and San Francisco is exposed to falling crude prices and the potential deflation of a Silicon Valley bubble. Spirit is a fringe carrier with total debt more than four times EBITDA, and might not be top of mind for lawmakers if Washington is required to provide further assistance to the industry.
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Spirit Airlines (NYSE: SAVE) led the march downward on Thursday, falling nearly 10% early in the day, while shares of American Airlines Group (NASDAQ: AAL) and United Airlines Holdings (NASDAQ: UAL) were both down more than 6%. See the 10 stocks *Stock Advisor returns as of March 18, 2020 Lou Whiteman owns shares of Spirit Airlines. The Motley Fool owns shares of and recommends Spirit Airlines.
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Spirit Airlines (NYSE: SAVE) led the march downward on Thursday, falling nearly 10% early in the day, while shares of American Airlines Group (NASDAQ: AAL) and United Airlines Holdings (NASDAQ: UAL) were both down more than 6%. 10 stocks we like better than United Airlines Holdings When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. See the 10 stocks *Stock Advisor returns as of March 18, 2020 Lou Whiteman owns shares of Spirit Airlines.
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Spirit Airlines (NYSE: SAVE) led the march downward on Thursday, falling nearly 10% early in the day, while shares of American Airlines Group (NASDAQ: AAL) and United Airlines Holdings (NASDAQ: UAL) were both down more than 6%. But even if that happens, it is going to take until 2021 at least for these stocks to really take off. See the 10 stocks *Stock Advisor returns as of March 18, 2020 Lou Whiteman owns shares of Spirit Airlines.
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6121.0
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2020-04-02 00:00:00 UTC
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Why Shares of Major Airlines Lost Altitude in March
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AAL
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https://www.nasdaq.com/articles/why-shares-of-major-airlines-lost-altitude-in-march-2020-04-02
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nan
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nan
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What happened
Airline stocks have been hit hard by the COVID-19 coronavirus pandemic, which has caused travel demand to plummet and has led to concerns about the industry's ability to navigate through the crisis. Shares of United Airlines Holdings (NASDAQ: UAL) lost 48.8% in March, according to data provided by S&P Global Market Intelligence, and shares of Delta Air Lines (NYSE: DAL) and American Airlines Group (NASDAQ: AAL) were down 38.2% and 36%, respectively.
It could have been worse: The stocks were down significantly more mid-month prior to the federal government passing a stimulus plan that contained relief for the beleaguered sector.
Airline data by YCharts.
So what
Airlines big and small have been crippled by the pandemic and have seen revenue evaporate overnight. Delta, for example, expects second-quarter revenue to fall 80% year over year and said it is losing upwards of $350 million per week.
The carriers have cut a significant portion of their schedules, grounded planes, and frozen hiring, but no amount of cuts can make up for revenue not coming through the door. In years past, weaker airlines typically went bankrupt during run-of-the-mill recessions, and by mid-month the markets were beginning to price in the potential of airline failures.
Image source: Getty Images.
The government came through with $50 billion to support the industry in late March, temporarily giving lift to the shares. But as United made clear in a memo to employees after the assistance package was finalized, the cash will only prolong the inevitable if traffic does not return.
"If the recovery is as slow as we fear, it means our airline and our workforce will have to be smaller than it is today," management told employees.
Now what
April began as March ended, with United down 18%, Delta 16%, and American 12% on the first day of the month. The stocks fell after the White House issued a grim prognosis of how long the pandemic might last and how severe it might be.
It's nearly impossible to evaluate the airline stocks based on fundamentals today. All three of these companies are trading at less than 3.2 times earnings and less than 0.3 times sales.
If the pandemic is contained in the months to come and traffic begins to return by mid-summer, all of the stocks are almost certainly undervalued. If the pandemic is not quelled soon or the U.S. falls into a deep recession that lasts well into 2021, it is possible there will be no amount of government assistance that can keep the airlines solvent.
My best guess is that travel is likely to return to at least more normal recessionary levels by the fall, and that the airlines have the wherewithal to survive until then. Investors able to handle turbulence in the months to come might want to take a small position in the industry and hope for the best, but for now I'd recommend focusing on the top operators who should be able to withstand the slowdown longer.
10 stocks we like better than United Airlines Holdings
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and United Airlines Holdings wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of March 18, 2020
Lou Whiteman owns shares of Delta Air Lines. The Motley Fool owns shares of and recommends Delta Air Lines. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Shares of United Airlines Holdings (NASDAQ: UAL) lost 48.8% in March, according to data provided by S&P Global Market Intelligence, and shares of Delta Air Lines (NYSE: DAL) and American Airlines Group (NASDAQ: AAL) were down 38.2% and 36%, respectively. What happened Airline stocks have been hit hard by the COVID-19 coronavirus pandemic, which has caused travel demand to plummet and has led to concerns about the industry's ability to navigate through the crisis. It could have been worse: The stocks were down significantly more mid-month prior to the federal government passing a stimulus plan that contained relief for the beleaguered sector.
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Shares of United Airlines Holdings (NASDAQ: UAL) lost 48.8% in March, according to data provided by S&P Global Market Intelligence, and shares of Delta Air Lines (NYSE: DAL) and American Airlines Group (NASDAQ: AAL) were down 38.2% and 36%, respectively. See the 10 stocks *Stock Advisor returns as of March 18, 2020 Lou Whiteman owns shares of Delta Air Lines. The Motley Fool owns shares of and recommends Delta Air Lines.
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Shares of United Airlines Holdings (NASDAQ: UAL) lost 48.8% in March, according to data provided by S&P Global Market Intelligence, and shares of Delta Air Lines (NYSE: DAL) and American Airlines Group (NASDAQ: AAL) were down 38.2% and 36%, respectively. 10 stocks we like better than United Airlines Holdings When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. See the 10 stocks *Stock Advisor returns as of March 18, 2020 Lou Whiteman owns shares of Delta Air Lines.
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Shares of United Airlines Holdings (NASDAQ: UAL) lost 48.8% in March, according to data provided by S&P Global Market Intelligence, and shares of Delta Air Lines (NYSE: DAL) and American Airlines Group (NASDAQ: AAL) were down 38.2% and 36%, respectively. If the pandemic is contained in the months to come and traffic begins to return by mid-summer, all of the stocks are almost certainly undervalued. See the 10 stocks *Stock Advisor returns as of March 18, 2020 Lou Whiteman owns shares of Delta Air Lines.
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6122.0
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2020-04-01 00:00:00 UTC
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At What Point Is Delta Stock a Screaming Buy?
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AAL
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https://www.nasdaq.com/articles/at-what-point-is-delta-stock-a-screaming-buy-2020-04-01
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nan
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nan
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips
There’s no point in delving too deeply into the super obvious, which is that Delta Air Lines (NYSE:DAL) and industry peers have been hammered by the coronavirus. That goes for most of the travel and hospitality space as well. Even after its recent bounce, DAL stock is still 53% from its 52-week high.
Source: NextNewMedia / Shutterstock.com
At what point does all of this panic become an opportunity?
For Delta and other airlines, that’s a very difficult question to answer because the situation continues to evolve. There are many unknowns and moving parts with the coronavirus and the airline sector.
30 Stocks on a Deathwatch
How will the former ultimately impact the economy? How will the latter look after federal aid relief?
Airlines vs. Coronavirus
It’s not a secret to investors that the coronavirus has depressed global and domestic air travel. With President Donald Trump recently extending the social distancing guidelines until April 30 and with the U.S. now having the most COVID-19 cases, it’s unlikely consumers will be flocking to the airport anytime soon.
Airlines have become easy for the public to attack. Because the industry spent so much of its free cash flow on buybacks (with some reports as high as 96%), it’s understandable why many don’t want them to be bailed out. Critics should be aware that, while the industry spent billions on buybacks, virtually no business was preparing for such a slowdown in such a short amount of time. Unlike a regular recession, the global economy did not ease on the brakes — it slammed on the brakes with both feet.
That sudden disappearance of cash flow is dealing a swift blow to many companies, Delta included.
At the end of the day, air travel isn’t going away. The industry will receive federal aid as a part of the $2.2 trillion stimulus plan signed on March 27. The move should ensure that the industry stays upright in these difficult times and ultimately removes some risk for the group.
Valuing Delta Stock
Click to Enlarge
Source: Chart courtesy of Statista Source from Bureau of Transportation Statistics
DAL stock has always commanded a low valuation on a price-to-earnings (P/E) basis. The same goes for United Airlines (NASDAQ:UAL), American Airlines (NASDAQ:AAL) and others. You can see that in a situation like this, a low P/E doesn’t do much to help. But you can also see where that low P/E doesn’t tell the whole story, especially when “E” — earnings — goes tumbling.
Get this. 30 days ago, analysts expected Delta to earn $7.42 per share in 2020. Now? That estimate is down to just 19 cents for the year. Obviously it’s too early to determine what COVID-19’s impact will be on this year’s financials. But the decline in estimates is rather incredible. It shows just how fast the economic landscape has changed in the past month and how much exposure Delta has.
When — not if — we get back to regular life, the airlines will still have planes in the sky. Luckily, DAL stock is one of the highest quality companies in the space. Generally, Southwest Airlines (NYSE:LUV) has the best financials across the board. However, Delta was a close second in many categories.
The company churns out several billion dollars in net income per year and has solid free cash flow. In fiscal 2019, Delta generated $3.48 billion in free cash flow. Of course, with profitability and free cash flow plunging, liabilities and cash burn become the next concern.
Management said that Delta is burning about $50 million a day and saw negative net bookings in the short term. The bad news is that Delta’s best free cash flow quarter comes during the second quarter (which we’re about to enter). Q2 is the airline’s second-best quarter for revenue, which slightly trails Q3.
The hope is that by Q3, we’re seeing a solid rebound in economic activity. Many are even hopeful that that rebound begins at some point in Q2. But either way, it’s clear that one of Delta’s best quarters will take a huge hit.
Trading DAL Stock
Click to Enlarge
Source: Chart courtesy of StockCharts.com
Investors looking to scoop up airline stocks need to understand that the industry is likely to remain volatile. We don’t know if DAL stock or others will revisit the recent lows. The worst-case scenario is seemingly off the table with the $2.2 trillion stimulus package in play, although business is still going to suffer in the short term.
Does that mean we may revisit $20 again? Long-term investors would like it. From a technical perspective, I would love a chance near $14, although I’m not sure it will come to fruition.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell did not hold a position in any of the aforementioned securities.
The post At What Point Is Delta Stock a Screaming Buy? appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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The same goes for United Airlines (NASDAQ:UAL), American Airlines (NASDAQ:AAL) and others. With President Donald Trump recently extending the social distancing guidelines until April 30 and with the U.S. now having the most COVID-19 cases, it’s unlikely consumers will be flocking to the airport anytime soon. Critics should be aware that, while the industry spent billions on buybacks, virtually no business was preparing for such a slowdown in such a short amount of time.
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The same goes for United Airlines (NASDAQ:UAL), American Airlines (NASDAQ:AAL) and others. Click to Enlarge Source: Chart courtesy of Statista Source from Bureau of Transportation Statistics DAL stock has always commanded a low valuation on a price-to-earnings (P/E) basis. The company churns out several billion dollars in net income per year and has solid free cash flow.
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The same goes for United Airlines (NASDAQ:UAL), American Airlines (NASDAQ:AAL) and others. InvestorPlace - Stock Market News, Stock Advice & Trading Tips There’s no point in delving too deeply into the super obvious, which is that Delta Air Lines (NYSE:DAL) and industry peers have been hammered by the coronavirus. The bad news is that Delta’s best free cash flow quarter comes during the second quarter (which we’re about to enter).
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The same goes for United Airlines (NASDAQ:UAL), American Airlines (NASDAQ:AAL) and others. Airlines vs. Coronavirus It’s not a secret to investors that the coronavirus has depressed global and domestic air travel. The company churns out several billion dollars in net income per year and has solid free cash flow.
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6123.0
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2020-04-01 00:00:00 UTC
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Why Airline Shares Are Down Today
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AAL
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https://www.nasdaq.com/articles/why-airline-shares-are-down-today-2020-04-01
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nan
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nan
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What happened
Shares of airlines are losing altitude again on Wednesday, under pressure following a somber news conference Tuesday night in which President Donald Trump warned of a long, drawn-out battle against the novel coronavirus. Time is of the essence for airlines now that the industry has won government support to tide it over until the fall.
Shares of Delta Air Lines (NYSE: DAL) and United Airlines Holdings (NASDAQ: UAL) each traded down more than 10% at 11:30 a.m., with shares of American Airlines Group (NASDAQ: AAL), Southwest Airlines (NYSE: LUV), and JetBlue Airways (NASDAQ: JBLU) all down more than 5%.
So what
The airline industry's woes are by now well known: The pandemic has brought global travel to a halt, starving these high-fixed-cost businesses of revenue for a long time. The U.S. government last week stepped in to help, providing up to $50 billion in support as part of the $2 trillion economic stimulus package.
That buys the industry time, with United and American already telling employees the extra funding will allow them to avoid layoffs through September. But United did note that it can not sustain its current footprint indefinitely, with CEO Oscar Munoz saying in a letter to employees that "if the recovery is as slow as we fear, it means our airline and our workforce will have to be smaller than it is today."
Image source: Getty Images.
With the assistance package in place, airline investors are now trying to figure out how long the pandemic will last and how long the economy will suffer.
President Trump in comments Tuesday night doused hopes of a quick recovery, saying, "This is going to be a painful two weeks." Deborah Birx, one of the scientists on the White House coronavirus task force, during the same news conference said that more than 100,000 Americans could die from the virus even with the most stringent mitigation measures in place.
Those estimates put the markets under pressure on Wednesday and had airline investors concerned there is little hope for a quick turnaround.
Now what
It's a delicate time to be an airline investor. Thanks to the bailout package we can say with some certainty that there is not going to be a near-term U.S. bankruptcy, but there is significant uncertainty about what the future holds for the industry.
I remain bullish about long-term travel trends, and optimistic that travel will at least return to more normal recessionary levels by the fall. Smaller airlines like JetBlue and more indebted ones like American could face bigger problems, but all the major U.S. operators have the wherewithal to survive a recession.
Expect more volatility in the weeks to come as dire pandemic headlines continue, but for those able to stomach the turbulence I do believe there is an opportunity here to buy into some of the industry's top operators at a discount.
10 stocks we like better than JetBlue Airways
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and JetBlue Airways wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of March 18, 2020
Lou Whiteman owns shares of Delta Air Lines. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines. The Motley Fool recommends JetBlue Airways. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Shares of Delta Air Lines (NYSE: DAL) and United Airlines Holdings (NASDAQ: UAL) each traded down more than 10% at 11:30 a.m., with shares of American Airlines Group (NASDAQ: AAL), Southwest Airlines (NYSE: LUV), and JetBlue Airways (NASDAQ: JBLU) all down more than 5%. What happened Shares of airlines are losing altitude again on Wednesday, under pressure following a somber news conference Tuesday night in which President Donald Trump warned of a long, drawn-out battle against the novel coronavirus. But United did note that it can not sustain its current footprint indefinitely, with CEO Oscar Munoz saying in a letter to employees that "if the recovery is as slow as we fear, it means our airline and our workforce will have to be smaller than it is today."
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Shares of Delta Air Lines (NYSE: DAL) and United Airlines Holdings (NASDAQ: UAL) each traded down more than 10% at 11:30 a.m., with shares of American Airlines Group (NASDAQ: AAL), Southwest Airlines (NYSE: LUV), and JetBlue Airways (NASDAQ: JBLU) all down more than 5%. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines. The Motley Fool recommends JetBlue Airways.
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Shares of Delta Air Lines (NYSE: DAL) and United Airlines Holdings (NASDAQ: UAL) each traded down more than 10% at 11:30 a.m., with shares of American Airlines Group (NASDAQ: AAL), Southwest Airlines (NYSE: LUV), and JetBlue Airways (NASDAQ: JBLU) all down more than 5%. What happened Shares of airlines are losing altitude again on Wednesday, under pressure following a somber news conference Tuesday night in which President Donald Trump warned of a long, drawn-out battle against the novel coronavirus. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines.
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Shares of Delta Air Lines (NYSE: DAL) and United Airlines Holdings (NASDAQ: UAL) each traded down more than 10% at 11:30 a.m., with shares of American Airlines Group (NASDAQ: AAL), Southwest Airlines (NYSE: LUV), and JetBlue Airways (NASDAQ: JBLU) all down more than 5%. What happened Shares of airlines are losing altitude again on Wednesday, under pressure following a somber news conference Tuesday night in which President Donald Trump warned of a long, drawn-out battle against the novel coronavirus. Time is of the essence for airlines now that the industry has won government support to tide it over until the fall.
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6124.0
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2020-04-01 00:00:00 UTC
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Nasdaq 100 Movers: UAL, TTWO
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AAL
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https://www.nasdaq.com/articles/nasdaq-100-movers%3A-ual-ttwo-2020-04-01
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nan
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nan
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In early trading on Wednesday, shares of Take-Two Interactive Software, topped the list of the day's best performing components of the Nasdaq 100 index, trading up 2.2%. Year to date, Take-Two Interactive Software has lost about 1.0% of its value.
And the worst performing Nasdaq 100 component thus far on the day is United Airlines Holdings, trading down 10.8%. United Airlines Holdings Inc is lower by about 68.1% looking at the year to date performance.
Two other components making moves today are American Airlines Group, trading down 9.3%, and JD.com trading up 0.8% on the day.
VIDEO: Nasdaq 100 Movers: UAL, TTWO
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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And the worst performing Nasdaq 100 component thus far on the day is United Airlines Holdings, trading down 10.8%. United Airlines Holdings Inc is lower by about 68.1% looking at the year to date performance. VIDEO: Nasdaq 100 Movers: UAL, TTWO The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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In early trading on Wednesday, shares of Take-Two Interactive Software, topped the list of the day's best performing components of the Nasdaq 100 index, trading up 2.2%. Year to date, Take-Two Interactive Software has lost about 1.0% of its value. And the worst performing Nasdaq 100 component thus far on the day is United Airlines Holdings, trading down 10.8%.
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In early trading on Wednesday, shares of Take-Two Interactive Software, topped the list of the day's best performing components of the Nasdaq 100 index, trading up 2.2%. And the worst performing Nasdaq 100 component thus far on the day is United Airlines Holdings, trading down 10.8%. Two other components making moves today are American Airlines Group, trading down 9.3%, and JD.com trading up 0.8% on the day.
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In early trading on Wednesday, shares of Take-Two Interactive Software, topped the list of the day's best performing components of the Nasdaq 100 index, trading up 2.2%. And the worst performing Nasdaq 100 component thus far on the day is United Airlines Holdings, trading down 10.8%. VIDEO: Nasdaq 100 Movers: UAL, TTWO The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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6125.0
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2020-03-31 00:00:00 UTC
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American Airlines Stock Is a Bargain Buy That Will Fly Again
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AAL
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https://www.nasdaq.com/articles/american-airlines-stock-is-a-bargain-buy-that-will-fly-again-2020-03-31
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nan
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nan
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips
Global markets are in the throes of the mother of all corrections. Stocks have never fallen so fast, or from such heights. And the airline industry is the poster child for this shake up of global economies. Airline stocks like American Airlines (NYSE:AAL) who were profitable just a few weeks ago, now are asking for handouts just to continue existing.
Source: GagliardiPhotography / Shutterstock.com
Through no fault of its own, AAL stock finds itself at 2008 levels , a dizzying 70% down from recent highs. But it isn’t alone: Delta Air Lines (NYSE:DAL) and United Airlines (NASDAQ:UAL) are in a similar jam as travel around the globe freezes. Hardly anyone is flying now, so AAL’s income statement is essentially useless beyond the negative journal entries.
But unlike in 2008, this is a self-imposed stop to travel that will be lifted soon. The freeze isn’t due to demand collapse but rather a halt by choice of quarantine. But you’ll need a stomach of steel to withstand the selling pressure that these stocks have been and will be suffering this year.
7 Small-Cap Stocks That Might Not Survive
The industry is suffering tremendous losses as their planes are grounded while the fixed operating costs pile up. Consequently, industry competitors are considering consolidating flights among airlines. Under normal circumstances this would be illegal but the authorities will look the other way if it comes to it.
What investors want to know now is if this is an opportunity to buy into AAL stock. Looking long-term, yes. People will have to fly again, so buying this stock near 2008 levels is sane.
AAL Stock Is Worthy Of A Bailout If Needed
The political debate is now over whether or not to bailout airlines. Their problems really started last year with the grounding of the Boeing’s (NYSE:BA) 737 Max model. American had already sidelined its Max models through June but this is an added wrinkle that extends to most of its fleet. So AAL stock will remain hobbled for months or until the virus goes into remission.
These are great American companies and it would be shameful if the government will let them fail. While there is no imminent risk of that, the current situation doesn’t look like it’s going to end anytime soon.
So there better be steps taken to avert the potential disaster. We don’t need a Lehman moment for the airline industry, and I think the authorities learned their lesson in 2008. Our government has already showed its commitment to keeping the economy going. They already committed two trillion dollars in stimulus and will not stop short of helping the airlines as well if it comes to it.
It is Wrong To Give Up On American Airlines
There is speculation that the bailout could be tied to equity ownership that would punish stock holders. But the more realistic option is that the government would impose financial rules such as banning buy-backs and dividends, rather than taking a stake in the company itself. This is all speculative, but it is necessary to consider all possibilities when trying to catch these falling machete stocks.
The long-term bullish thesis right now is almost foolproof provided AAL stock survives this test and avoids going to zero via government action. Otherwise, patience will pay over time as the stock recovers to set new all-time highs.
Since volatility is still so high, conviction in any investment ought to be moderate. Staking full-size investments now is reckless behavior. Leaving room to add to your position later is the best way to manage the position. Alternately, rather than buying shares, investors could sell put options to go long AAL stock without any out-of-pocket expenses.
Technically and for the short-term, if the bulls can beat $40 per share, they can trigger a $12 buy signal. There will be resistance levels along the way, but markets are eager to push stocks higher.
Fundamentally, it’s hard to argue that shares are expensive here. AAL stock is under 4 price-to-earnings ratio and selling at a fifth of its sales. Albeit the metrics are wonky since there are no sales flowing through the P&L.
Nevertheless, AAL stock is not bloated here. The near-term future for American Airlines might be murky but eventually they will fly again.
Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. Join his live chat room for free here.
The post American Airlines Stock Is a Bargain Buy That Will Fly Again appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Alternately, rather than buying shares, investors could sell put options to go long AAL stock without any out-of-pocket expenses. Airline stocks like American Airlines (NYSE:AAL) who were profitable just a few weeks ago, now are asking for handouts just to continue existing. Source: GagliardiPhotography / Shutterstock.com Through no fault of its own, AAL stock finds itself at 2008 levels , a dizzying 70% down from recent highs.
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Airline stocks like American Airlines (NYSE:AAL) who were profitable just a few weeks ago, now are asking for handouts just to continue existing. Alternately, rather than buying shares, investors could sell put options to go long AAL stock without any out-of-pocket expenses. Source: GagliardiPhotography / Shutterstock.com Through no fault of its own, AAL stock finds itself at 2008 levels , a dizzying 70% down from recent highs.
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Airline stocks like American Airlines (NYSE:AAL) who were profitable just a few weeks ago, now are asking for handouts just to continue existing. AAL Stock Is Worthy Of A Bailout If Needed The political debate is now over whether or not to bailout airlines. Source: GagliardiPhotography / Shutterstock.com Through no fault of its own, AAL stock finds itself at 2008 levels , a dizzying 70% down from recent highs.
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AAL stock is under 4 price-to-earnings ratio and selling at a fifth of its sales. Airline stocks like American Airlines (NYSE:AAL) who were profitable just a few weeks ago, now are asking for handouts just to continue existing. Source: GagliardiPhotography / Shutterstock.com Through no fault of its own, AAL stock finds itself at 2008 levels , a dizzying 70% down from recent highs.
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6126.0
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2020-03-31 00:00:00 UTC
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Why Shares of Airlines Are Climbing Today
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AAL
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https://www.nasdaq.com/articles/why-shares-of-airlines-are-climbing-today-2020-03-31
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nan
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nan
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What happened
Investors in airline stocks continue to waver on the industry following the passage of a $2 trillion economic stimulus bill that includes $50 billion for passenger carriers. The stocks rallied last week but were down on Monday, only to bounce back Tuesday as more details trickle out about how the airlines are going to cope with the COVID-19 coronavirus pandemic-induced travel slowdown.
Shares of United Airlines Holdings (NASDAQ: UAL) led the way on Tuesday, up 10% at noon, with shares of Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), and Southwest Airlines (NYSE: LUV) all up more than 5%.
So what
The airline sector has been among the hardest hit by the pandemic, with travel demand all but evaporating overnight. A Transportation Security Administration (TSA) spokesperson said Tuesday that on Monday, the agency screened 154,080 passengers nationwide, the lowest single day in 10 years. By comparison, on March 30, 2019, the TSA screened 2,360,053 people.
Image source: Getty Images.
Most airline stocks lost more than half of their value in the first three weeks of March before stabilizing as lawmakers in Washington agreed on an assistance package that includes $25 billion in grants and $25 billion in loan guarantees to help get the industry through this slowdown. The airlines have until Friday to apply for the assistance, with American already telegraphing its intention to seek relief and other carriers expected to follow.
Markets are now going back and forth on the sector, with investors both growing increasingly confident the airlines have the financial firepower to weather a multimonth storm but also worried about how quickly demand might return. United has warned workers that the assistance is likely only enough to get it through the summer, saying if demand doesn't return it would consider furloughs after Sept. 30.
On Tuesday, the news flow was mostly positive, with the Department of Transportation signaling it will be flexible when enforcing rules requiring the airlines to sustain service to all markets in return for the assistance.
Now what
The good news for investors is that after enduring weeks of seemingly daily double-digit declines, the stocks have stabilized somewhat. The bad news is that until the pandemic is under control and we have some idea of how quickly the economy will bounce back, and with it air travel, it is going to be hard for these stocks to really take off.
Major airlines year-to-date data by YCharts
This is going to take some time to play out, but for those who can stomach the turbulence, I do believe it is safe to start looking at airline stocks. Given the uncertainty, it is best to focus on the top operators in the industry that should be able to survive the longest if conditions remain bad past the summer months.
10 stocks we like better than Southwest Airlines
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Southwest Airlines wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of March 18, 2020
Lou Whiteman owns shares of Delta Air Lines. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Shares of United Airlines Holdings (NASDAQ: UAL) led the way on Tuesday, up 10% at noon, with shares of Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), and Southwest Airlines (NYSE: LUV) all up more than 5%. What happened Investors in airline stocks continue to waver on the industry following the passage of a $2 trillion economic stimulus bill that includes $50 billion for passenger carriers. Markets are now going back and forth on the sector, with investors both growing increasingly confident the airlines have the financial firepower to weather a multimonth storm but also worried about how quickly demand might return.
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Shares of United Airlines Holdings (NASDAQ: UAL) led the way on Tuesday, up 10% at noon, with shares of Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), and Southwest Airlines (NYSE: LUV) all up more than 5%. See the 10 stocks *Stock Advisor returns as of March 18, 2020 Lou Whiteman owns shares of Delta Air Lines. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines.
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Shares of United Airlines Holdings (NASDAQ: UAL) led the way on Tuesday, up 10% at noon, with shares of Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), and Southwest Airlines (NYSE: LUV) all up more than 5%. Most airline stocks lost more than half of their value in the first three weeks of March before stabilizing as lawmakers in Washington agreed on an assistance package that includes $25 billion in grants and $25 billion in loan guarantees to help get the industry through this slowdown. See the 10 stocks *Stock Advisor returns as of March 18, 2020 Lou Whiteman owns shares of Delta Air Lines.
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Shares of United Airlines Holdings (NASDAQ: UAL) led the way on Tuesday, up 10% at noon, with shares of Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), and Southwest Airlines (NYSE: LUV) all up more than 5%. Most airline stocks lost more than half of their value in the first three weeks of March before stabilizing as lawmakers in Washington agreed on an assistance package that includes $25 billion in grants and $25 billion in loan guarantees to help get the industry through this slowdown. * David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Southwest Airlines wasn't one of them!
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2020-03-31 00:00:00 UTC
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Should the Government Bail Out Boeing and the Airlines?
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AAL
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https://www.nasdaq.com/articles/should-the-government-bail-out-boeing-and-the-airlines-2020-03-31
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In this episode of Industry Focus: Energy, Nick Sciple and Motley Fool contributor Lou Whiteman focus on the government bailout for the aerospace industry in general, and particularly, on Boeing (NYSE: BA).
The airlines have been one of the industries most affected by this current pandemic, with major routes suspended indefinitely. What are the airlines getting from the stimulus? What does their outlook look like? And should you consider their stocks?
Lastly, they answer listeners' questions. Find out if you should have a certain multinational conglomerate on your watch list, and much more.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.
10 stocks we like better than Boeing
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David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Boeing wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of March 18, 2020
This video was recorded on March 26, 2020.
Nick Sciple: It's Thursday, and we're diving into the government bailouts ahead for the aerospace industry. I'm your host Nick Sciple. Joining me today to break it all down is Motley Fool contributor Lou Whiteman. Lou, welcome back on the show.
Lou Whiteman: Thanks for having me, always a pleasure.
Sciple: Yeah, it's great to have you on. And you were on the show back on Feb. 27. Since then, the stock market is now down 12% after this rally the past couple of days, when we entered bear-market territory in that interim. What have you been doing as an investor during this kind of crazy volatility?
Whiteman: So, this is from Twitter, so it may not be true, but I actually just saw: Technically, we are up 20% in three days, so we are out of bear-market territory. So, congratulations, we did it.
You know, I've been doing what a lot of people are doing -- watching and just trying not to watch too closely. We talked last month about trying to separate material impact from permanent impact. And I've been trying to continue, as I look at the stocks: A lot of the economy is going to get beaten down, and a lot of companies are going to show poor results in 2020, but are trying to determine if there isn't permanent damage done, trying to weather the storm. You know, that's easier said than done, but, yeah.
Sciple: Trying to think long-term, you mentioned weathering the storm, and that ties into the news today. Late last night, the Senate unanimously approved a $2 trillion emergency relief bill intended to offset some of the financial damage going on from this pandemic. It's insane how quickly this happened, Lou. Have you ever seen anything happen like this before? You've been watching the markets a lot longer than I have.
Whiteman: You know, it's funny, it feels both quick and too slow. Yes, it's come together really quickly, but at the same time, parts of this, like the checks to consumers, I'd argue -- they should have been doing that two weeks ago to really stop the damage. But you know, it's still the old Winston Churchill quote about America [getting] it right eventually. And when push comes to shove, there is a need here. It's coming together; it sort of rhymes with 2008, but it's much different. But put on the spot, we are finally getting something together, and hopefully for the good.
Sciple: Yeah, a lot of stuff to unpack here, and just a signpost for our listeners: This could be one of our longer shows, since there's a lot of stuff to talk about. I'll just kind of run through some of the facts and figures from this bill:
$1,200 checks going to all Americans earning $75,000 or less. It's going to be phased out for folks earning above that threshold.
$367 billion in employee retention funds for small businesses.
$500 billion in corporate rescue funding.
And the part that we're going to talk about today is monies allocated for passenger airlines -- $25 billion in loans and certain other guarantees, as well as $25 billion in things like grants. There's another provision of the bill that authorizes $17 billion in assistance for companies deemed crucial for national security. And many observers have signposted that that is likely to ensure assistance for Boeing.
So I want to talk about Boeing first, before we get into the airlines. This is a company that's been through the wringer in the last year. What was the financial position of this business even before the coronavirus disruption took place?
Whiteman: Yeah, Boeing has been a mess. The 737 MAX is the first thing that comes to everyone's mind. It was grounded almost more than a year ago now. It was early March 2019, after a pair of fatal accidents. Boeing is a huge company with plenty of financial resources. The MAX was going to be a big seller. So this hadn't been a great period going into this.
The issue now is, you know, the MAX was already off the table, wide-body demand, the larger commercial planes. That was showing signs of weakness even before that; now you have airlines grounding 70%, 80% of their fleet. And with that, that's going to be A, less demand for spare parts in the near term, and [B] potentially, if this lasts long enough, they're not going to need all those new airplanes. And so, this is a serious situation for Boeing, a company that was in a huge mess already.
Sciple: Yeah, as a company, it more or less doubled its debt load in 2019, and then most recently, back in December, CEO Dennis Muilenburg was ousted from the company right on Christmas Eve, which is a great time to drop this type of news when, you know, everybody is getting ready for Christmas. But when you look at this new leadership in place, the issues around the company, I think Congress called them out as "culture of concealment": How confident are you in this leadership to navigate these issues ahead?
Whiteman: Well, Boeing is a real Jekyll-and-Hyde company. It's an amazing portfolio, an American powerhouse -- but at the same time, cultural issues. The 737 MAX really exposed a lot of just, you know, poor practices in the company. But this is a company, if you go back 20 years, their last big military win on the aviation side was a tanker program that the CFO ended up in jail over that. And that program comes in billions over budget. When they finally delivered a plane, the Air Force had to ground it immediately because there was construction debris left in the plane.
This is just a weird company. Dave Calhoun is new leadership. They definitely needed to replace the CEO, but then again, he's been on the board since 2009, so he has overseen a lot of this.
You know, Boeing is still -- I have no desire to touch it. I didn't have any desire to touch it when all the other stocks weren't on sale. And now, there's so much else out there you can buy, that you can look at right now. It's an amazing company, amazing potential, but you know, I have no confidence to buy in.
Sciple: Yeah, when you look at the duopoly this company is in, it's really hard to see them getting disrupted, but a lot of these cultural issues really give you some concerns. Reminds me some about GE [General Electric], you know -- we heard the news a couple of years ago about all the issues that [had] built up over time, then all of a sudden the stock collapsed.
You mentioned the tanker thing. My hometown Mobile, Alabama, originally won that tanker contract; Airbus originally had won that contract, [but] Boeing pulled some kind of political strings. So there's not a lot of goodwill around that company in my hometown either. You know hopefully, they can navigate this. As you said, this is a really important business.
When you look at the state of the business, you mentioned the sell-off or the issues in the demand for wide-body planes. However, this new CEO has said that if the government, as part of these bailouts, wants to take equity, they might not even take the money. So, are they positioned to ride this out, notwithstanding support from the government?
Whiteman: That comment was another in this long list of just, "Wow! what's going on there?" for me. And again, with a new CEO, but sort of the same talk. I think, honestly, they have $15 billion in liquidity, they have a $25 billion in annual sales defense business that, while it's a small part of Boeing, it would rank as a top five defense contractor. That's a company within a company.
Boeing has liquidity; Boeing has a runway. I would imagine when those comments were made, you probably heard a silent scream from the supply chain. That's what worries me. You have a second tier that is very reliant on Boeing, that is very reliant on new plane sales: Spirit AeroSystems [Holdings], Triumph Group; beneath that, you have their suppliers. These are very specialized equipment; you're building, even if it's just a small screw, it's a screw that is to a technical specification. All it takes is one liquidity issue in that supply chain, and the whole thing crumbles quickly.
Does Boeing need it? I think Boeing could certainly use it. Does Boeing's supply chain need it, and should Boeing's CEO shut up and take it? Absolutely. For the long-term good of the business and for, honestly, the defense side too; a lot of these guys work on defense too. There's a lot more going on there than Boeing's CEO deciding to flex his muscle in a television interview.
Sciple: Yeah, it's just, whether you need it or not, it's a really bad look in the context of all the things the company has gone through and the fact that they -- I mean, I think the number called out was they wanted $60 billion in assistance. Come on, if you're asking for me, the taxpayer, to bail you out, just take the money, all right?
And you called out the suppliers, this is another thing we're seeing across industries right now, through this rise of just-in-time inventory. Once some of these factories get closed, how long does this kind of bubble out through the system? Even assume that there's no financial difficulties, once one of these factories is closed and you disrupt the supply chain: How long until these things can really get back up and running? Is that something we should be thinking about as investors as well?
Whiteman: It's definitely something to monitor. I mean, it was really interesting to me that the defense side of this is much more stable. We're not going to see demand for military platforms fall off the cliff the way we could commercial jets. But the Pentagon has been, I would say, admirably proactive. They put out a memo telling their prime suppliers, they're actually going to make progress payments ahead of time, they're going to up the percentages with the goal for that liquidity to trickle through the system.
Again, this is the other side of the same coin. A lot of these suppliers are on razor-thin margins. They have a commercial business and a defense business. If the commercial business is falling off a cliff, it's not in the Pentagon's best interest to see the suppliers, you know, wounded or shutting down.
I mean, the Pentagon, it's good business for them to do that, but I think it also should be taken by the market as a signal that they saw a reason to do this.
It's hard to say, liquidity is coming into the system, so I'm not predicting gloom-and-doom, but it's certainly something we need to be watching.
Sciple: Yeah, all I have to say, I think both Lou and I agree, given the cultural issues at Boeing, that they were still in really dire straits when it comes to what was going on with 737 MAX, even leading up to this. Even if the government comes in and bails them out, this is not a company I'm superexcited about buying into, given the value across the entire rest of the market.
Whiteman: Right. And that's one last point, and I haven't checked it today, but you know they were so highly valued because of that commercial business, as much as they've fallen. Going into this week they were down 70% for the year, which is just crazy for a company that size, but even then they were on a multiple that is comparable to some of the other defense companies. This is not a company that was on sale necessarily.
And yeah, there's a lot of good aerospace companies that look a lot more attractive right now than they do.
Sciple: Yeah. So, moving on from Boeing to discuss the airlines, who are really the big focus of a lot of this legislation. What was the financial condition of these companies before the coronavirus disruption?
Whiteman: So, this is the part that's a Shakespearean tragedy, because this is an industry that throughout its history, since deregulation in the 1970s, has just been a miserable place for investors. Warren Buffett famously said, if a capitalist had been at Kitty Hawk, he would have shot them down. That kind of sums up investors' feelings on the industry.
Every downturn, we've seen storied names fall from the sky, whether it's TWA, Braniff, Pan Am, so many great companies. Last time around, post 9/11 they all went into bankruptcy, they all did deals. This industry was healthier coming into this than they have ever been before. American Airlines [Group] (NASDAQ: AAL) CEO Doug Parker, famously, and now regrettably, said: I don't know if airlines will ever lose money again. [Editor's note: Parker's actual quote was "I don't think we're ever going to lose money again."]
That quote doesn't look good right now, but there was a reason he said that. This industry came into this ready for a downturn, they didn't come into it ready for revenue to fall to zero, and that's what they got and so they end up in the same place anyway, even though they did the right things.
Sciple: Yeah, it's tough. You know, you look at the airlines and people say, "Why didn't you develop...have this rainy day fund for if this takes place?" And listen, given the probabilities of something like this happening, that was a risk they were willing to take. And I think a lot of investors thought that was a reasonable risk to take, and then these things happen, and you're kind of left holding the bag.
Whiteman: Sure. And if you look at the specifics of what some of these are saying and try to imagine what company in the S&P 500 could take it: Delta [Air Lines] (NYSE: DAL) predicts second-quarter revenue will be down 80% year over year. United [Airlines Holdings] (NASDAQ: UAL) has cut almost 70% of its schedule. Hawaiian Airlines [Hawaiian Holdings] (NASDAQ: HA) is suspending all but two flights off of the island. Yes, the whole economy is hurting right now, but find me a business that has just seen revenue go to zero in the near term, and then the question is: How long can any business survive, pay their employees, which mind you, for now at least, the airlines have continued to pay their employees. Find me an industry that can see revenue go to zero for months and not be in trouble. This isn't a matter of saving for a rainy day.
Sciple: Right. And you have to think about the operating leverage of this industry, the fixed costs to just maintain your fleet, all those sorts of things. If you don't have revenue coming in the door, it really starts to eat up on you really, really fast, when you have the kind of operating leverages that these businesses have.
So, one of the criticisms around the airlines and them getting, kind of, support from the government has been this number: I think Bloomberg came out with the article saying [that] over the past decade 96% of free cash flow has been spent on buybacks, and that you know the airlines should have been more prepared for this. So what are your thoughts on those criticisms of the industry?
Whiteman: All right. Well, as much as it pains me, as I said before in articles, as much as it pains me to be the defender of moral hazard in corporate welfare, and there are some ugly stats here and it's hard to defend some of these practices. But for one thing, you should never set policy based on a tweet, and you should never set public policy based on one stat. That 96% of free cash flow number [that] went into buybacks is accurate. It is also only accurate because [it's] industrywide, and is heavily weighed by American, a company that was doing a huge amount of investment in its fleet which limited its free cash flow, which makes the number look really bad. You know, United isn't great either, so it's not just [that] I don't want to pick on American, but if you look at a company like Delta, you look at a company like Alaska [Air Group], their numbers were actually lower as a percentage of free cash flow than the S&P 500 average.
I would hate for lawmakers to set a policy or decide on the fate of the industry based on one stat that takes the whole industry and not look at these companies. And while it exposes a problem in the system, this is hardly confined to the airlines. And it makes for bad policy when you try and correct long-term issues in the moment of a crisis.
Sciple: Yeah, I agree with that. I will say, when you look at Doug Parker out of American pulling in almost $200 million in stock-based compensation over that time frame: This is a company that did spend more than its free cash flow on buybacks. When you look -- I mean, the whole industry, $431 billion in buybacks, just makes me, as someone kind of bailing out this industry, really conflicted on, you know, we want to protect the employees -- but also, I mean, gosh! Should these folks be able to pull $200 million out of the company, and then get bailed out by the government with any consequences? I don't know.
The other thing we think about a lot here is [that] Warren Buffett is a massive owner of this industry, 10% across the board. So, as we come in and save the equity here, we're really kind of bailing out Warren Buffett to a certain extent.
Whiteman: To a certain extent. Again, nuance, nuance, nuance in all of these things. Warren Buffett owns a major stake in all of the big four airlines. They control about 80% of the market, so you are correct.
For me right now, the bigger worry is some of the airlines Buffett doesn't own, the smaller ones. There's also -- and I remember this from the TARP program [Troubled Asset Relief Program] back in 2008 -- part of this is a confidence game. All of these airlines have billions in unencumbered assets that they can borrow against. The question is, will someone make those loans? Part of what we're trying to do with a bailout is for the government to come in, flex its muscles, [and say: "We're not going to let this industry fail." The counterparty on the other side holding an existing loan, or thinking about making a loan, is going to be more willing to step in if they believe the government will be there if things get worse. And that is, as far as just yelling "Let the private markets handle it," this is a very blunt instrument and a not great way to do it. But in effect what we're doing is, we are clearing the way for more private investment.
Sciple: Yeah, exactly. It's kind of that liquidity backstop. So, if you're someone who's going to loan to this business, you have some assurance that you'll recoup your investment. So, as a result, [laughs] if I was having to loan to these airlines right now and I was worried they're going to go bankrupt here in a few months, the interest rates that I'd be demanding or the types of covenants I'd be demanding would just be so prohibitive. So, that's been very important.
Another part of this bill that has been called out is they've rolled out waivers on fuel and excise taxes through 2020, which a Bernstein analyst came out and said that should save American $1.3 billion in taxes, $2.32 a share; $1.53 a share for Delta; $3.73 a share for United Airlines; and $0.90 a share for Southwest [Airlines]. So, that's really helping them as well, even away from the direct cash infusions.
Some of the conditions on accepting these funds have been, they'll have to suspend dividends and buybacks through 2021, caps on CEO pay, that sort of thing. When you look at these conditions placed on these bailout funds, what are your thoughts on those?
Whiteman: Sure. Just to back up real quick to the taxes thing, that is interesting, I was just pulling for one company. I think you said $2.32 per share for American, that it's a benefit.
Sciple: Yes.
Whiteman: In the last 90 days, American's consensus estimate for 2020 has gone from a $5.34-per-share profit to a $3.12-per-share loss. Which again, not as to say good or bad, but that $2.32 is a huge number -- but what we're talking about here is a much bigger number. And that's kind of all of these things, just the context and the, yeah-buts.
But, yeah, as for the conditions on the bailout, the package, and this gets to sort of the moral hazard: I think what I've read is appropriate. I am curious, especially on the equity side of it, if it's required. Because I can see some of these stronger airlines turning it down, honestly, or at least saying, "Not now."
The loans make sense, the loans the government gets back. We forget, but the government actually did really well on TARP, way back when.
I get the lack of grants. I think the argument for grants would be, in effect, it's an employee stimulus plan, because you give us the money, we'll make sure, even though we're only flying 30% of our flights, we're not laying off employees. You can go back and forth, but certainly there should be some accountability, especially when the loans are in place. I get nervous about permanent stipulations, because it's hypocritical to both say, "You guys are private companies, you should use the private markets," and then handcuff them in terms of what they can do relative to other companies.
Delta isn't competing for capital with American, Delta is competing for capital against every other company out there. And if Delta has rules either on executives or on their stock or on their repurchases long-term, it is harder for Delta to get private sources of capital.
So, permanent things, trying to write legislation for one industry when you have a bigger problem, I don't like that. But I don't know how you can say, "As long as you have these loans, you can't do X, Y and Z," which is capital going elsewhere. I don't know how you can object to that.
Sciple: Yeah. Even private lenders when they'll lend to a company, they will put covenants in place that restrict the dividends they can give out and that sort of thing. And the government, in this case, is the ultimate lender of last resort, and I think you should be able to extract these sorts of terms, because that's what a private lender would be able to extract as well.
One thing I've thought about here, Lou, and maybe it's a little bit off the beaten path here, is how quickly the government has rushed in to backstop these industries. If I'm somebody like Warren Buffett and I'm sitting on $120 billion of cash that I can deploy, does this hurt his opportunity to get those kind of bargain-basement deals and to rush in and be the lender of last resort, given that the government has really hopped in and done that role?
Whiteman: So, we've talked about this and we've written about it. I mean, personally, as a Berkshire [Hathaway] shareholder and a shareholder of a couple of airlines, I think I'd be shocked if in six months Warren Buffett hasn't done a big deal. I wouldn't have guessed, going into this year, it would be an airline, but watching them fall, a company like Delta, you know, that's interesting.
I don't know, I mean, Buffett got a great deal on some of those banks when he bailed them out. I don't know if that was great policy either, you know. [laughs] So, yes, I think marginally this has hurt the bargain shopping, but I don't know if that's bad policy that even Warren Buffett can't come in and just grab assets on the cheap. You know, that's something out of It's a Wonderful Life, and we didn't like it when Mr. Potter did that.
Sciple: That's true. He's the bad guy in that movie, if you remember well. So as we talk about kind of grabbing assets on the cheap, these companies potentially receiving bailout funds, there's two views on that. There is, "Well, the government is going to backstop these companies, and so the bottom may be in in them." Or, this signals that there's the rough financial condition, and maybe it's just you don't want to borrow trouble buying into these companies.
As an investor yourself, Lou, how are you thinking about investing [in], or maybe avoiding, these airline companies? And if you are to invest in them, is there any company that jumps out to you as: This would be where I would go?
Whiteman: Sure. Let's talk about a couple of names really quick. For one, I don't want to call a bottom, you're right. Until we know the extent of the pandemic and the long-term impact of it, you know, even if the outbreak is over in a month, if we are in a recession, it's going to be hard for these companies to really bounce back until that recession is over, that could be 2021 or something. So, we can't call a bottom, we can say that there are seemingly good assets at interesting prices.
The best airlines to buy right now, for safety, I think are Delta and Southwest. If all the rest of them fail, Delta and Southwest have the balance sheets, have the business to be the last standing. Of the two, I'd favor Delta because it has fallen so much further.
Another one, if you really want to risk-reward, and there's a lot more risk here, but Spirit Airlines is a very small company; it's much more vulnerable, but it's also very well-run. And it is what they call an ultralow-cost carrier, which basically for these purposes means, they can make money at fair levels that most companies can't. If we come out of the pandemic in a recession, the airlines are going to try and stimulate demand with low fares. That usually doesn't work for corporate travel, but it is usually pretty effective on filling planes with tourists. Spirit is positioned to make money on lower fares than most of its rivals. So if it gets through this, even in a recessionary scenario, Spirit has been beaten down, and there's a decent investment there.
On the other side, of the big airlines, American is clearly the most vulnerable. They have $25 billion-plus in debt, they were in a different part of their life cycle. They were the last one of the big ones to go through bankruptcy, they are just further behind on a lot of things that the others are doing. I think they will make it. I think they have plenty of liquidity, they have assets, but if there is a vulnerable big airline, it's them.
I also worry about Hawaiian. It's a good company, it's well-run; but it is a niche operator, it's got huge expenses because all of your flights are trans-Pacific, there's no little puddle-jumpers. Again, I don't see them failing, but I do worry about them. And again, Spirit, you know I just spoke well of them, but their debt-to-EBITDA [ratio] is 4.0, I think. This is a company that if this is extended, or if the bailout doesn't get to the smaller companies, this is a company that can easily get wiped out as well, which is why it's a huge risk-reward.
Sciple: So you raised this, so a couple of things I want to call out, since a couple of those tickers are ones that aren't intuitive. So, Spirit is SAVE. Southwest is LUV. Delta, DAL. American Airlines, AAL. So, just so you have those tickers.
Whiteman: Southwest: Love Field, Dallas, Texas, that's where they started. That's a great ticker.
Sciple: There you go. You mentioned the bankruptcy thing; that does kind of raise a question that I've had kind of going back to the bailout. Why is bankruptcy not the route that we're going this time? You know, GM [General Motors], we let them go bankrupt in 2008; the airlines have gone through this process many times before. Why is the bailout the route that we're choosing now, versus kind of letting bankruptcy go out and letting that process take its course?
Whiteman: This is a great question, and I'll be honest, 90% of the arguments I've had on Twitter over the last few weeks have been about some version of: Why don't we do a nice, orderly bankruptcy like we did with GM? And you know I was covering the autos back then, and I remember that process a little differently than a nice, orderly bankruptcy.
First and foremost, it wasn't overnight. General Motors first received money in December of 2008, it was $13.4 billion for one company alone, and it came from the TARP program, which was another advantage over now, where there was a program that was set up, there [were] very controversial views there, but at least there was an instrument in place for the government to use.
GM got another, I think it was, $4 billion in April. And then they finally filed for bankruptcy in June of 2009, more than six months after that first injection of cash. So in that case, Treasury spent $18 billion on one company to glide it into bankruptcy over six months. Now, we're talking eight maybe more simultaneous processes, which is a lot of bandwidth for the Treasury, even if they have it, on a much tighter time frame. I would argue, maybe none of these companies would need the $20 billion [sic] GM used, but you know $50 billion would be nothing, would be peanuts compared to what we would spend just to glide these companies into bankruptcy.
And then it worked out well, but half of what I was writing about with 2009 and 2010 were all of these questions, and government control and equity. And all this, you know, it worked out relatively well, it didn't work out so well for [Fiat] Chrysler [Automobiles], but Chrysler was a different story. But it had its own challenges of its own. And there were a lot of people, just like there's a lot of people complaining about what we're giving to the airlines now, there were a lot of people complaining about that too. It points to just how hard this is, especially if you have to move quickly.
Sciple: Right. Again, as we said at the top of the show, [it's] kind of unprecedented to see an entire industry go from firing on all cylinders more or less -- travel was at all-time highs -- to zero in a matter of a couple of months. One other thing, in the context of -- and you may not have, I mean, there's no hard-and-fast answer to this, but it's something I've been thinking about in the context of everybody being on lockdown. This rise, and folks doing meetings over Zoom [a product of Zoom Video Communications], working remotely -- snap your fingers and the airlines get through this disruption: A big part of airline travel demand is business travel. With this kind of a continued rise in remote meetings, Zoom meetings, that sort of thing, should we be prepared for airline travel demands to be less strong, particularly, in the business-travel part of the market, coming out of this?
Whiteman: You know, there's no way to answer this question the way I want to without sounding like an old Luddite; which, you know, might be accurate. On the margins, yes. But I've heard a lot of people both amazed at Zoom and frustrated with -- and not to pick on Zoom, I think, actually, I'm very impressed with Zoom.
I remember 15 years ago, I think it was United Airlines, ran an ad campaign that was basically: There's still a place for that handshake, for the face-to-face. On the margins, yes, the world is changing. We do more in email right now than we could. So there are things that used to require a visit that now are done automatically. I would be surprised if this meant the end of corporate travel, or even a huge divot.
And also, as we're growing into more of a global economy, the more lucrative business, the global travel, I think, will continue to rise even if jumps up to New York do take a hit on this. I would be surprised if that's a long-term, real balance-sheet-altering legacy of this. But you know I've been surprised by a lot of things.
Sciple: Yeah, the time will tell. And to your point, I think that in-person sales process, it's hard to get past that. The charm doesn't work the same way over Zoom as it does in person. We'll have to see. It's worth calling out that this may not be the end of legislative action when it comes to stimulating the economy, helping these businesses out. Nancy Pelosi, Speaker of the House, has said, we have some unfinished business and their next bill will lean toward recovery; this current bill is to make it through this situation. So as we have more information on that, we'll sure be here to cover it.
I want to move on to a listener question from Christian. Lou, you and I maybe a year ago had talked about United Technologies, and Christian's question is on that company. He says, "I recently started listening to the podcast and love the insights everyone gives. It has helped me understand more of the market as a whole, as well as looking at each industry." He's been wondering about United Technologies. He knows they announced a three-part split of the company, but since he hasn't heard any news at the time he wrote this, the current price was around $83, down from about $150; United Technologies is now at back up to a $102 today with the market rally. "With the sudden fall in the market and the potential of the split-up, should this be a good company to keep on your radar and start building a position today?" Thoughts on that, Lou.
Whiteman: I like United Technologies, I really do. I mean the issue for them, and as far as we know, it will still close -- they are in the process: They are very close to merging with Raytheon (NYSE: RTN). It's a complex deal. United Technologies is a conglomerate, they're going to break off Otis Elevator, they're going to break off Carrier HVAC into their own companies, and basically merge a commercial aerospace heavy business with Raytheon, which is a defense business.
You know, it's funny, a year ago everybody on both sides hated this deal, because the defense people didn't want commercial and commercial didn't want defense. This last month, we've seen the value in diversification. As far as I know, the deal is on, and the deal will close in the coming weeks. I like the long term.
If I was Christian right now, I don't know if I'd buy in, unless I wanted to be an owner of Otis and Carrier too. You can wait a few weeks, because those two companies are going to be spun off as new stocks for shareholders, and then United Technologies is officially going to buy Raytheon. So, if you bought today, you'd end up with shares of those two companies and the new Raytheon Technologies.
For me, I want to see how this company post-merger is, and I might look into buying it in the second half of the year, if things are going as planned. I don't, so much, have a desire to own some of those other businesses; it's just not what I'm looking for, so I personally wouldn't. But United Technologies has been a great company; the new Raytheon Technologies, which is what they're going to call it, is a very, very interesting concept, and I think it could do real well. I just wouldn't pull the trigger today.
Sciple: Yeah, I think the aerospace theme, more broadly, is just massive growth over time. And to your point, bringing together that defense arm of Raytheon with the commercial aerospace part of the business really gives a lot of optionality there for them. I will say, if you're a dividend-focused investor, I think Otis could be pretty attractive, because they have really stable revenues from maintenance on elevators that's required regulatorily, so that kind of helps them.
One question I had for you: On Tuesday, Jason and Emily talked about Dividend Aristocrats. United Technologies is a Dividend Aristocrat; however, with the company getting split up, do you know how that maybe affects their status, or does it at all?
Whiteman: Well, you know, this was an interesting rabbit hole to dive down, because we're trying to figure out. And this was news to me that this is actually determined by a board at S&P [Global], which I wasn't aware of. I knew the term, but I didn't know where it came from. That's going to be up for them to do, to figure out.
From what I've seen in past situations, because United Technologies, the aerospace arm, is spinning off the other two units, and they are buying Raytheon, that that heritage -- it appears, if they go as they have in the past, that that legacy will stay with the aerospace business, and become Raytheon Technologies as a Dividend Aristocrat. I'm not on that S&P board, so I can't speak for them. I'd love for them to hit me up, because I was trying to find an answer to that, if I'm wrong. But it seems like Raytheon Technologies will inherit that title. But I agree with you, both of those businesses -- Carrier, who knows, but Otis and Raytheon Technologies, should be [good payers].
Sciple: Yeah, I think if you're looking for dividend stocks, I think each of those are solid choices. And on this bailout stuff, a lot to continue to play out, we'll be talking about that into the future. I wanted to ask you one other question unrelated to stocks before we hit the road. We're all working from home now, and all of us at team FHQ are -- I know probably tons of our listeners are -- you're someone who's been working at home since long before any of this stuff ever happened. Do you have any tips for those of us new to working at home about how we should handle it?
Whiteman: Yeah, feeling pretty smug right now. I've been self-quarantining since 2002. [laughs] So, you know, I was way ahead of the trend on this. And it's funny, because the interesting thing to me has been watching my wife and watching my neighbors and everyone trying to do this. I think we're all creatures of habit, we all have our routine, and the routines of all have been screwed up.
The best advice I have is just either, stay on your routine the best you can, if that's possible, or forge a new one. Because that is the disruption in what we're used to, I think, [that] really slows you down. There's plenty of distractions at work, there's plenty of distractions at home; it's just try and stay in the same routine, and maybe not watch the markets all day, but it depends on where it's going. But just try and be as normal as you can.
Sciple: Yeah, I was talking to my fiancee this morning. It's kind of like Groundhog Day around here, you get up, and you know, rinse-repeat. But, yeah, getting in that routine has been really valuable. I'd say for me, listening to a lot of music really helps me out when things are going crazy. Do you have any music stuff that you like to go to in these stretched times?
Whiteman: You see, I'm the opposite, I usually listen to music all day, but now I got other people in my house all day. [laughs] So, just stuff like that. You know, I'm old, so for me it's normally 80s alternative rock. But, yeah, I don't know if that helps get you through bad days anyway, because a lot of that is somewhat dark. [laughs]
Sciple: Yeah. Well, you know, we've been talking about airlines and aerospace this whole day. So, maybe I'll just turn on some Kenny Loggins' "Danger Zone" to get in the mood.
Lou, thanks, as always, for coming on the show.
Whiteman: Pleasure to be here.
Sciple: As always, people on the program may own companies discussed on the show, and The Motley Fool may have formal recommendations for or against the stocks discussed, so don't buy or sell anything based solely on what you hear.
Thanks to Austin Morgan for his work behind the glass. For Lou Whiteman, I'm Nick Sciple, thanks for listening and Fool on!
Lou Whiteman owns shares of Berkshire Hathaway (B shares), Delta Air Lines, and Spirit Airlines. Nick Sciple has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares), Delta Air Lines, Southwest Airlines, Spirit Airlines, Twitter, and Zoom Video Communications. The Motley Fool recommends Alaska Air Group and Hawaiian Holdings and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short May 2020 $120 calls on Zoom Video Communications. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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American Airlines [Group] (NASDAQ: AAL) CEO Doug Parker, famously, and now regrettably, said: I don't know if airlines will ever lose money again. American Airlines, AAL. It is also only accurate because [it's] industrywide, and is heavily weighed by American, a company that was doing a huge amount of investment in its fleet which limited its free cash flow, which makes the number look really bad.
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American Airlines [Group] (NASDAQ: AAL) CEO Doug Parker, famously, and now regrettably, said: I don't know if airlines will ever lose money again. American Airlines, AAL. In this episode of Industry Focus: Energy, Nick Sciple and Motley Fool contributor Lou Whiteman focus on the government bailout for the aerospace industry in general, and particularly, on Boeing (NYSE: BA).
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American Airlines [Group] (NASDAQ: AAL) CEO Doug Parker, famously, and now regrettably, said: I don't know if airlines will ever lose money again. American Airlines, AAL. You know, United isn't great either, so it's not just [that] I don't want to pick on American, but if you look at a company like Delta, you look at a company like Alaska [Air Group], their numbers were actually lower as a percentage of free cash flow than the S&P 500 average.
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American Airlines [Group] (NASDAQ: AAL) CEO Doug Parker, famously, and now regrettably, said: I don't know if airlines will ever lose money again. American Airlines, AAL. So I want to talk about Boeing first, before we get into the airlines.
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6128.0
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2020-03-31 00:00:00 UTC
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American Airlines Says No Change Fee For Tickets Bought By April 30
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AAL
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https://www.nasdaq.com/articles/american-airlines-says-no-change-fee-for-tickets-bought-by-april-30-2020-03-31
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(RTTNews) - American Airlines Group has extended its offer to waive change fees for customers who purchase travel tickets through April 30, in response to lower travel demand due to the coronavirus or COVID-19 pandemic. The airline had earlier waived change fees for customers who purchased tickets through April 15.
American Airlines said Monday that customers who purchased flight tickets from March 1 through April 30 will not incur change fees prior to travel. The offer is available for any of American Airlines' published non-refundable fares.
Customers who have booked their tickets for travel before May 31, 2020, can re-book tickets for travel before December 31, 2020 or within one year of the date the ticket was issued, whichever is earlier.
To encourage monetary donations from customers to deal with the coronavirus pandemic, American Airlines said that through April 30, AAdvantage members can earn 10 miles for every dollar donated by them to the Red Cross, with a minimum donation of $25.
Airlines are continuing to cut flight schedules and fares as the rapid spread of the coronavirus across the world has sharply reduced demand for air travel. The weak demand for air travel is the worst since the last financial crisis.
In recent weeks, United Airlines, Delta Air Lines and JetBlue Airways have also suspended their change fees due to passenger uncertainty about travel.
American Airlines said last week that it will suspend 60 percent of its capacity in April compared to the prior-year period and plans to suspend up to 80 percent of its capacity in May.
The company attributed the capacity reductions to significantly decreased customer demand and government travel restrictions related to COVID-19. The reduced April schedule is reflected on the airline's website from March 29, while the reduced May schedule will be loaded on April 5.
According to reports, American Airlines is seeking $12 billion in federal government aid due to the impact of the COVID-19 pandemic. The airline reportedly told its employees in an email that if it received the aid, there would be no involuntary furloughs or pay cuts for the next six months.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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American Airlines said Monday that customers who purchased flight tickets from March 1 through April 30 will not incur change fees prior to travel. Airlines are continuing to cut flight schedules and fares as the rapid spread of the coronavirus across the world has sharply reduced demand for air travel. In recent weeks, United Airlines, Delta Air Lines and JetBlue Airways have also suspended their change fees due to passenger uncertainty about travel.
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(RTTNews) - American Airlines Group has extended its offer to waive change fees for customers who purchase travel tickets through April 30, in response to lower travel demand due to the coronavirus or COVID-19 pandemic. The airline had earlier waived change fees for customers who purchased tickets through April 15. American Airlines said Monday that customers who purchased flight tickets from March 1 through April 30 will not incur change fees prior to travel.
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(RTTNews) - American Airlines Group has extended its offer to waive change fees for customers who purchase travel tickets through April 30, in response to lower travel demand due to the coronavirus or COVID-19 pandemic. American Airlines said Monday that customers who purchased flight tickets from March 1 through April 30 will not incur change fees prior to travel. To encourage monetary donations from customers to deal with the coronavirus pandemic, American Airlines said that through April 30, AAdvantage members can earn 10 miles for every dollar donated by them to the Red Cross, with a minimum donation of $25.
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(RTTNews) - American Airlines Group has extended its offer to waive change fees for customers who purchase travel tickets through April 30, in response to lower travel demand due to the coronavirus or COVID-19 pandemic. American Airlines said Monday that customers who purchased flight tickets from March 1 through April 30 will not incur change fees prior to travel. Airlines are continuing to cut flight schedules and fares as the rapid spread of the coronavirus across the world has sharply reduced demand for air travel.
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6129.0
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2020-03-31 00:00:00 UTC
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Can the Rally of United Airlines Stock Last?
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AAL
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https://www.nasdaq.com/articles/can-the-rally-of-united-airlines-stock-last-2020-03-31
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips
After plunging from $89 to $21 as of earlier this month, United Airlines (NYSE:UAL) stock has gone on to stage an impressive rally. As of today, the shares are trading just shy of $33. Other airlines like American (NYSE:AAL), Delta (NYSE:DAL), and Southwest (NYSE:LUV) have also surged recently.
Source: NextNewMedia / Shutterstock.com
Since the markets had become extremely oversold, it was inevitable that they would undergo an explosive rally
The massive federal stimulus bill and the aggressive actions of the Federal Reserve. also provided much-needed catalysts to the stock market.
Yet despite all this, it’s important to keep things in perspective. First of all, during harsh bear markets, there can be strong rallies. Secondly United still faces many headwinds that could easily lead to more plunges by UAL stock.
The fact is that commercial air travel is likely to remain depressed for some time. According to a recent post in the Wall Street Journal, plans have already been made to shut down most flights in the U.S., as about 80% of the population has been ordered by their states or municipalities to stay at home.
7 Small-Cap Stocks That Might Not Survive
United’s Financial Situation
United has some key advantages , such as its enormous size and its trusted brand. The company has also been able to be quite profitable during the past decade.
It has about $8 billion of liquidity on its balance sheet and about $20 billion of its assets have not been used as collateral.
Based on United’s own analysis, the company would still have $3 billion of liquidity if travel volumes average 20% of their normal levels for the rest of the year.
Moreover, United’s largest investor is Berkshire Hathaway’s (NYSE:BRK-B) Warren Buffett. He’s certainly someone who takes a long-term view of things. He also has enough resources to provide the airlines with the financial support it needs. Of course, during the depths of the financial crisis, Buffett provided many firms, including Bank of America (NYSE:BAC), with financial support.
Something else to consider is that United is poised to get financial assistance from the federal government, as the stimulus bill recently signed into law includes $60 billion of aid for the country’s airlines.
The Bottom Line on UAL Stock
Even after the recent surge of United’s stock, its valuation remains fairly cheap, even if its earnings sink by 50% this year. It is also encouraging that savvy investors are starting to buy the shares. Just look at Altimeter Capital. This investment firm recently scooped up 653,000 shares of UAL stock, bringing its total stake in the company to 12.5 million shares or 5%.
Again, United still faces steep risks. There is also little clarity on how long the virus will last and what its ultimate impact will be on air travel.
In other words, expect the stock to continue to be volatile. However, for long-term investors, United’s shares may be worth averaging into right now, as the company should thrive once everything starts to get back on track.
Tom Taulli (@ttaulli) is the author of various books on investing and technology, including Artificial Intelligence Basics, High-Profit IPO Strategies and All About Short Selling. He is also the founder of WebIPO, which was one of the first platforms for public offerings during the 1990s. As of this writing, he did not hold a position in any of the aforementioned securities.
The post Can the Rally of United Airlines Stock Last? appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Other airlines like American (NYSE:AAL), Delta (NYSE:DAL), and Southwest (NYSE:LUV) have also surged recently. According to a recent post in the Wall Street Journal, plans have already been made to shut down most flights in the U.S., as about 80% of the population has been ordered by their states or municipalities to stay at home. Something else to consider is that United is poised to get financial assistance from the federal government, as the stimulus bill recently signed into law includes $60 billion of aid for the country’s airlines.
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Other airlines like American (NYSE:AAL), Delta (NYSE:DAL), and Southwest (NYSE:LUV) have also surged recently. InvestorPlace - Stock Market News, Stock Advice & Trading Tips After plunging from $89 to $21 as of earlier this month, United Airlines (NYSE:UAL) stock has gone on to stage an impressive rally. Of course, during the depths of the financial crisis, Buffett provided many firms, including Bank of America (NYSE:BAC), with financial support.
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Other airlines like American (NYSE:AAL), Delta (NYSE:DAL), and Southwest (NYSE:LUV) have also surged recently. InvestorPlace - Stock Market News, Stock Advice & Trading Tips After plunging from $89 to $21 as of earlier this month, United Airlines (NYSE:UAL) stock has gone on to stage an impressive rally. The Bottom Line on UAL Stock Even after the recent surge of United’s stock, its valuation remains fairly cheap, even if its earnings sink by 50% this year.
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Other airlines like American (NYSE:AAL), Delta (NYSE:DAL), and Southwest (NYSE:LUV) have also surged recently. InvestorPlace - Stock Market News, Stock Advice & Trading Tips After plunging from $89 to $21 as of earlier this month, United Airlines (NYSE:UAL) stock has gone on to stage an impressive rally. He’s certainly someone who takes a long-term view of things.
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6130.0
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2020-03-31 00:00:00 UTC
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American Airlines to Seek $12 Billion in Government Assistance
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AAL
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https://www.nasdaq.com/articles/american-airlines-to-seek-%2412-billion-in-government-assistance-2020-03-31
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American Airlines Group (NASDAQ: AAL) reportedly intends to seek up to $12 billion in government aid through the recently passed relief legislation, enough to prevent layoffs or pay cuts for at least six months.
American is seen as the major airline that's most vulnerable to an extended downturn because of its industry-high debt load. The airline is also responsible for much of the ire directed at the airlines due to its aggressive share repurchasing policies.
Image source: American Airlines.
In a memo obtained by Reuters, company officials said American is eligible for about $6 billion in payroll grants and $6 billion in loans under the $2 trillion economic stimulus package passed last week. That amount, coupled with American's cash reserves, will allow the company to withstand "even the worst of potential future scenarios," CEO Doug Parker and President Robert Isom said in the memo.
American also plans to improve the terms of voluntary unpaid leave and early retirement options for flight attendants and other employees.
The airline industry has been hard hit by the COVID-19 pandemic, which has caused travel demand to evaporate. A Transportation Security Administration (TSA) spokesperson said Tuesday that on Monday, the agency screened 154,080 passengers nationwide, the lowest single day in 10 years. By comparison, on March 30, 2019, the TSA screened 2,360,053 people.
Terms of the government bailout package require airlines that accept payroll grants to do no layoffs before Sept. 30. Last week, American rival United Airlines Holdings said that it will honor that restriction but warned that layoffs would be inevitable if traffic does not return by the fall.
Parker and Isom in the memo said "we certainly hope and expect" that by Sept. 30, "the virus will be contained, Americans will be flying again and we will be back to flying a full schedule."
10 stocks we like better than American Airlines Group
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and American Airlines Group wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of March 18, 2020
Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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American Airlines Group (NASDAQ: AAL) reportedly intends to seek up to $12 billion in government aid through the recently passed relief legislation, enough to prevent layoffs or pay cuts for at least six months. That amount, coupled with American's cash reserves, will allow the company to withstand "even the worst of potential future scenarios," CEO Doug Parker and President Robert Isom said in the memo. A Transportation Security Administration (TSA) spokesperson said Tuesday that on Monday, the agency screened 154,080 passengers nationwide, the lowest single day in 10 years.
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American Airlines Group (NASDAQ: AAL) reportedly intends to seek up to $12 billion in government aid through the recently passed relief legislation, enough to prevent layoffs or pay cuts for at least six months. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market. See the 10 stocks *Stock Advisor returns as of March 18, 2020 Lou Whiteman has no position in any of the stocks mentioned.
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American Airlines Group (NASDAQ: AAL) reportedly intends to seek up to $12 billion in government aid through the recently passed relief legislation, enough to prevent layoffs or pay cuts for at least six months. 10 stocks we like better than American Airlines Group When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. * David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and American Airlines Group wasn't one of them!
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American Airlines Group (NASDAQ: AAL) reportedly intends to seek up to $12 billion in government aid through the recently passed relief legislation, enough to prevent layoffs or pay cuts for at least six months. 10 stocks we like better than American Airlines Group When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. See the 10 stocks *Stock Advisor returns as of March 18, 2020 Lou Whiteman has no position in any of the stocks mentioned.
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6131.0
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2020-03-30 00:00:00 UTC
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Nasdaq 100 Movers: AAL, VRTX
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AAL
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https://www.nasdaq.com/articles/nasdaq-100-movers%3A-aal-vrtx-2020-03-30
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In early trading on Monday, shares of Vertex Pharmaceuticals, topped the list of the day's best performing components of the Nasdaq 100 index, trading up 5.8%. Year to date, Vertex Pharmaceuticals registers a 4.9% gain.
And the worst performing Nasdaq 100 component thus far on the day is American Airlines Group, trading down 13.9%. American Airlines Group is lower by about 57.8% looking at the year to date performance.
Two other components making moves today are United Airlines Holdings, trading down 12.9%, and Autodesk, trading up 5.1% on the day.
VIDEO: Nasdaq 100 Movers: AAL, VRTX
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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VIDEO: Nasdaq 100 Movers: AAL, VRTX The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. And the worst performing Nasdaq 100 component thus far on the day is American Airlines Group, trading down 13.9%. American Airlines Group is lower by about 57.8% looking at the year to date performance.
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VIDEO: Nasdaq 100 Movers: AAL, VRTX The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. Year to date, Vertex Pharmaceuticals registers a 4.9% gain. And the worst performing Nasdaq 100 component thus far on the day is American Airlines Group, trading down 13.9%.
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VIDEO: Nasdaq 100 Movers: AAL, VRTX The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. In early trading on Monday, shares of Vertex Pharmaceuticals, topped the list of the day's best performing components of the Nasdaq 100 index, trading up 5.8%. And the worst performing Nasdaq 100 component thus far on the day is American Airlines Group, trading down 13.9%.
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VIDEO: Nasdaq 100 Movers: AAL, VRTX The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. In early trading on Monday, shares of Vertex Pharmaceuticals, topped the list of the day's best performing components of the Nasdaq 100 index, trading up 5.8%. And the worst performing Nasdaq 100 component thus far on the day is American Airlines Group, trading down 13.9%.
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6132.0
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2020-03-30 00:00:00 UTC
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Will the Rescue Package Help American Airlines Stock Reach Its Recent Highs?
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AAL
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https://www.nasdaq.com/articles/will-the-rescue-package-help-american-airlines-stock-reach-its-recent-highs-2020-03-30
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips
The adverse economic impact of the COVID-19 outbreak is being felt by many industries and shares, including the American Airlines (NASDAQ:AAL) stock price. Year-to-date AAL stock is down more than 51% while the S&P 500 index is off 18.6%.
Source: GagliardiPhotography / Shutterstock.com
With last week’s approval of a big rescue for the aviation sector, investors are wondering how concerned they should be about the future of travel and tourism shares, especially of airline stocks.
Today I’d like to discuss the segment and AAL stock more in detail so that you can make a better-informed decision about your holdings.
We’ve Had Industry Bailouts Before
President Trump signed a $2.2 trillion economic rescue package into law March 27 that includes more than $50 billion for commercial airlines, including $25 billion in direct grants.
CEO Doug Parker said the carrier could get $12 billion in federal assistance, although there are questions about what sort of conditions grants and loans could come with.
Many investors will know that this is not the first time that the federal government has come to the rescue of industries and companies. For example, following the events of 9/11 in 2001, Congress passed the “Air Transportation Safety and System Stabilization Act” and approved a $15 billion bailout package for the airline industry.
We had also witnessed the concept of too-big-to-fail in the aftermath of the 2008/09 financial crisis, when several industries received crucial help from the government. However, there was widespread criticism at the time. The public, many politicians, and analysts felt that the bailout package then had not done much to for the average American. Furthermore, many companies, including airlines, had spent their extra cash to buyback shares and increase compensation for corporate executives.
7 Stocks to Buy Once the Market Bottoms
On the other hand, the current bailout package aims to address a number of points that are likely to help protect jobs for airlines employees. In other words, it comes with several strings attached. The stimulus package “would prohibit stock buybacks and share dividends for at least a year after the loans have been repaid. It also restricts executive compensation.”
Bye-bye to Buybacks
According to a recent Barron’s article, “from 2009 to 2018, 465 companies in the S&P 500 index spent $4.3 trillion on stock buybacks, equal to 52% of their combined profits … In the airline industry alone, American, Delta, United, and Southwest, as well as Fedex and UPS, spent heavily, with $77 billion in buybacks (56% of profits) and $35 billion in dividends (25% of profits).”
Now that airlines will not be able to buy back their shares or offer dividends, it is quite difficult to make a long-term bullish case for most airline stocks.
At this point, the government is hopeful that these payments will help stabilize the nation’s air transportation system. However, holders of AAL stock as well in other airlines should keep an eye on potential industry developments in the coming weeks and months. This is a dynamic situation that may change rapidly.
Cost vs. Revenue Imbalance
The economics of running an airline are quite complex. Overall, it is quite expensive to run an airline. The business is capital intensive and substantial investment is needed. From purchasing to maintaining hundreds of planes, management has to plan quarters ahead.
At the end of the day, like any other company, airlines such as AAL, need revenues to cover operating costs and become profitable. The industry’s two largest operating costs are fuel and labor.
Sources of operating revenue, say for American Airlines, include passenger, cargo, excess baggage and certain other transport-related revenue.
Analysts highlight the importance of economic activity such as GDP levels on air traffic growth and profit levels. They also regard the industry as cyclical. Cyclicality would mean that AAL stock would rise when the economy is growing and fall when the economy slows down.
10 of the Best Long-Term Stocks to Buy in a Bear Market
Fewer passengers and fewer flights lead to declining revenue and profits for airlines companies, which pressures their share prices. Furthermore, the narrow margins at which airlines operate can be worrisome.
Therefore, if you believe that we may be headed for an economic recession, you may want to review your exposure to AAL stock.
Price Action Means More Volatility Ahead
Airline shares have been tumbling as coronavirus fears continue to ripple through the markets. And recent headlines have not been happy reading for investors in American Airlines.
So far in March, AAL stock is down over 44%, which means the shares are now deep in a bear market. The 52-week price range has been $35.24 (April 15, 2019) and $10.01 (March 23, 2020).
If you are an investor who also pays attention to technical charts, short-term price action would urge caution. The AAL share price is likely to be volatile with a downward bias.
Most airline shares had not fully participated in the broader stock market rally we witnessed in 2019 or in early 2020, either. Over the 12 months, AAL stock price has instead fallen about 55%.
From a technical chart perspective, it is likely that AAL stock price may once again test the recent low of around $10. The company is expected to report Q1 earnings in the last week of April. Therefore if you are not yet a shareholder, you may first want to analyze the quarterly results at the time.
Investor Takeaway on AAL Stock
The safety and stability of the nation’s commercial airline system is vital. However, despite the much needed rescue package, not all airlines may be able to survive a big shock such such as the one we are now witnessing.
Until we have more clarity on the global fight against the virus, there will likely be more turbulence ahead for airlines shares such as AAL stock.
Buying when markets are in a free-fall takes courage. After all, so many news headlines are propelled by rather dire predictions. But if you liked a given stock several weeks ago for solid fundamental reasons, you would probably like it more when the price is lower.
7 Drowning Energy Stocks to Avoid for Now
Many analysts indeed believe the recent crash gives investors a buying opportunity as markets tend to bounce back, usually in matter of months. Nonetheless, shares of airlines may go even lower after you buy into a company like American Airlines.
Therefore, any decision regarding your portfolio holdings, especially in sectors that are directly affected by the economic consequences of the global pandemic, should be made within your own risk/return profile. You may also want to talk to a financial adviser regarding your own circumstances.
I personally would not be willing to buy airline stocks at this point.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation. As of this writing, Tezcan Gecgil did not hold a position in any of the aforementioned securities.
The post Will the Rescue Package Help American Airlines Stock Reach Its Recent Highs? appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips The adverse economic impact of the COVID-19 outbreak is being felt by many industries and shares, including the American Airlines (NASDAQ:AAL) stock price. Year-to-date AAL stock is down more than 51% while the S&P 500 index is off 18.6%. Today I’d like to discuss the segment and AAL stock more in detail so that you can make a better-informed decision about your holdings.
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips The adverse economic impact of the COVID-19 outbreak is being felt by many industries and shares, including the American Airlines (NASDAQ:AAL) stock price. Year-to-date AAL stock is down more than 51% while the S&P 500 index is off 18.6%. Today I’d like to discuss the segment and AAL stock more in detail so that you can make a better-informed decision about your holdings.
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips The adverse economic impact of the COVID-19 outbreak is being felt by many industries and shares, including the American Airlines (NASDAQ:AAL) stock price. Year-to-date AAL stock is down more than 51% while the S&P 500 index is off 18.6%. Today I’d like to discuss the segment and AAL stock more in detail so that you can make a better-informed decision about your holdings.
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips The adverse economic impact of the COVID-19 outbreak is being felt by many industries and shares, including the American Airlines (NASDAQ:AAL) stock price. Over the 12 months, AAL stock price has instead fallen about 55%. Year-to-date AAL stock is down more than 51% while the S&P 500 index is off 18.6%.
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6133.0
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2020-03-29 00:00:00 UTC
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Will Warren Buffett Buy an Airline? Or Is He Looking to Sell?
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AAL
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https://www.nasdaq.com/articles/will-warren-buffett-buy-an-airline-or-is-he-looking-to-sell-2020-03-29
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nan
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nan
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In late 2016, investors were shocked to learn that Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) had invested in the four largest U.S. airlines: American Airlines (NASDAQ: AAL), Delta Air Lines (NYSE: DAL), United Airlines (NASDAQ: UAL), and Southwest Airlines (NYSE: LUV). True, the U.S. airline industry had turned in several years of strong earnings at that point. However, Buffett had been burned before from investing in the airline industry and had been warning investors about the danger of investing in airlines for two decades.
Today, Berkshire Hathaway owns stakes of roughly 10% in all four of these airlines -- slightly more for Delta; slightly less for the others. As of a few months ago, its airline investments had done fairly well. Its top three airline holdings -- Delta, Southwest, and United -- ended 2019 with a combined market value of $8.6 billion, 37% ahead of Berkshire's cost basis. But since then, the COVID-19 pandemic has caused air travel to crater, crushing airline stocks.
Airline Stock Performance data by YCharts.
The depressed valuations across the airline sector could entice Buffett to consider buying an airline outright. After all, Berkshire Hathaway ended 2019 with $128 billion of cash and short-term investments that Buffett has been eager to put into higher-return investments. That said, the sharp turnaround in the airline sector's fortunes could also persuade Buffett to bail on his airline investments.
The case for buying an airline outright
In Berkshire Hathaway's recent annual report, Buffett underscored his belief that stocks will dramatically outperform bonds over the long run. "What we can say is that if something close to current rates should prevail over the coming decades and if corporate tax rates also remain near the low level businesses now enjoy, it is almost certain that equities will over time perform far better than long-term, fixed-rate debt instruments," he wrote.
Warren Buffett continues to believe in the value of long-term investments in stocks. Image source: The Motley Fool.
Based on that analysis, the present bear market represents an excellent opportunity to deploy some of Berkshire's massive $128 billion cash pile.
Airline stocks have been particularly hard hit. Southwest Airlines stock has fallen 30% year to date, while shares of American, Delta, and United have all lost about half of their value -- even more, in United's case. That has left them trading at very low valuations relative to their 2019 earnings. Assuming the industry returns to its recent level of profitability over the next few years as the COVID-19 pandemic is beaten back, the valuations are quite compelling, as my Foolish colleague Lou Whiteman discussed earlier this month.
Delta Air Lines would be the most logical acquisition target. It's trading at a bigger discount than Southwest Airlines stock, and Delta has been far more profitable than American Airlines and United Airlines in recent years. In addition, Delta's market cap is larger than those of American and United put together. If Buffett's goal is to put a lot of money to work quickly, that makes Delta Air Lines a more attractive acquisition candidate.
American Airlines, Delta Air Lines, and United Airlines market caps data by YCharts.
Berkshire Hathaway's fortress balance sheet could also increase the attractiveness of buying an airline like Delta right now. To some extent, airline stocks are trading at a discount because of short-term liquidity concerns. Those concerns would be moot following an acquisition by Berkshire Hathaway. In addition, nearly unlimited access to capital would enable a Berkshire-owned airline to continue investing during the current downturn, potentially leading to long-term competitive advantages relative to rivals that are slashing spending to conserve cash.
The case for selling
Buffett is a seasoned, long-term investor. He's not the type to panic and sell all of Berkshire Hathaway's airline stocks just because they have plummeted in value over the past few weeks. (Indeed, most of Berkshire's stock portfolio has fallen significantly this year.)
However, Buffett might sell if his investment thesis changes. When Berkshire Hathaway made its big airline investments, the sector was routinely turning in double-digit pre-tax margins and producing ample free cash flow. It appeared that after decades of consolidation and failures of some weaker airlines, the remaining U.S. airlines were high-quality businesses that would be consistently profitable.
The COVID-19 pandemic has dealt a big blow to that thesis. Buffett may believe that the pandemic is a once-in-a-century event and that the big losses airlines will post in 2020 are an anomaly. Yet it's also possible that the events of the past month will serve as a reminder to him of just how dangerous the airline business is.
Buffett has shown that he's willing to walk away from big bets when his opinion about a stock changes. For example, Berkshire Hathaway made a big bet on IBM in 2011 but unloaded its stake a couple of years ago below cost, after Buffett realized that Big Blue's competitive advantages were a lot smaller than he had previously believed. In similar fashion, Berkshire Hathaway could determine that better risk-adjusted returns are available elsewhere and sell its airline stocks.
Selling is more likely than buying
On balance, I think it is quite unlikely that Buffett will buy an airline. Most importantly, Buffett's investment strategy prioritizes owning high-quality companies over "cheap" companies, and it's hard to call any airline a high-quality business these days. Meanwhile, the recent stock market sell-off has made the valuations of genuine high-quality businesses more attractive.
In addition, to buy Delta, for example, Berkshire Hathaway would presumably be forced to sell all of its other airline stocks, collectively worth over $3 billion. That would reduce the net amount of cash deployed.
As for the prospect that Berkshire Hathaway will sell its airline stocks, it's a tough call. I expect airlines to bounce back over the next two or three years, with air travel demand eventually returning to strong growth. Nevertheless, I think there's a 50/50 chance that Buffett will revert to his previous attitude toward airlines, take his lumps, and move on.
10 stocks we like better than Berkshire Hathaway
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Berkshire Hathaway (A shares) wasn't one of them! That's right -- they think these 10 stocks are even better buys.
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*Stock Advisor returns as of March 18, 2020
Adam Levine-Weinberg owns shares of American Airlines Group and Delta Air Lines and is long January 2021 $40 calls on Southwest Airlines. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares), Delta Air Lines, and Southwest Airlines and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short June 2020 $205 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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In late 2016, investors were shocked to learn that Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) had invested in the four largest U.S. airlines: American Airlines (NASDAQ: AAL), Delta Air Lines (NYSE: DAL), United Airlines (NASDAQ: UAL), and Southwest Airlines (NYSE: LUV). The case for buying an airline outright In Berkshire Hathaway's recent annual report, Buffett underscored his belief that stocks will dramatically outperform bonds over the long run. Assuming the industry returns to its recent level of profitability over the next few years as the COVID-19 pandemic is beaten back, the valuations are quite compelling, as my Foolish colleague Lou Whiteman discussed earlier this month.
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In late 2016, investors were shocked to learn that Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) had invested in the four largest U.S. airlines: American Airlines (NASDAQ: AAL), Delta Air Lines (NYSE: DAL), United Airlines (NASDAQ: UAL), and Southwest Airlines (NYSE: LUV). American Airlines, Delta Air Lines, and United Airlines market caps data by YCharts. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares), Delta Air Lines, and Southwest Airlines and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short June 2020 $205 calls on Berkshire Hathaway (B shares).
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In late 2016, investors were shocked to learn that Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) had invested in the four largest U.S. airlines: American Airlines (NASDAQ: AAL), Delta Air Lines (NYSE: DAL), United Airlines (NASDAQ: UAL), and Southwest Airlines (NYSE: LUV). It's trading at a bigger discount than Southwest Airlines stock, and Delta has been far more profitable than American Airlines and United Airlines in recent years. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares), Delta Air Lines, and Southwest Airlines and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short June 2020 $205 calls on Berkshire Hathaway (B shares).
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In late 2016, investors were shocked to learn that Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) had invested in the four largest U.S. airlines: American Airlines (NASDAQ: AAL), Delta Air Lines (NYSE: DAL), United Airlines (NASDAQ: UAL), and Southwest Airlines (NYSE: LUV). After all, Berkshire Hathaway ended 2019 with $128 billion of cash and short-term investments that Buffett has been eager to put into higher-return investments. It's trading at a bigger discount than Southwest Airlines stock, and Delta has been far more profitable than American Airlines and United Airlines in recent years.
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6134.0
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2020-03-27 00:00:00 UTC
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American Airlines Sees Situation Getting Worse, Not Better
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AAL
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https://www.nasdaq.com/articles/american-airlines-sees-situation-getting-worse-not-better-2020-03-27
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nan
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nan
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In response to diminished demand for air travel in the age of coronavirus, on March 10, American Airlines (NASDAQ: AAL) announced that it will reduce domestic capacity (i.e. the number of seats it has available for reservation, and by extension, the number of flights it will operate) by 7.5%. International flights would get cut 10% "for the summer peak" flying season.
Just four days later, demand had slipped further. American announced a 20% reduction in domestic capacity for April and a 30% reduction for May -- alongside a 75% reduction in international flights for the period running from March 16 to May 6.
Image source: Getty Images.
Fast forward two more weeks, and today American announced its latest cuts.
American now expects domestic capacity to decline between 60% and 70% in April, and between 70% and 80% in May.
International capacity will be down between 80% and 90% in both periods.
Given the collapse in demand for air travel, the fact that American is cutting flights is not really surprising. What is a bit surprising -- and disconcerting -- is that the company is cutting more flights farther out (in May, relative to April), rather than the reverse. The implication appears to be that, in American's estimation at least, this situation will get worse, not better, as time progresses.
The good news, however, is that the U.S. Senate has finally passed its long-awaited Coronavirus Aid, Relief, and Economic Security Act, or "CARES Act," offering $25 billion in loans and loan guarantees to the airline industry as a whole, and a further $25 billion to pay employee salaries and benefits.
If declines in air travel are accelerating like American anticipates, they're going to need it.
10 stocks we like better than American Airlines Group
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and American Airlines Group wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of March 18, 2020
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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In response to diminished demand for air travel in the age of coronavirus, on March 10, American Airlines (NASDAQ: AAL) announced that it will reduce domestic capacity (i.e. the number of seats it has available for reservation, and by extension, the number of flights it will operate) by 7.5%. What is a bit surprising -- and disconcerting -- is that the company is cutting more flights farther out (in May, relative to April), rather than the reverse. The good news, however, is that the U.S. Senate has finally passed its long-awaited Coronavirus Aid, Relief, and Economic Security Act, or "CARES Act," offering $25 billion in loans and loan guarantees to the airline industry as a whole, and a further $25 billion to pay employee salaries and benefits.
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In response to diminished demand for air travel in the age of coronavirus, on March 10, American Airlines (NASDAQ: AAL) announced that it will reduce domestic capacity (i.e. the number of seats it has available for reservation, and by extension, the number of flights it will operate) by 7.5%. American announced a 20% reduction in domestic capacity for April and a 30% reduction for May -- alongside a 75% reduction in international flights for the period running from March 16 to May 6. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.
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In response to diminished demand for air travel in the age of coronavirus, on March 10, American Airlines (NASDAQ: AAL) announced that it will reduce domestic capacity (i.e. the number of seats it has available for reservation, and by extension, the number of flights it will operate) by 7.5%. American announced a 20% reduction in domestic capacity for April and a 30% reduction for May -- alongside a 75% reduction in international flights for the period running from March 16 to May 6. 10 stocks we like better than American Airlines Group When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen.
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In response to diminished demand for air travel in the age of coronavirus, on March 10, American Airlines (NASDAQ: AAL) announced that it will reduce domestic capacity (i.e. the number of seats it has available for reservation, and by extension, the number of flights it will operate) by 7.5%. American now expects domestic capacity to decline between 60% and 70% in April, and between 70% and 80% in May. Given the collapse in demand for air travel, the fact that American is cutting flights is not really surprising.
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6135.0
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2020-03-27 00:00:00 UTC
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Stock Market Wrap-Up: With Coronavirus Relief, Will the U.S. Government Become Airline Shareholders?
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AAL
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https://www.nasdaq.com/articles/stock-market-wrap-up%3A-with-coronavirus-relief-will-the-u.s.-government-become-airline
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nan
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Friday was a down day for the stock market, as investors followed the usual adage of buying the lead-up to the passage of the coronavirus stimulus bill and then selling its actually becoming law. The Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) came into the day with a three-day winning streak, but worries about the rising spread of COVID-19 weighed on hopes that the government's assistance package would be enough to help ailing businesses make it through the coronavirus crisis. Along with the Nasdaq Composite (NASDAQINDEX: ^IXIC), most major benchmarks were down 3% to 4% on the day.
Today's stock market
INDEX
PERCENTAGE CHANGE (DECLINE)
POINT CHANGE (DECLINE)
Dow
(4.06%)
(915)
S&P 500
(3.37%)
(89)
Nasdaq Composite
(3.79%)
(295)
Data source: Yahoo! Finance.
With coronavirus relief available to businesses, the big questions are which companies will take advantage of it, and what the impact will be on investors. The Treasury Department has left open the door for the federal government to take ownership stakes in companies that receive aid. The airline industry has been among the hardest hit by the pandemic, and some investors increasingly believe that the government could take an equity position in some of the biggest airline stocks in the business.
What airlines could get
The stimulus package provides significant financial assistance to airlines like Delta Air Lines (NYSE: DAL), United Airlines Holdings (NASDAQ: UAL), Southwest Airlines (NYSE: LUV), and American Airlines Group (NASDAQ: AAL). The legislation gives the Treasury the discretion to offer up to $25 billion in direct financial assistance grants, representing money that airlines would use to allow their workers to keep getting paid through September. In addition, airlines would qualify for another $25 billion in loans that they'd presumably need to pay back.
Image source: Getty Images.
These aid packages come with conditions, however. No layoffs or furloughs are allowed through Sept. 30. Airlines would have to give up paying dividends or buying back their stock until a year after they've repaid any assistance. Airline executives wouldn't be allowed to receive greater compensation in the future than they did in 2019.
The big catch
Perhaps the most interesting aspect of airline aid from the federal government is that the Treasury would have the ability to take an equity stake in companies that take government money. That's reminiscent of the TARP bailouts during the financial crisis in 2008, when the government received so-called TARP warrants from the financial institutions that receive federal money. Those warrants carried a term of 10 years, and the Treasury eventually chose to sell them to investors through public offerings in order to recoup some of the money it spent on bank bailouts.
Some companies have decided that they'll do everything they can to avoid taking federal money precisely because they don't want to deal with the government having an ownership interest in their businesses. Boeing (NYSE: BA) has reportedly refused billions in potential loans, and the possible need to give the Treasury shares of preferred stock or warrants is a key factor in the decision. Whether Boeing will be able to make it through the crisis without taking advantage of the aid in the legislation is uncertain, but its reluctance points to the potential bargaining power that the Treasury would have in negotiating a deal.
For airline investors, the idea of federal government ownership just adds to the pain of losing hundreds of millions of dollars in dividend income as well as the positive impact that stock buybacks have had on share prices over the past decade. If it helps airlines survive the coronavirus crisis and a possible recession to come, however, most investors will find that cost worth it in the long run.
10 stocks we like better than Boeing
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Boeing wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of March 18, 2020
Dan Caplinger owns shares of Boeing. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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What airlines could get The stimulus package provides significant financial assistance to airlines like Delta Air Lines (NYSE: DAL), United Airlines Holdings (NASDAQ: UAL), Southwest Airlines (NYSE: LUV), and American Airlines Group (NASDAQ: AAL). The Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) came into the day with a three-day winning streak, but worries about the rising spread of COVID-19 weighed on hopes that the government's assistance package would be enough to help ailing businesses make it through the coronavirus crisis. Boeing (NYSE: BA) has reportedly refused billions in potential loans, and the possible need to give the Treasury shares of preferred stock or warrants is a key factor in the decision.
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What airlines could get The stimulus package provides significant financial assistance to airlines like Delta Air Lines (NYSE: DAL), United Airlines Holdings (NASDAQ: UAL), Southwest Airlines (NYSE: LUV), and American Airlines Group (NASDAQ: AAL). That's reminiscent of the TARP bailouts during the financial crisis in 2008, when the government received so-called TARP warrants from the financial institutions that receive federal money. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines.
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What airlines could get The stimulus package provides significant financial assistance to airlines like Delta Air Lines (NYSE: DAL), United Airlines Holdings (NASDAQ: UAL), Southwest Airlines (NYSE: LUV), and American Airlines Group (NASDAQ: AAL). The airline industry has been among the hardest hit by the pandemic, and some investors increasingly believe that the government could take an equity position in some of the biggest airline stocks in the business. For airline investors, the idea of federal government ownership just adds to the pain of losing hundreds of millions of dollars in dividend income as well as the positive impact that stock buybacks have had on share prices over the past decade.
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What airlines could get The stimulus package provides significant financial assistance to airlines like Delta Air Lines (NYSE: DAL), United Airlines Holdings (NASDAQ: UAL), Southwest Airlines (NYSE: LUV), and American Airlines Group (NASDAQ: AAL). (3.37%) (89) Nasdaq Composite (3.79%) (295) Data source: Yahoo! Airlines would have to give up paying dividends or buying back their stock until a year after they've repaid any assistance.
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6136.0
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2020-03-27 00:00:00 UTC
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Why Airline Stocks Are Falling Today
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AAL
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https://www.nasdaq.com/articles/why-airline-stocks-are-falling-today-2020-03-27
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nan
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nan
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What happened
Airline stocks took a breather on Friday after three straight days of steady gains. The industry's outlook is much stronger now than it was a week ago thanks to the $2 trillion economic relief package making its way through Congress, but business conditions figure to be under pressure for some time to come.
Shares of Southwest Airlines (NYSE: LUV), American Airlines Group (NASDAQ: AAL), United Airlines Holdings (NASDAQ: UAL), JetBlue Airways (NASDAQ: JBLU), and Spirit Airlines (NYSE: SAVE) all opened down more than 10% before rebounding slightly as the day went on. Shares of Delta Air Lines (NYSE: DAL) and Hawaiian Holdings (NASDAQ: HA) are also down more than 5% on Friday.
So what
Airlines have been among the sectors hit hardest by the COVID-19 pandemic, with travel demand all but disappearing overnight and revenue dropping by 80% or more. The companies have taken steps including cutting flights, grounding planes, and freezing hiring, but no amount of cuts can compensate for a lack of revenue coming through the door.
Lawmakers have responded with up to $50 billion in loans and grants available to airlines in the Coronavirus Aid, Relief, and Economic Security Act (or CARES Act), which should go a long way toward helping these companies avoid flying into bankruptcy.
Image source: Getty Images.
But there is only so much that legislation can do, and the airlines still face an uncertain future. Until the pandemic is contained, it is hard to predict what the ultimate impact to their businesses will be. And if the U.S. falls into a recession, it could be multiple quarters before lucrative business travel rebounds.
Airline investors have endured a bumpy ride in 2020. Shares of all of the stocks listed here are down between 30% and 60% for the year. But in the last week alone, Spirit had more than doubled heading into Friday trading, and much of the industry is up more than 40% for the week even with Friday's pullback.
Airline five-day pricing as of 1:42 p.m. Friday data by YCharts.
Now what
The airlines finish the week with a better financial outlook than at the start, but also facing a difficult environment in which to try to gain altitude. There is also likely to be continued volatility as the pandemic plays out.
For investors able to block out the noise and focus on the long term, I believe it is a good time to be looking carefully at the airline business. But be warned this will take some time to play out, and you are best off sticking with the top operators, at least for now.
10 stocks we like better than JetBlue Airways
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and JetBlue Airways wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of March 18, 2020
Lou Whiteman owns shares of Delta Air Lines and Spirit Airlines. The Motley Fool owns shares of and recommends Delta Air Lines, Southwest Airlines, and Spirit Airlines. The Motley Fool recommends Hawaiian Holdings and JetBlue Airways. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Shares of Southwest Airlines (NYSE: LUV), American Airlines Group (NASDAQ: AAL), United Airlines Holdings (NASDAQ: UAL), JetBlue Airways (NASDAQ: JBLU), and Spirit Airlines (NYSE: SAVE) all opened down more than 10% before rebounding slightly as the day went on. The industry's outlook is much stronger now than it was a week ago thanks to the $2 trillion economic relief package making its way through Congress, but business conditions figure to be under pressure for some time to come. Shares of Delta Air Lines (NYSE: DAL) and Hawaiian Holdings (NASDAQ: HA) are also down more than 5% on Friday.
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Shares of Southwest Airlines (NYSE: LUV), American Airlines Group (NASDAQ: AAL), United Airlines Holdings (NASDAQ: UAL), JetBlue Airways (NASDAQ: JBLU), and Spirit Airlines (NYSE: SAVE) all opened down more than 10% before rebounding slightly as the day went on. The Motley Fool owns shares of and recommends Delta Air Lines, Southwest Airlines, and Spirit Airlines. The Motley Fool recommends Hawaiian Holdings and JetBlue Airways.
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Shares of Southwest Airlines (NYSE: LUV), American Airlines Group (NASDAQ: AAL), United Airlines Holdings (NASDAQ: UAL), JetBlue Airways (NASDAQ: JBLU), and Spirit Airlines (NYSE: SAVE) all opened down more than 10% before rebounding slightly as the day went on. See the 10 stocks *Stock Advisor returns as of March 18, 2020 Lou Whiteman owns shares of Delta Air Lines and Spirit Airlines. The Motley Fool owns shares of and recommends Delta Air Lines, Southwest Airlines, and Spirit Airlines.
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Shares of Southwest Airlines (NYSE: LUV), American Airlines Group (NASDAQ: AAL), United Airlines Holdings (NASDAQ: UAL), JetBlue Airways (NASDAQ: JBLU), and Spirit Airlines (NYSE: SAVE) all opened down more than 10% before rebounding slightly as the day went on. But in the last week alone, Spirit had more than doubled heading into Friday trading, and much of the industry is up more than 40% for the week even with Friday's pullback. Now what The airlines finish the week with a better financial outlook than at the start, but also facing a difficult environment in which to try to gain altitude.
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6137.0
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2020-03-27 00:00:00 UTC
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Despite Stimulus, Uncertainty Remains for Grounded American Airlines Stock
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AAL
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https://www.nasdaq.com/articles/despite-stimulus-uncertainty-remains-for-grounded-american-airlines-stock-2020-03-27
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nan
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nan
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips
What’s the play with American Airlines (NASDAQ:AAL) stock? Down more than 50% in a month, shares could be a great contrarian buy. Especially if the economic fallout from the coronavirus from China proves less dire than predicted.
Source: GagliardiPhotography / Shutterstock.com
Yet the outbreak only added to the airline’s existing issues. Borrowing money to finance buybacks, the airline played it fast and loose.
That worked while the economy was firing on all cylinders. But with air travel effectively halted and the company hemorrhaging cash, it’s hard to see this story end in anything but tears for investors.
However, there’s light at the end of the tunnel. A government bailout of the airline industry could prevent bankruptcy. But with high uncertainty and minimal upside, it’s tough to find a compelling reason to buy AAL stock at today’s price levels, around $15 per share.
10 Stocks to Buy That Will Benefit From Coronavirus Mayhem
So should you go short American Airlines stock? Or do you wait for a more promising entry point and lay down your chips? Let’s dive in and render a verdict for this moribund airline.
AAL Stock and COVID-19
The coronavirus from China (COVID-19) could send scores of companies into Chapter 11. This includes restaurants, retailers, casinos, cruise lines, along with airlines. A capital-intensive, highly-leveraged industry, airlines are ill-equipped to handle black swan events like this outbreak.
The airline industry’s behavior also doesn’t give them much sympathy. Customers resent the industry’s nickel-and-dime tactics in order to maximize profits. And another major industry trend has brought challenges to them, as they come to Washington, hat-in-hand, for a bailout.
What I’m talking about are stock buybacks. As InvestorPlace’s Bret Kenwell discussed March 24, nearly all of the industry’s free cash flow has gone to buybacks in recent years. American Airlines is no exception. As this Seeking Alpha contributor recently wrote, the airline overextended itself borrowing money to buy back shares. It’s up for debate whether bailing out companies that spent their safety net on buybacks is right or wrong. But with the U.S. Senate passing a stimulus bill, an airline bailout is on the table.
Yet does federal intervention equal big upside for AAL stock? The bill includes $25 billion in loan and loan guarantees for passenger airlines. Yet American Airlines alone has $24.3 billion in debt and finance leases. In other words, it may not be enough to shore up the whole industry.
This bill could ensure the airline doesn’t go bankrupt. But that doesn’t mean shares won’t fall further, if unprofitability continues and the company must borrow more due to cash outflows, further downside appears more likely.
Stimulus May Not Be Enough To Send Shares Higher
In recent days, AAL stock has rebounded from its 52-week low around $10 per share, up to above $15 per share. A passed stimulus package could bring further upside. But there are several factors to consider. Firstly, if the airline accepts any of the loans/loan guarantees offered by the bill, they would be unable to pay out dividends or buy back stock for one year after the loans were repaid.
But more importantly, does this bill change the current environment for American Airlines? According to the New York Times, with coronavirus bringing travel to a halt, only a handful of passengers are riding the airline’s typically busy routes, like New York to Los Angeles. And with most of its international routes grounded, they have little money coming into their coffers.
Until things get back to normal, it’s hard to predict upside potential in AAL stock. All bets are off whether “normal” happens a few weeks from now, or a few months from now. So, with this uncertainty, how do we handicap this stock?
That’s the issue. It’s tough to put a number how much coronavirus will set American Airlines back. Also, there’s no guarantee the airline’s volume immediately returns back to 100%. What if their passenger volume only goes back to, say, 80% of where it was?
Too Late To Short, Too Early To Buy AAL Stock
The opportunity to short AAL stock has come and gone. Investors shrewd enough to sell short as the outbreak first made headlines back in January realized big profits. But investors who try to ride it down to zero today could get more than they bargained for. Going short this name, if the end of coronavirus lockdowns is around the corner, could result in an epic squeeze.
Yet, we may be far from the bottom. Shares have rebounded in recent days as the stimulus bill advances in Congress. But, this could be a dead cat bounce in hindsight. With the risk it takes years for the airline to get back to where it was, buying at $15 for it to rally back to $30 looks like a bad proposition.
So, what’s the play? Wait things out with AAL stock. The risk/return at $15 per share doesn’t look worthwhile.
Thomas Niel, contributor to InvestorPlace, has been writing single-stock analysis for web-based publications since 2016. As of this writing, Thomas Niel did not hold a position in any of the aforementioned securities.
The post Despite Stimulus, Uncertainty Remains for Grounded American Airlines Stock appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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But with high uncertainty and minimal upside, it’s tough to find a compelling reason to buy AAL stock at today’s price levels, around $15 per share. InvestorPlace - Stock Market News, Stock Advice & Trading Tips What’s the play with American Airlines (NASDAQ:AAL) stock? AAL Stock and COVID-19 The coronavirus from China (COVID-19) could send scores of companies into Chapter 11.
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips What’s the play with American Airlines (NASDAQ:AAL) stock? But with high uncertainty and minimal upside, it’s tough to find a compelling reason to buy AAL stock at today’s price levels, around $15 per share. AAL Stock and COVID-19 The coronavirus from China (COVID-19) could send scores of companies into Chapter 11.
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips What’s the play with American Airlines (NASDAQ:AAL) stock? Too Late To Short, Too Early To Buy AAL Stock The opportunity to short AAL stock has come and gone. But with high uncertainty and minimal upside, it’s tough to find a compelling reason to buy AAL stock at today’s price levels, around $15 per share.
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips What’s the play with American Airlines (NASDAQ:AAL) stock? But with high uncertainty and minimal upside, it’s tough to find a compelling reason to buy AAL stock at today’s price levels, around $15 per share. AAL Stock and COVID-19 The coronavirus from China (COVID-19) could send scores of companies into Chapter 11.
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6138.0
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2020-03-27 00:00:00 UTC
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First Week of AAL November 20th Options Trading
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AAL
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https://www.nasdaq.com/articles/first-week-of-aal-november-20th-options-trading-2020-03-27
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Investors in American Airlines Group Inc (Symbol: AAL) saw new options become available this week, for the November 20th expiration. One of the key data points that goes into the price an option buyer is willing to pay, is the time value, so with 238 days until expiration the newly available contracts represent a potential opportunity for sellers of puts or calls to achieve a higher premium than would be available for the contracts with a closer expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the AAL options chain for the new November 20th contracts and identified one put and one call contract of particular interest.
The put contract at the $12.00 strike price has a current bid of $3.45. If an investor was to sell-to-open that put contract, they are committing to purchase the stock at $12.00, but will also collect the premium, putting the cost basis of the shares at $8.55 (before broker commissions). To an investor already interested in purchasing shares of AAL, that could represent an attractive alternative to paying $14.77/share today.
Because the $12.00 strike represents an approximate 19% discount to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the put contract would expire worthless. The current analytical data (including greeks and implied greeks) suggest the current odds of that happening are 74%. Stock Options Channel will track those odds over time to see how they change, publishing a chart of those numbers on our website under the contract detail page for this contract. Should the contract expire worthless, the premium would represent a 28.75% return on the cash commitment, or 44.08% annualized — at Stock Options Channel we call this the YieldBoost.
Below is a chart showing the trailing twelve month trading history for American Airlines Group Inc, and highlighting in green where the $12.00 strike is located relative to that history:
Turning to the calls side of the option chain, the call contract at the $15.00 strike price has a current bid of $4.65. If an investor was to purchase shares of AAL stock at the current price level of $14.77/share, and then sell-to-open that call contract as a "covered call," they are committing to sell the stock at $15.00. Considering the call seller will also collect the premium, that would drive a total return (excluding dividends, if any) of 33.04% if the stock gets called away at the November 20th expiration (before broker commissions). Of course, a lot of upside could potentially be left on the table if AAL shares really soar, which is why looking at the trailing twelve month trading history for American Airlines Group Inc, as well as studying the business fundamentals becomes important. Below is a chart showing AAL's trailing twelve month trading history, with the $15.00 strike highlighted in red:
Considering the fact that the $15.00 strike represents an approximate 2% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. The current analytical data (including greeks and implied greeks) suggest the current odds of that happening are 42%. On our website under the contract detail page for this contract, Stock Options Channel will track those odds over time to see how they change and publish a chart of those numbers (the trading history of the option contract will also be charted). Should the covered call contract expire worthless, the premium would represent a 31.48% boost of extra return to the investor, or 48.27% annualized, which we refer to as the YieldBoost.
The implied volatility in the put contract example is 119%, while the implied volatility in the call contract example is 108%.
Meanwhile, we calculate the actual trailing twelve month volatility (considering the last 252 trading day closing values as well as today's price of $14.77) to be 68%. For more put and call options contract ideas worth looking at, visit StockOptionsChannel.com.
Top YieldBoost Calls of the Nasdaq 100 »
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Of course, a lot of upside could potentially be left on the table if AAL shares really soar, which is why looking at the trailing twelve month trading history for American Airlines Group Inc, as well as studying the business fundamentals becomes important. Below is a chart showing AAL's trailing twelve month trading history, with the $15.00 strike highlighted in red: Considering the fact that the $15.00 strike represents an approximate 2% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. Investors in American Airlines Group Inc (Symbol: AAL) saw new options become available this week, for the November 20th expiration.
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Below is a chart showing AAL's trailing twelve month trading history, with the $15.00 strike highlighted in red: Considering the fact that the $15.00 strike represents an approximate 2% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. Investors in American Airlines Group Inc (Symbol: AAL) saw new options become available this week, for the November 20th expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the AAL options chain for the new November 20th contracts and identified one put and one call contract of particular interest.
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Below is a chart showing AAL's trailing twelve month trading history, with the $15.00 strike highlighted in red: Considering the fact that the $15.00 strike represents an approximate 2% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. Investors in American Airlines Group Inc (Symbol: AAL) saw new options become available this week, for the November 20th expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the AAL options chain for the new November 20th contracts and identified one put and one call contract of particular interest.
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At Stock Options Channel, our YieldBoost formula has looked up and down the AAL options chain for the new November 20th contracts and identified one put and one call contract of particular interest. Below is a chart showing AAL's trailing twelve month trading history, with the $15.00 strike highlighted in red: Considering the fact that the $15.00 strike represents an approximate 2% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. Investors in American Airlines Group Inc (Symbol: AAL) saw new options become available this week, for the November 20th expiration.
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6139.0
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2020-03-26 00:00:00 UTC
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Trade Association Decries "Bottlenecks;" Airlines Use Passenger Planes to Move Vital Cargo
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AAL
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https://www.nasdaq.com/articles/trade-association-decries-bottlenecks-airlines-use-passenger-planes-to-move-vital-cargo
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The International Air Transport Association (IATA), trade association for the world's airlines, is calling on governments to take action to ensure air cargo flows smoothly and efficiently to help the fight against the spread of COVID-19.
Alexandre de Juniac, IATA's director general and CEO, specifically pointed out bureaucratic "bottlenecks" related to securing slots and obtaining operating permits, as cargo planes carrying medical supplies and equipment attempt to try and fill demand. As global passenger air services have virtually ground to a halt, airlines are battling government obstacles trying to meet cargo demand by repurposing passenger planes for cargo hauls, and reintroducing freight shipping services.
Image source: Getty Images.
In an effort to increase cargo capacity, Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), and United Airlines Holdings (NASDAQ: UAL) are using passenger aircraft for cargo-only flights, domestically and internationally. International Airlines Group's (OTC: ICAGY) British Airways, Air Canada (OTC: ACDVF), and other international carriers are doing the same thing.
The opportunity for the airlines to help transport important cargo as the world fights the pandemic also gives the industry much needed revenue as passenger capacity has been drastically cut.
The IATA most recently estimated that passenger airlines could lose up to $252 billion in revenue from the COVID-19 crisis, a 44% cut from the level of a year ago. In its call on airlines and governments to help support using the previous passenger routes for cargo, IATA pointed to examples of 2 million masks being transported by Airbus (OTC: EADSY) from China to Europe, and medical equipment donations being moved to African nations.
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Howard Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Delta Air Lines. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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In an effort to increase cargo capacity, Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), and United Airlines Holdings (NASDAQ: UAL) are using passenger aircraft for cargo-only flights, domestically and internationally. Alexandre de Juniac, IATA's director general and CEO, specifically pointed out bureaucratic "bottlenecks" related to securing slots and obtaining operating permits, as cargo planes carrying medical supplies and equipment attempt to try and fill demand. The opportunity for the airlines to help transport important cargo as the world fights the pandemic also gives the industry much needed revenue as passenger capacity has been drastically cut.
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In an effort to increase cargo capacity, Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), and United Airlines Holdings (NASDAQ: UAL) are using passenger aircraft for cargo-only flights, domestically and internationally. The International Air Transport Association (IATA), trade association for the world's airlines, is calling on governments to take action to ensure air cargo flows smoothly and efficiently to help the fight against the spread of COVID-19. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.
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In an effort to increase cargo capacity, Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), and United Airlines Holdings (NASDAQ: UAL) are using passenger aircraft for cargo-only flights, domestically and internationally. As global passenger air services have virtually ground to a halt, airlines are battling government obstacles trying to meet cargo demand by repurposing passenger planes for cargo hauls, and reintroducing freight shipping services. See the 10 stocks Stock Advisor returns as of 2/1/20 Howard Smith has no position in any of the stocks mentioned.
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In an effort to increase cargo capacity, Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), and United Airlines Holdings (NASDAQ: UAL) are using passenger aircraft for cargo-only flights, domestically and internationally. The International Air Transport Association (IATA), trade association for the world's airlines, is calling on governments to take action to ensure air cargo flows smoothly and efficiently to help the fight against the spread of COVID-19. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.
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6140.0
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2020-03-26 00:00:00 UTC
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Why Airline Shares Are Up Today
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AAL
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https://www.nasdaq.com/articles/why-airline-shares-are-up-today-2020-03-27
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What happened
Shares of airlines on Thursday traded up for the third straight day as investors continue to applaud the $2 trillion economic relief package making its way through Congress. Airlines are set to receive about $50 billion in aid as part of the package, which hopefully will be enough to get them through the COVID-19 coronavirus pandemic-related travel slowdown.
Shares of Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), Southwest Airlines (NYSE: LUV), and JetBlue Airways (NASDAQ: JBLU) all opened up more than 10% on Thursday, and shares of United Airlines Holdings (NASDAQ: UAL) traded up 9%. All have retreated somewhat as the day went on but remain in the green as of 2:45 pm.
So what
The airlines were among the hardest hit sectors due to the pandemic, with travel demand evaporating overnight as the virus spread globally. Carriers have responded by cutting flights, freezing hiring, and grounding planes, but no amount of cutting is likely to be enough when revenue is supposed to drop by 80% or more.
Image source: Getty Images.
The so-called Coronavirus Aid, Relief, and Economic Security Act, "CARES Act," offers assistance to try to deaden the blow and allow airlines to avoid mass layoffs or bankruptcy. Commercial airlines will receive up to $25 billion in loans and loan guarantees, and have access to another $25 billion in grants.
The help comes with conditions limiting share buybacks and executive compensation for as long as the loans are outstanding, and the grants might be tied to an equity or warrant issuance. But despite those terms, investors have been celebrating in recent days because the assistance should help airlines to work with private lenders and other counter-parties to access additional private-sector liquidity.
Now what
Even with the rally this week these shares are still off between 15% and 48% over the last month. The airlines are still priced for an extended downturn at best, and a bankruptcy at worst, and with the government backstop finally arriving, it might be a good time to look for buying opportunities.
I think it is safe to buy airlines despite the continued pandemic uncertainty. Just be picky about buying best-of-breed companies, and be warned that as long as the uncertainty remains it is likely volatility will eventually return to the sector.
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*Stock Advisor returns as of March 18, 2020
Lou Whiteman owns shares of Delta Air Lines. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines. The Motley Fool recommends JetBlue Airways. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Shares of Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), Southwest Airlines (NYSE: LUV), and JetBlue Airways (NASDAQ: JBLU) all opened up more than 10% on Thursday, and shares of United Airlines Holdings (NASDAQ: UAL) traded up 9%. What happened Shares of airlines on Thursday traded up for the third straight day as investors continue to applaud the $2 trillion economic relief package making its way through Congress. But despite those terms, investors have been celebrating in recent days because the assistance should help airlines to work with private lenders and other counter-parties to access additional private-sector liquidity.
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Shares of Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), Southwest Airlines (NYSE: LUV), and JetBlue Airways (NASDAQ: JBLU) all opened up more than 10% on Thursday, and shares of United Airlines Holdings (NASDAQ: UAL) traded up 9%. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines. The Motley Fool recommends JetBlue Airways.
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Shares of Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), Southwest Airlines (NYSE: LUV), and JetBlue Airways (NASDAQ: JBLU) all opened up more than 10% on Thursday, and shares of United Airlines Holdings (NASDAQ: UAL) traded up 9%. See the 10 stocks *Stock Advisor returns as of March 18, 2020 Lou Whiteman owns shares of Delta Air Lines. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines.
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Shares of Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), Southwest Airlines (NYSE: LUV), and JetBlue Airways (NASDAQ: JBLU) all opened up more than 10% on Thursday, and shares of United Airlines Holdings (NASDAQ: UAL) traded up 9%. They think these 10 stocks are even better buys. The Motley Fool recommends JetBlue Airways.
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6141.0
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2020-03-26 00:00:00 UTC
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Southwest Stock Is the Only Safe Bet in the Turbulent Airline Sector
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AAL
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https://www.nasdaq.com/articles/southwest-stock-is-the-only-safe-bet-in-the-turbulent-airline-sector-2020-03-26
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips
Can it get any worse for airlines? The industry is facing its worst crisis since the 9/11 attacks. The coronavirus from China has caused the global economy to come to a grinding halt. And international borders are shutting down as well; a vast number of countries have closed their points of entry to foreigners. It’s all adding up to the biggest slowdown in air travel in modern memory. The sector’s stocks, including Southwest Airlines (NYSE:LUV), are plunging. LUV stock has tumbled from $55 to $40 in recent weeks. That said, the tide has turned this week, as the Senate has passed a major economic relief package that includes $25 billion of assistance for the airlines.
Source: Felipe_Sanchez / Shutterstock.com
But the sector isn’t necessarily out of the woods yet. On Monday, the Wall Street Journal reported that the U.S. airlines industry is preparing for the real possibility of a total domestic aviation shutdown. The article stated that:
“Major U.S. airlines are drafting plans for a potential voluntary shutdown of virtually all passenger flights across the U.S., according to industry and federal officials, as government agencies also consider ordering such a move and the nation’s air-traffic control system continues to be ravaged by the corona virus contagion. No final decisions have been made by the carriers or the White House, these officials said. As airlines struggle to keep aircraft flying with minimal passengers, various options are under consideration, these people said.”
That would be a complete fiasco for most of the airline industry. Domestic airlines are heavily indebted and have billions of dollars of short-term liabilities. They simply don’t have the capacity to survive any meaningful shutdown. Other than Southwest, that is. That is why it is the only financially secure airline in America right now.
As of this writing, it appears that the government is prepared to give the airlines a major stimulus package to rescue the industry. However, the bill is still awaiting approval by the House. Furthermore, while the industry is set to receive $25 billion, there are questions about how much each airline will get and what conditions will be tied to the cash.
10 Stocks to Buy That Will Benefit From Coronavirus Mayhem
Southwest’s Sturdy Finances
The airline industry is currently demanding tens of billions of dollars of cash grants from the government. If it doesn’t get the funds, the airlines are threatening to furlough most of their employees, leading to a massive spike in unemployment. That is an ugly, if potentially effective, form of crisis negotiating, and it seems like it will pay off.
Fortunately for the owners of LUV stock, the current moment is not so dire, regardless of whether the industry’s bluster pays off or not. That’s because Southwest will survive with or without a government bailout.
As of last quarter, Southwest had $4 billion of cash and only $4 billion of general short-term current liabilities. It had an additional $4 billion more of unearned revenues, mostly in the form of ticket sales. It will have to refund some of the latter money, but it can probably keep most of it in exchange for future tickets and vouchers. That means that Southwest’s short-term finances are in pretty good shape. It will need only a modest amount of either revenue or short-term borrowings to stay afloat for the time being.
Furthermore, Southwest has minimal long-term debt of $1.3 billion, so it can actually borrow as much money as it needs from banks now. To secure potential loans, it has tons of unencumbered assets because it didn’t lease out all its planes to creditors. That is another huge edge that it has over its rivals. So Southwest is the only airline that has a bulletproof balance sheet.
Soaring Above Its Rivals
Southwest’s balance sheet looks good in isolation. It looks even better compared to other prominent U.S. airlines. For airlines, it’s common to use a metric called the Debt/EBITDA ratio. That metric compares a company’s long-term debt to its earnings before interest, taxes, depreciation, and amortization. It shows whether a company can handle the amount of liabilities it carries. As in golf, lower is better. Generally, for an airlines, less than two is a good score.
According to a recent Barron’s article, popular-low cost carrier Spirit Airlines (NYSE:SAVE) has a deeply troubling Debt/EBITDA ratio of 4.3. That led Barron’s to label Spirit the “most imperiled” major airline. Plenty of other airlines are in trouble too; American (NYSE:AAL) suffers from a Debt/EBITDA ratio of nearly five. United (NYSE:UAL) is in uncomfortable territory with a ratio of 2.7. Delta (NYSE:DAL) is in better shape, as its ratio is an imperfect but not disastrous 1.9.
However, Southwest is completely in a league of its own with a 0.7 ratio. That gives the company unmatched flexibility to ride out this crisis compared to its rivals.
The Verdict on LUV Stock
Airline stocks have been soaring this week on hopes of an imminent bailout. That makes sense in the short-term. But the aid, at least according to current reports, appears to come with strings attached. For example, the cash can only be used to pay employees’ salaries, forcing airlines to come up with the cash for all of their other expenses.
Southwest is in good shape compared to the other airlines. The company hasn’t gone bankrupt in the past, and its stock has actually performed well over the long-term.
Even if President Trump or the Federal Aviation Administration orders a total shutdown of domestic travel for a period, Southwest can probably survive, regardless of the conditions attached to the bailout. That makes LUV stock much more attractive than the shares of the other carriers.
How much are the shares worth? Since LUV stock is down a relatively modest 33% from its recent highs, it isn’t really priced for total catastrophe yet. It’s not trading at “fire sale” levels. Given the bargains across the travel sector at the moment, LUV stock probably isn’t the best one to take a home run swing on. But if you want a name that is likely to recover in time and has a rock-solid balance sheet, Southwest is a great choice.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek. At the time of this writing, he held no positions in any of the aforementioned securities.
The post Southwest Stock Is the Only Safe Bet in the Turbulent Airline Sector appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Plenty of other airlines are in trouble too; American (NYSE:AAL) suffers from a Debt/EBITDA ratio of nearly five. The article stated that: “Major U.S. airlines are drafting plans for a potential voluntary shutdown of virtually all passenger flights across the U.S., according to industry and federal officials, as government agencies also consider ordering such a move and the nation’s air-traffic control system continues to be ravaged by the corona virus contagion. 10 Stocks to Buy That Will Benefit From Coronavirus Mayhem Southwest’s Sturdy Finances The airline industry is currently demanding tens of billions of dollars of cash grants from the government.
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Plenty of other airlines are in trouble too; American (NYSE:AAL) suffers from a Debt/EBITDA ratio of nearly five. The sector’s stocks, including Southwest Airlines (NYSE:LUV), are plunging. As of last quarter, Southwest had $4 billion of cash and only $4 billion of general short-term current liabilities.
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Plenty of other airlines are in trouble too; American (NYSE:AAL) suffers from a Debt/EBITDA ratio of nearly five. The sector’s stocks, including Southwest Airlines (NYSE:LUV), are plunging. 10 Stocks to Buy That Will Benefit From Coronavirus Mayhem Southwest’s Sturdy Finances The airline industry is currently demanding tens of billions of dollars of cash grants from the government.
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Plenty of other airlines are in trouble too; American (NYSE:AAL) suffers from a Debt/EBITDA ratio of nearly five. The sector’s stocks, including Southwest Airlines (NYSE:LUV), are plunging. As of this writing, it appears that the government is prepared to give the airlines a major stimulus package to rescue the industry.
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6142.0
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2020-03-26 00:00:00 UTC
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Why It Looks Like GE Stock Can Easily Rally 50% From Here
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AAL
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https://www.nasdaq.com/articles/why-it-looks-like-ge-stock-can-easily-rally-50-from-here-2020-03-26
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips
General Electric (NYSE:GE) has been crushed, but under the circumstances, who can be surprised? From peak to trough, GE stock is down 55% from its February highs.
Source: Carsten Reisinger / Shutterstock.com
There’s a trifecta of concerns weighing on General Electric though. First, the S&P 500 is down about 35% from peak to trough, while the CBOE Volatility Index (VIX) hit its highest level since the financial crisis. That’s an obvious negative for the stock — and almost all stocks.
Second, GE has its own company-specific issues. There’s a reason shares went from ~$30 in December 2016 to sub-$7 in December 2018. Free cash flow and debt concerns have been like an anchor for this name for a while now.
Lastly, the deep concerns over the aerospace industry are weighing on GE. Boeing (NYSE:BA) shares have nosedived. Delta Air Lines (NYSE:DAL), American Airlines (NASDAQ:AAL), United Airlines (NASDAQ:UAL) and others have crashed too. With so many unknowns in this space, orders for new aircraft are certainly a concern.
10 Stocks to Buy That Will Benefit From Coronavirus Mayhem
Aerospace is one of General Electric’s strongest units, and if this space takes a hit, it’s clear why GE stock has been under pressure.
What Now?
Current 2020 estimates call for earnings of 55 cents per share on revenue of $90.42 billion. The latter will fall 5% year-over-year, should GE report in-line results. However, given the impact from the coronavirus and what we’re seeing unfolding in the aerospace industry — from cratering flight counts to bailouts from Congress — investors need to assume these current estimates are inaccurate.
While the present situation creates a struggle for General Electric, that’s nothing new for the company.
From 2016 through 2018, GE generated revenue of $119.6 billion, $120.4 billion and $121.6 billion, respectively. However, net income for those years came in at $8.8 billion, negative $5.8 billion and negative $22.3 billion, respectively.
During that three-year span, GE had a free cash flow deficit of $8.7 billion. In 2019, free cash flow came in at a positive $2.6 billion, but a net loss of $4.9 billion was recorded. These were year-over-year improvements though, and while major concerns are still present, it suggests that 2018 may have very well been the bottom in its business.
While the biggest worry for General Electric — bankruptcy — seems off the table, for now, investors are still leery. As revenue and free cash flow dry up due to coronavirus uncertainty, it’s hard to calculate what the financial impact will be. Sadly, so many of the outside forces weighing on GE stock still have unknown outcomes.
So how can GE have up to 50% upside potential?
Trading GE Stock
Source: Chart courtesy of StockCharts.com
GE stock has been cut in half in just over a month, falling from ~$13 in mid-February to sub-$6.50. The stock actually took out what now appears to be extreme lows from the fourth quarter of 2018.
The move in GE was deserved. The company does not have strong financials and there are several negative catalysts stressing the stock. That being said, those stressors may present opportunities.
If this was another extreme low, General Electric could have serious upside. Shares bottomed around $6, with a 50% move sending the stock to the underside of prior uptrend support (blue line) around $9.
On Tuesday, GE climbed to the top of its recent trading range (blue box), closing near $7. A 50% rally from this level is more difficult and will require the stock to reclaim prior uptrend support. However, should it do so, a rally of this magnitude would take shares to about $10.50. It may not get all the way to this point, with a number of key moving averages in the way.
But investors who can nibble the stock in the $6 range may find that serious gains are possible. On a close below $5.90 and perhaps investors will consider stopping out. GE stock is not perfect, but the risk/reward may favor the upside for aggressive bulls.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell did not hold a position in any of the aforementioned securities.
The post Why It Looks Like GE Stock Can Easily Rally 50% From Here appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Delta Air Lines (NYSE:DAL), American Airlines (NASDAQ:AAL), United Airlines (NASDAQ:UAL) and others have crashed too. However, given the impact from the coronavirus and what we’re seeing unfolding in the aerospace industry — from cratering flight counts to bailouts from Congress — investors need to assume these current estimates are inaccurate. As revenue and free cash flow dry up due to coronavirus uncertainty, it’s hard to calculate what the financial impact will be.
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Delta Air Lines (NYSE:DAL), American Airlines (NASDAQ:AAL), United Airlines (NASDAQ:UAL) and others have crashed too. InvestorPlace - Stock Market News, Stock Advice & Trading Tips General Electric (NYSE:GE) has been crushed, but under the circumstances, who can be surprised? Shares bottomed around $6, with a 50% move sending the stock to the underside of prior uptrend support (blue line) around $9.
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Delta Air Lines (NYSE:DAL), American Airlines (NASDAQ:AAL), United Airlines (NASDAQ:UAL) and others have crashed too. InvestorPlace - Stock Market News, Stock Advice & Trading Tips General Electric (NYSE:GE) has been crushed, but under the circumstances, who can be surprised? 10 Stocks to Buy That Will Benefit From Coronavirus Mayhem Aerospace is one of General Electric’s strongest units, and if this space takes a hit, it’s clear why GE stock has been under pressure.
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Delta Air Lines (NYSE:DAL), American Airlines (NASDAQ:AAL), United Airlines (NASDAQ:UAL) and others have crashed too. In 2019, free cash flow came in at a positive $2.6 billion, but a net loss of $4.9 billion was recorded. If this was another extreme low, General Electric could have serious upside.
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2020-03-25 00:00:00 UTC
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Why Shares of Airlines Are Soaring Today
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https://www.nasdaq.com/articles/why-shares-of-airlines-are-soaring-today-2020-03-25
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What happened
Airline stocks were gaining altitude on Wednesday after the White House and Congress overnight announced a deal on a $2 trillion stimulus package. The deal includes $50 billion for U.S. passenger and cargo airlines, which should help the companies weather the severe travel slowdown caused by the COVID-19 coronavirus pandemic.
Shares of Hawaiian Holdings (NASDAQ: HA) and Spirit Airlines (NYSE: SAVE) were each up more than 30% as of 1 p.m. EDT today, while shares of Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), United Airlines Holdings (NASDAQ: UAL), and JetBlue Airways (NASDAQ: JBLU) were all up more than 15%, and both Alaska Air Group (NYSE: ALK) and Southwest Airlines (NYSE: LUV) were up more than 8%.
So what
Few industries have been hit harder by the pandemic than the airlines, with travel demand disappearing overnight and ticket sales expected to remain slow through the summer at least. Absent assistance, the companies are facing tough decisions as revenue has plummeted. Delta, for example, expects 2020 second-quarter revenue to be down 80% year over year, and it is currently burning through $350 million per week.
Even the healthiest U.S. carriers have lost more than 40% of their value over the last month as investors braced for potential bankruptcies or failures. The airlines have asked the government for help, rallying employees to lobby lawmakers in hopes of winning a package of grants and loan guarantees to help weather the storm.
Image source: Getty Images.
The airlines got their wish Wednesday when lawmakers reached a tentative agreement on a stimulus package that would provide help to the industry. The bailout does come with some stipulations, but they are much more manageable than some proposals floated in recent weeks, including talk that the government should take major equity stakes in the carriers.
Any company receiving government loans as part of the stimulus bill would be subject to a ban on stock buybacks through the term of the loan, plus potentially additional time up to a year. It would also be forced to limit executive bonuses and take steps to protect workers.
The terms would place limitations on the companies in the near term but would not prevent them from tapping equity markets and other sources of private capital in the future.
Now what
It's worth noting that as of this writing, the stimulus plan still had not been signed into law. It appears likely to be done by end of day Wednesday, or Thursday morning at the latest, but it is dangerous to assume anything, especially where Washington is concerned.
Even with the bailout package secured, airlines would still face a difficult path. The pandemic could easily send the U.S. economy into an extended recession and keep lucrative business travelers sidelined for months. But their stocks, even after factoring in Wednesday's rally, remain down between 24% and 56% year to date. A recession is priced in, and for those with the risk tolerance to handle the uncertainty ahead, now is the time to selectively buy into airlines.
10 stocks we like better than United Airlines Holdings
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and United Airlines Holdings wasn't one of them! That's right -- they think these 10 stocks are even better buys.
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*Stock Advisor returns as of March 18, 2020
Lou Whiteman owns shares of Delta Air Lines and Spirit Airlines. The Motley Fool owns shares of and recommends Delta Air Lines, Southwest Airlines, and Spirit Airlines. The Motley Fool recommends Alaska Air Group, Hawaiian Holdings, and JetBlue Airways. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Shares of Hawaiian Holdings (NASDAQ: HA) and Spirit Airlines (NYSE: SAVE) were each up more than 30% as of 1 p.m. EDT today, while shares of Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), United Airlines Holdings (NASDAQ: UAL), and JetBlue Airways (NASDAQ: JBLU) were all up more than 15%, and both Alaska Air Group (NYSE: ALK) and Southwest Airlines (NYSE: LUV) were up more than 8%. What happened Airline stocks were gaining altitude on Wednesday after the White House and Congress overnight announced a deal on a $2 trillion stimulus package. So what Few industries have been hit harder by the pandemic than the airlines, with travel demand disappearing overnight and ticket sales expected to remain slow through the summer at least.
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Shares of Hawaiian Holdings (NASDAQ: HA) and Spirit Airlines (NYSE: SAVE) were each up more than 30% as of 1 p.m. EDT today, while shares of Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), United Airlines Holdings (NASDAQ: UAL), and JetBlue Airways (NASDAQ: JBLU) were all up more than 15%, and both Alaska Air Group (NYSE: ALK) and Southwest Airlines (NYSE: LUV) were up more than 8%. The Motley Fool owns shares of and recommends Delta Air Lines, Southwest Airlines, and Spirit Airlines. The Motley Fool recommends Alaska Air Group, Hawaiian Holdings, and JetBlue Airways.
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Shares of Hawaiian Holdings (NASDAQ: HA) and Spirit Airlines (NYSE: SAVE) were each up more than 30% as of 1 p.m. EDT today, while shares of Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), United Airlines Holdings (NASDAQ: UAL), and JetBlue Airways (NASDAQ: JBLU) were all up more than 15%, and both Alaska Air Group (NYSE: ALK) and Southwest Airlines (NYSE: LUV) were up more than 8%. See the 10 stocks *Stock Advisor returns as of March 18, 2020 Lou Whiteman owns shares of Delta Air Lines and Spirit Airlines. The Motley Fool owns shares of and recommends Delta Air Lines, Southwest Airlines, and Spirit Airlines.
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Shares of Hawaiian Holdings (NASDAQ: HA) and Spirit Airlines (NYSE: SAVE) were each up more than 30% as of 1 p.m. EDT today, while shares of Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), United Airlines Holdings (NASDAQ: UAL), and JetBlue Airways (NASDAQ: JBLU) were all up more than 15%, and both Alaska Air Group (NYSE: ALK) and Southwest Airlines (NYSE: LUV) were up more than 8%. Any company receiving government loans as part of the stimulus bill would be subject to a ban on stock buybacks through the term of the loan, plus potentially additional time up to a year. That's right -- they think these 10 stocks are even better buys.
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2020-03-25 00:00:00 UTC
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Southwest Airlines Stock Rips 11% — Now What?
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AAL
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https://www.nasdaq.com/articles/southwest-airlines-stock-rips-11-now-what-2020-03-25
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips
Airlines have been devastated by the coronavirus. Down “just” 34.9% from its one-year highs though, and Southwest Airlines (NYSE:LUV) hasn’t performed all that bad. In fact, LUV stock is outperforming all of its major peers.
Source: Jeramey Lende / Shutterstock.com
Does that observation, combined with the stock’s recent double-digit rally, make it a buy?
It certainly makes it stand out for additional analysis. While many investors like to bottom fish — likely due to the big rally potentials, as American Airlines (NASDAQ:AAL) jumped more than 35% on Tuesday — relative strength is an attractive quality for stocks too.
7 Stocks to Buy Once the Market Bottoms
Let’s put it this way. American Airlines is still down 53% from the highs, while United Airlines (NASDAQ:UAL) is down 62.3%. Delta Air Lines (NYSE:DAL) is off 55% and Spirit Airlines (NYSE:SAVE), which soared almost 40% Tuesday, is still down 68% from its one-year highs.
Down 35% from its high and Southwest doesn’t look at that bad now, huh?
A Closer Look at Southwest Airlines
Southwest Airlines is one of the healthier airlines out there. Its trailing free cash flow of $2.96 billion lags only Delta.
The crazy thing is, though, Southwest generates significantly less revenue than its competitors. For instance, Delta generated trailing sales of $47 billion vs. Southwest’s sales of just $22.4 billion. American and United both had more than $40 billion in revenue, too.
Click to Enlarge
Source: Chart courtesy of Statista Source from Bureau of Transportation Statistics
So the fact Southwest can generate such strong free cash flow on such low revenue compared to its peers is really impressive. It also has the best profit margins of the group.
This is telling, too. Of the five airlines listed above, LUV stock boasts a quick ratio of 1.06. By normal standards, that’s not all that impressive, but for an airline, it’s solid.
Let’s put it this way: The next closest reading comes from Spirit at just 0.57. In other words, Southwest has one of the healthiest balance sheets of the bunch as well.
At the end of the day, Southwest has outperformed the stock performance of its peers, simply because Southwest Airlines has spanked its competition on the financial metrics. That said, the current virus situation is benefiting no one. Airline traffic is taking a serious hit, weighing on the entire industry.
While companies probably should have spent less on buybacks throughout the years, it’s hard to blame them for not expecting a global pandemic to slam on the economic brakes. The hit to free cash flow, revenue, and earnings will be meaningful. And it comes as we near the all-important summer season.
With any luck, the virus will soon peak and the public can get on with their normal lives. If it persists, however, it will likely be a problem for the airline industry.
Trading LUV Stock
Click to Enlarge
Source: Chart courtesy of StockCharts.com
Southwest Airlines may have the best metrics and may have held up best relative to its peers. But does that make it a buy? Not necessarily.
When the markets go into free-fall mode, unfortunately technical support levels can go out the window. Same with the fundamentals in many cases. Many investors and traders don’t like to admit that, but it’s true. Don’t get me wrong, both forms of analysis can help make key decisions, but oftentimes we need to understand there are larger forces at play.
In any regard, you’ll notice on the chart above that LUV stock has struggled since breaking support at $48. Each decline has resulted in a series of consolidation zones that ultimately led to lower prices. That’s shown via the blue boxes on the chart.
For the first time, we’re seeing LUV stock resolve higher instead of lower. From here, investors can now start to see a trade develop. For instance, above $34 and Southwest shares can remain in “zone 2.” Below $34 and it enters back into “zone 3” near the lows.
If shares can advance above $42 and enter back into “zone 1,” then even more upside can be realized. However, under the circumstances, I imagine it will be hard for shares to reclaim the $48 mark. For now, let’s see if shares can get up into the $40 to $41 area, and then potentially move higher. Below $36 puts $34 or lower on the table.
For many investors, it may still be too early to enter LUV stock. I don’t blame them. At least until we have more certainty in place or until a trend begins to form on the chart. For the time being, we have levels we can trade against, and that will have to do.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell did not hold a position in any of the aforementioned securities.
The post Southwest Airlines Stock Rips 11% — Now What? appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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While many investors like to bottom fish — likely due to the big rally potentials, as American Airlines (NASDAQ:AAL) jumped more than 35% on Tuesday — relative strength is an attractive quality for stocks too. While companies probably should have spent less on buybacks throughout the years, it’s hard to blame them for not expecting a global pandemic to slam on the economic brakes. Don’t get me wrong, both forms of analysis can help make key decisions, but oftentimes we need to understand there are larger forces at play.
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While many investors like to bottom fish — likely due to the big rally potentials, as American Airlines (NASDAQ:AAL) jumped more than 35% on Tuesday — relative strength is an attractive quality for stocks too. For instance, Delta generated trailing sales of $47 billion vs. Southwest’s sales of just $22.4 billion. Click to Enlarge Source: Chart courtesy of Statista Source from Bureau of Transportation Statistics So the fact Southwest can generate such strong free cash flow on such low revenue compared to its peers is really impressive.
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While many investors like to bottom fish — likely due to the big rally potentials, as American Airlines (NASDAQ:AAL) jumped more than 35% on Tuesday — relative strength is an attractive quality for stocks too. InvestorPlace - Stock Market News, Stock Advice & Trading Tips Airlines have been devastated by the coronavirus. A Closer Look at Southwest Airlines Southwest Airlines is one of the healthier airlines out there.
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While many investors like to bottom fish — likely due to the big rally potentials, as American Airlines (NASDAQ:AAL) jumped more than 35% on Tuesday — relative strength is an attractive quality for stocks too. 7 Stocks to Buy Once the Market Bottoms Let’s put it this way. A Closer Look at Southwest Airlines Southwest Airlines is one of the healthier airlines out there.
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2020-03-25 00:00:00 UTC
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Dividend Investors: Is Coronavirus Stimulus the Next Shoe to Drop?
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https://www.nasdaq.com/articles/dividend-investors%3A-is-coronavirus-stimulus-the-next-shoe-to-drop-2020-03-25
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The stock market has seen immense volatility lately, as investors try to figure out what impact the coronavirus pandemic will have on various parts of the economy. Already, the airline industry has come to a near standstill in response to the restrictions that national governments have put on international travel and the reluctance of domestic travelers to put themselves at any kind of risk of catching the COVID-19 disease.
Airlines have lobbied Washington lawmakers to get relief, and it now looks as though Congress has agreed on a deal that could provide billions of dollars in loans and other financial support to air carriers. However, that aid is almost certain to come with a catch: Those receiving it won't be able to do stock buybacks or pay dividends to shareholders until a year after they've paid back the federal government.
Image source: Getty Images.
Dividend investors always hate to see payout cuts. Most airlines haven't been all that generous in making dividend payments to shareholders, but one in particular -- Delta Air Lines (NYSE: DAL) -- has stood out from the crowd. The Atlanta-based carrier has already chosen to suspend its dividend in anticipation of taking government assistance of almost $1 billion -- which means less in dividend income annually for those who've invested in Delta. As it turns out, that cut will dwarf what most other major carriers have paid.
Once burned, twice shy
The history of airlines has been full of booms and busts. Several major airlines have gone through bankruptcy proceedings, making them leery of returning too much capital to shareholders during good times, only to wish they'd hung onto it when the bad times come. Moreover, with consolidation in the airline industry, many companies needed to preserve capital for use internally in integrating operations and streamlining fleets.
Even the decade-long era of prosperity for airlines wasn't enough to give every airline confidence to pay out substantial dividends. With the need to update aging aircraft fleets, capital remained at a premium for most air carriers.
As you can see below, though, there were a few exceptions:
AIRLINE STOCK
RECENT YIELD
2019 DIVIDEND PAYMENTS
Delta Air Lines
6%
$980 million
Southwest Airlines (NYSE: LUV)
1.9%
$372 million
American Airlines Group (NASDAQ: AAL)
2.9%
$178 million
Alaska Air Group (NYSE: ALK)
5.2%
$173 million
Allegiant Travel (NASDAQ: ALGT)
3%
$46 million
SkyWest (NASDAQ: SKYW)
2.3%
$24 million
Hawaiian Holdings (NASDAQ: HA)
4.7%
$23 million
Data source: S&P Global Market Intelligence.
Delta clearly stands out here and was one of the first to embrace dividends and payout growth. Back in 2013, the air carrier started a dividend of just $0.025 per share, amounting to a yield of less than 1%. Later that year, it more than doubled its payout, and subsequent increases since then took the quarterly payment all the way up to $0.4025 per share. Before the coronavirus hit, that worked out to a healthy dividend yield of nearly 3%.
Smaller impacts
By contrast, other airlines haven't been big dividend payers. Southwest, which has been the most consistently successful airline over time, has embraced dividend growth to some extent over the past 10 years, but at today's depressed prices, its yield remains below the overall stock market average.
American pays a dividend, but it hasn't changed since the airline started its payout in 2014. Only Alaska Air has demonstrated a similar commitment to dividend growth to that of Delta, and its much smaller size means less of a financial impact on dividend investors overall.
More cuts to come elsewhere?
So far, dividend stock investors have seen payout cuts limited largely to the industries most directly affected by the coronavirus pandemic. The real question is whether the economy will recover quickly enough to help minimize second-order effects on businesses in other sectors of the economy. If that recovery doesn't happen, then dividend investors could see themselves facing more extensive reductions to their portfolio income well beyond the hardest-hit industries.
10 stocks we like better than Southwest Airlines
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Southwest Airlines wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of March 18, 2020
Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines. The Motley Fool recommends Alaska Air Group and Hawaiian Holdings. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Delta Air Lines 6% $980 million Southwest Airlines (NYSE: LUV) 1.9% $372 million American Airlines Group (NASDAQ: AAL) 2.9% $178 million Alaska Air Group (NYSE: ALK) 5.2% $173 million Allegiant Travel (NASDAQ: ALGT) 3% $46 million SkyWest (NASDAQ: SKYW) 2.3% $24 million Hawaiian Holdings (NASDAQ: HA) 4.7% $23 million Data source: S&P Global Market Intelligence. Airlines have lobbied Washington lawmakers to get relief, and it now looks as though Congress has agreed on a deal that could provide billions of dollars in loans and other financial support to air carriers. However, that aid is almost certain to come with a catch: Those receiving it won't be able to do stock buybacks or pay dividends to shareholders until a year after they've paid back the federal government.
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Delta Air Lines 6% $980 million Southwest Airlines (NYSE: LUV) 1.9% $372 million American Airlines Group (NASDAQ: AAL) 2.9% $178 million Alaska Air Group (NYSE: ALK) 5.2% $173 million Allegiant Travel (NASDAQ: ALGT) 3% $46 million SkyWest (NASDAQ: SKYW) 2.3% $24 million Hawaiian Holdings (NASDAQ: HA) 4.7% $23 million Data source: S&P Global Market Intelligence. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines. The Motley Fool recommends Alaska Air Group and Hawaiian Holdings.
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Delta Air Lines 6% $980 million Southwest Airlines (NYSE: LUV) 1.9% $372 million American Airlines Group (NASDAQ: AAL) 2.9% $178 million Alaska Air Group (NYSE: ALK) 5.2% $173 million Allegiant Travel (NASDAQ: ALGT) 3% $46 million SkyWest (NASDAQ: SKYW) 2.3% $24 million Hawaiian Holdings (NASDAQ: HA) 4.7% $23 million Data source: S&P Global Market Intelligence. Southwest, which has been the most consistently successful airline over time, has embraced dividend growth to some extent over the past 10 years, but at today's depressed prices, its yield remains below the overall stock market average. Only Alaska Air has demonstrated a similar commitment to dividend growth to that of Delta, and its much smaller size means less of a financial impact on dividend investors overall.
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Delta Air Lines 6% $980 million Southwest Airlines (NYSE: LUV) 1.9% $372 million American Airlines Group (NASDAQ: AAL) 2.9% $178 million Alaska Air Group (NYSE: ALK) 5.2% $173 million Allegiant Travel (NASDAQ: ALGT) 3% $46 million SkyWest (NASDAQ: SKYW) 2.3% $24 million Hawaiian Holdings (NASDAQ: HA) 4.7% $23 million Data source: S&P Global Market Intelligence. American pays a dividend, but it hasn't changed since the airline started its payout in 2014. Only Alaska Air has demonstrated a similar commitment to dividend growth to that of Delta, and its much smaller size means less of a financial impact on dividend investors overall.
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2020-03-25 00:00:00 UTC
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Carnival Stock Is Caught in the Perfect Storm of Volatility
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https://www.nasdaq.com/articles/carnival-stock-is-caught-in-the-perfect-storm-of-volatility-2020-03-25
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips
The face of this historic stock market crash is perhaps the cruise line industry. So it’s not a surprise to see Carnival Corporation (NYSE:CCL) stock fall almost 90% from its highs. In January CCL stock was $52 and at the lows of last week it was under $8 per share.
Source: NAN728 / Shutterstock.com
But Carnival’s management didn’t do anything to cause this drop. Instead, the stock is falling because of how fast the coronavirus from China hit the industry. Similar damage occurred in airline stocks. For example, Delta Air Lines (NYSE:DAL) and American Airlines (NASDAQ:AAL) are also down at least 70% from their highs.
Clearly this isn’t normal price action.
What we have seen happen to CCL stock this year is devastation of epic proportions. Such devastation typically doesn’t occur without a company-specific reason. But this time there is no one to blame.
Nobody saw the virus coming. And moreover, very few expected the whole world to go into lockdown.
7 Stocks to Buy Once the Market Bottoms
In hindsight we can say that it would have been better to take the first list. From here, betting on further downside means you expect Carnival to go out of business. Just a few weeks ago it was a profitable company with a rosy outlook.
CCL Stock Is in Tremendous Pain
Remember, the market is still highly volatile. CCL stock could still reach new lows. Yesterday, the Dow Jones Industrial Average rose 11% in mere hours. And for what reason? With all this chaos in mind, don’t try to pick the “perfect” bottom.
Value can’t save Carnival. Neither can its huge dividend yield. We simply don’t know what the company’s income statement will look like for 2020. The balance sheet is more important here because Carnival’s survival is at stake.
Fortunately governments have committed to helping businesses survive this debacle, so we can expect some federal relief coming for Carnival. The thesis here is that time will heal the company’s wounds. It’s in a coma, but it’s not dead yet.
The Carnival Stock Chart Finally Shows Support
Source: Charts by TradingView
It didn’t take long for this correction to send CCL stock back to levels from 1992. But at this point, the damage — and even the potential for additional wounds — has been priced in to the stock.
If the medical community finds a vaccine in 2020, then the world can return to normal. Part of that “normal” is people vacationing and cruising. It is important to note that senior citizens may be slower to return to the cruise industry because of coronavirus fears.
That’s why I don’t expect a V-shaped recovery for CCL stock, unless there is a miracle headline.
So what’s the strategy? Buy low, and sell high. Investors need to think like Warren Buffett and be greedy when others are fearful. The best deals are usually available when there is blood in the streets.
Humanity Will Prevail Over Covid-19
The message here is that this too shall pass. But there is definitely risk here, or else there would be no reward. An upside bet on CCL stock must be tactical, and investors must put on their trader hats while entering long positions.
There are also could be lingering risks that impact Carnival. Some behaviors could change forever after this virus scare. For example, there will be some people who decide to never cruise again.
Remember, just because CCL stock is cheap doesn’t mean it can’t get cheaper. When volatility is this high, investors need to take partial positions. It is reckless to take on full-size risk all at once.
Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. Join his live chat room for free here.
The post Carnival Stock Is Caught in the Perfect Storm of Volatility appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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For example, Delta Air Lines (NYSE:DAL) and American Airlines (NASDAQ:AAL) are also down at least 70% from their highs. Fortunately governments have committed to helping businesses survive this debacle, so we can expect some federal relief coming for Carnival. An upside bet on CCL stock must be tactical, and investors must put on their trader hats while entering long positions.
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For example, Delta Air Lines (NYSE:DAL) and American Airlines (NASDAQ:AAL) are also down at least 70% from their highs. InvestorPlace - Stock Market News, Stock Advice & Trading Tips The face of this historic stock market crash is perhaps the cruise line industry. So it’s not a surprise to see Carnival Corporation (NYSE:CCL) stock fall almost 90% from its highs.
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For example, Delta Air Lines (NYSE:DAL) and American Airlines (NASDAQ:AAL) are also down at least 70% from their highs. InvestorPlace - Stock Market News, Stock Advice & Trading Tips The face of this historic stock market crash is perhaps the cruise line industry. So it’s not a surprise to see Carnival Corporation (NYSE:CCL) stock fall almost 90% from its highs.
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For example, Delta Air Lines (NYSE:DAL) and American Airlines (NASDAQ:AAL) are also down at least 70% from their highs. Such devastation typically doesn’t occur without a company-specific reason. It is important to note that senior citizens may be slower to return to the cruise industry because of coronavirus fears.
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6147.0
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2020-03-25 00:00:00 UTC
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"Airlines" Didn't Waste All Their Cash Flow on Share Buybacks: American Airlines Did
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AAL
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https://www.nasdaq.com/articles/airlines-didnt-waste-all-their-cash-flow-on-share-buybacks%3A-american-airlines-did-2020-03
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nan
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nan
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Last Monday, Bloomberg reported that the top five U.S. airlines -- American Airlines (NASDAQ: AAL), Delta Air Lines (NYSE: DAL), United Airlines (NASDAQ: UAL), Southwest Airlines (NYSE: LUV), and Alaska Air -- spent a whopping 96% of their free cash flow (FCF) on share buybacks over the past decade. Numerous other media outlets picked up on this statistic, which became a rallying cry for people opposed to government financial support for the airline industry in the midst of the COVID-19 pandemic.
However, while this statistic is accurate, it's also a bit misleading. First, for people unfamiliar with financial terminology like free cash flow, it might appear that airlines were buying back stock hand over fist while neglecting to invest in their businesses. Second, the headline doesn't capture the fact that the high spending on buybacks relative to FCF was distorted by a single outlier: American Airlines.
Free cash flow vs. operating cash flow
Operating cash flow (OCF) is the amount of cash a business generates in a given period (i.e., a quarter or a year) before accounting for capital investments. One of the big decisions corporate leaders must make is how to allocate this cash flow. Some must be reinvested in the business in the form of capital expenditures, or capex. FCF is whatever is left after capex. This FCF can be used for several purposes: most notably, dividends, share buybacks, acquisitions, and balance sheet improvements. (For U.S. airlines, acquisitions are mostly off the table at this point because of antitrust concerns.)
Calculating the percentage of FCF spent on share buybacks, or dividends and buybacks combined, can tell you how a company is prioritizing returning capital to shareholders compared to improving its balance sheet. However, it's only a partial view of capital allocation, as it excludes the arguably more important decision about how much to reinvest in the business.
For example, in 2019, Delta Air Lines generated $3.5 billion of FCF, based on the standard calculation methodology. It spent $2 billion on share buybacks and $980 million on dividends, so 58% of FCF went toward buybacks and 86% went toward all forms of capital returns. Yet operating cash flow was $8.4 billion. Thus, Delta devoted just 24% of its operating cash flow to buybacks; a substantial majority of the airline's cash from operations was reinvested in the business rather than being converted into FCF.
Delta reinvested the majority of its operating cash flow into the business last year. Image source: Delta Air Lines.
In short, even if airlines spend most of their FCF on buybacks, buybacks may still account for a relatively small percentage of their operating cash flow. Indeed, most U.S. airlines have been investing heavily in their businesses in recent years, pressuring FCF.
One airline stands out for high buybacks
The even more misleading aspect of Bloomberg's headline is that American Airlines has led the industry in spending on share buybacks since its late 2013 merger with US Airways, despite not producing positive FCF on a cumulative basis.
Over the past five years, American Airlines spent $11.9 billion on buybacks. The vast majority of that share repurchase activity came in 2015 and 2016, when fuel prices were low and it seemed to many that airlines had entered a period of sustained high margins. American Airlines has also paid out over $1 billion of dividends over the past five years, for total capital returns of nearly $13 billion.
American Airlines returned this cash to shareholders despite poor FCF generation. On a cumulative basis, the airline generated operating cash flow of $24.9 billion and spent $25.9 billion on capex as part of an aggressive fleet renewal initiative over the past five years, putting FCF in negative territory.
Capex has exceeded American's cash from operations over the past five years. Image source: American Airlines.
American paid for most of this capex by issuing debt and entering sale-leaseback transactions. Meanwhile, it returned a little more than half of its operating cash flow to shareholders over this period, mainly through buybacks. This led to a huge increase in the company's leverage. CEO Doug Parker justified this policy based on the low interest rates available for financing aircraft and his belief that the airline industry would be consistently profitable.
In a case of "famous last words," Parker stated at American Airlines' 2016 annual meeting: "We have gotten to the point where we like other businesses will have good years and bad years, but the bad years will not be cataclysmic. They will just be less good than the good years."
Now, airlines are facing an even more cataclysmic year than they experienced during the biggest downturns of the past few decades. Most U.S. airlines have manageable debt loads, so they should be able to take their lumps in 2020 and eventually recover. By contrast, American Airlines entered 2020 with $33.4 billion of debt and lease liabilities and can ill afford to incur any additional debt due to short-term losses.
How have the top airlines used their cash flow?
Of course, even excluding American Airlines' outlier position, there's a wide range of capital allocation frameworks in the airline industry. But once American Airlines is excluded, the rest of the industry's use of cash flow seems quite reasonable.
The following table shows how much of their operating cash flow the top four U.S. airlines (which together account for the vast majority of the U.S. airline industry) reinvested in their businesses between 2015 and 2019, and how that affected FCF.
AIRLINE
OCF (CUMULATIVE)
CAPEX (CUMULATIVE)
CUMULATIVE CAPEX AS % OF OPERATING CASH FLOW
FCF (CUMULATIVE)
American Airlines
$24.9 billion
$25.9 billion
104%
($1 billion)
Delta Air Lines
$35.6 billion
$20.3 billion
57%
$15.3 billion
United Airlines
$28.1 billion
$21.3 billion
76%
$6.8 billion
Southwest Airlines
$20.3 billion
$9.2 billion
45%
$11.2 billion
Data source: Airline annual 10-K SEC filings. Note: United Airlines capex includes approximately $2.8 billion of assets acquired through the issuance of debt.
All of the top U.S. airlines spent heavily on capex over the past five years. Thanks to their strong profitability, Delta Air Lines and Southwest Airlines were able to make these investments while still limiting capex to about half of their operating cash flow. United Airlines is similar in size to Delta and spent a similar amount on capex, but because of its lower profitability, that represented 76% of its operating cash flow. American Airlines was the outlier, spending the most on capex despite being the least profitable. This led to its negative FCF.
The next table compares the four airlines' spending on dividends and buybacks to their operating cash flow and FCF. While all four have returned close to, or even more than, 100% of their FCF to shareholders, their capital returns look far more modest when compared with their operating cash flow.
AIRLINE
OCF (CUMULATIVE)
FCF (CUMULATIVE)
DIVIDENDS PLUS BUYBACKS (CUMULATIVE)
CUMULATIVE DIVIDENDS PLUS BUYBACKS AS % OF OCF
CUMULATIVE DIVIDENDS PLUS BUYBACKS AS % OF FCF
American Airlines
$24.9 billion
($1 billion)
$13 billion
52%
N/A
Delta Air Lines
$35.6 billion
$15.3 billion
$13.6 billion
38%
89%
United Airlines
$28.1 billion
$6.8 billion
$8.6 billion
31%
126%
Southwest Airlines
$20.3 billion
$11.2 billion
$9.9 billion
49%
88%
Data source: Airline annual 10-K SEC filings. Note: United Airlines figures include approximately $2.8 billion of assets acquired through the issuance of debt.
This table reveals that the four top airlines together generated about $32.3 billion of FCF over the past five years but spent $45.1 billion on dividends and buybacks (140% of their combined cumulative FCF). That said, this spending represented just 41% of their combined cumulative operating cash flow.
It's not an airline problem; it's an American Airlines problem
Companies returning more than 100% of their FCF to shareholders over long periods have only themselves to blame if they get into financial trouble. On the other hand, for a company with an investment-grade balance sheet -- like Southwest Airlines and, until recently, Delta Air Lines -- to return close to 100% of FCF through dividends and buybacks is entirely reasonable. After all, the only significant alternative is putting additional cash on an already-solid balance sheet indefinitely.
American Airlines has been rather irresponsible with its capital allocation in recent years. As shown in the tables above, it spent the highest proportion of its operating cash flow (52%) on dividends and buybacks, despite also spending more on capex than any of its peers.
By contrast, the other three top U.S. airlines spent 96% of their FCF and just 38% of their operating cash flow on dividends and buybacks over the past five years. (If we excluded dividends, as the Bloomberg analysis did, these percentages would be lower.) In other words, they reinvested more than half of their operating cash flow in their businesses and returned most of the leftover cash to investors. American Airlines was the only major airline that adopted a blatantly reckless financial policy. Other airlines shouldn't be blamed for American's mistakes.
10 stocks we like better than American Airlines Group
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Adam Levine-Weinberg owns shares of Alaska Air Group, American Airlines Group, and Delta Air Lines and is long January 2021 $40 calls on Southwest Airlines. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines. The Motley Fool recommends Alaska Air Group. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Last Monday, Bloomberg reported that the top five U.S. airlines -- American Airlines (NASDAQ: AAL), Delta Air Lines (NYSE: DAL), United Airlines (NASDAQ: UAL), Southwest Airlines (NYSE: LUV), and Alaska Air -- spent a whopping 96% of their free cash flow (FCF) on share buybacks over the past decade. First, for people unfamiliar with financial terminology like free cash flow, it might appear that airlines were buying back stock hand over fist while neglecting to invest in their businesses. CEO Doug Parker justified this policy based on the low interest rates available for financing aircraft and his belief that the airline industry would be consistently profitable.
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Last Monday, Bloomberg reported that the top five U.S. airlines -- American Airlines (NASDAQ: AAL), Delta Air Lines (NYSE: DAL), United Airlines (NASDAQ: UAL), Southwest Airlines (NYSE: LUV), and Alaska Air -- spent a whopping 96% of their free cash flow (FCF) on share buybacks over the past decade. American Airlines $24.9 billion $25.9 billion 104% ($1 billion) Delta Air Lines $35.6 billion $20.3 billion 57% $15.3 billion United Airlines $28.1 billion $21.3 billion 76% $6.8 billion Southwest Airlines $20.3 billion $9.2 billion 45% $11.2 billion Data source: Airline annual 10-K SEC filings. Delta Air Lines $35.6 billion $15.3 billion $13.6 billion 38% 89% United Airlines $28.1 billion $6.8 billion $8.6 billion 31% 126% Southwest Airlines $20.3 billion $11.2 billion $9.9 billion 49% 88% Data source: Airline annual 10-K SEC filings.
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Last Monday, Bloomberg reported that the top five U.S. airlines -- American Airlines (NASDAQ: AAL), Delta Air Lines (NYSE: DAL), United Airlines (NASDAQ: UAL), Southwest Airlines (NYSE: LUV), and Alaska Air -- spent a whopping 96% of their free cash flow (FCF) on share buybacks over the past decade. American Airlines $24.9 billion $25.9 billion 104% ($1 billion) Delta Air Lines $35.6 billion $20.3 billion 57% $15.3 billion United Airlines $28.1 billion $21.3 billion 76% $6.8 billion Southwest Airlines $20.3 billion $9.2 billion 45% $11.2 billion Data source: Airline annual 10-K SEC filings. Delta Air Lines $35.6 billion $15.3 billion $13.6 billion 38% 89% United Airlines $28.1 billion $6.8 billion $8.6 billion 31% 126% Southwest Airlines $20.3 billion $11.2 billion $9.9 billion 49% 88% Data source: Airline annual 10-K SEC filings.
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Last Monday, Bloomberg reported that the top five U.S. airlines -- American Airlines (NASDAQ: AAL), Delta Air Lines (NYSE: DAL), United Airlines (NASDAQ: UAL), Southwest Airlines (NYSE: LUV), and Alaska Air -- spent a whopping 96% of their free cash flow (FCF) on share buybacks over the past decade. Yet operating cash flow was $8.4 billion. Delta reinvested the majority of its operating cash flow into the business last year.
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6148.0
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2020-03-24 00:00:00 UTC
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Blood in the Street Provides Turbulent Opportunity in American Airlines
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AAL
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https://www.nasdaq.com/articles/blood-in-the-street-provides-turbulent-opportunity-in-american-airlines-2020-03-24
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nan
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nan
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips
Right now, airline stocks look like horror movie extras after being slashed by coronavirus fears.
Source: GagliardiPhotography / Shutterstock.com
Since peaking at $30.78 in Feb. 2020, American Airlines (NASDAQ:AAL) is now down to $11.25. Delta Air Lines (NYSE:DAL) fell from $60 to $24. United Airlines (NASDAQ:UAL) plummeted from $84 to $25. Southwest Airlines (NYSE:LUV) fell from $58 to $31.
Travel restrictions are keeping folks at home and airlines are in freefall, as carriers announce schedule cuts to conserve cash, and trimming guidance to match.
And yet things could still get worse for the sector. According to the U.S. government, we could see the pandemic last up to 18 months or longer. Hospitals are also sounding the alarms on short supplies with the outbreak showing no signs of slowing.
7 Stocks to Buy That Have Survived the Recent Carnage
While the fear has become palpable, it’s also creating a “blood in the streets” opportunity for stocks, like American Airlines.
Airlines Would be No. 1 for Bailout, Says President Trump
Granted, the virus has been terrifying for many of us. Total confirmed global cases are now up to 254,653 with 10,415 deaths. Employees are being forced to work from home. Businesses are being shut down. Many of us are stuck homeschooling our kids with schools closed.
Airlines travel has been devastated. So much so, American Airlines plans to cancel up to 30% of its flights or May, and 23% in the second quarter, says Barron’s contributor Daren Fonda. Delta has canceled 65% of flights in May and 50% for the second quarter.
Again, the fear is palpable, but it’s creating an opportunity for patient investors.
One, months from now, no one will be talking about the coronavirus. Consumers and businesses alike will resume their lives. Travel restrictions will be lifted, and demand for international flights will pick up again.
Two, President Trump has pledged to help airlines: “Airlines would be No. 1,” the president said. “You go from having the best year they have ever had to having no passengers because of what we have had to do to win this war — and it’s a war.”
Be Greedy When Others are Fearful
“American and its peers are far from a cash crunch. The company successfully raised more than $1 billion earlier in the year and has significant unencumbered assets to borrow against if it needs more cash in a pinch. At year’s end, it also had about $7.1 billion in total available liquidity under its borrowing agreements,” noted Motley Fool contributor Lou Whiteman.
While buying American Airlines isn’t for the squeamish, if you can ignore the headlines, and focus squarely on the long-term story, I think it’s a good time to buy and hold AAL stock, long-term. A year from now, with the virus in the rearview mirror, I think AAL stock could be back up to $20 a share. If you can handle the turbulence, I think American Airlines is a good bet.
Ian Cooper, an InvestorPlace.com contributor, has been analyzing stocks and options for web-based advisories since 1999. As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.
The post Blood in the Street Provides Turbulent Opportunity in American Airlines appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Source: GagliardiPhotography / Shutterstock.com Since peaking at $30.78 in Feb. 2020, American Airlines (NASDAQ:AAL) is now down to $11.25. While buying American Airlines isn’t for the squeamish, if you can ignore the headlines, and focus squarely on the long-term story, I think it’s a good time to buy and hold AAL stock, long-term. A year from now, with the virus in the rearview mirror, I think AAL stock could be back up to $20 a share.
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Source: GagliardiPhotography / Shutterstock.com Since peaking at $30.78 in Feb. 2020, American Airlines (NASDAQ:AAL) is now down to $11.25. While buying American Airlines isn’t for the squeamish, if you can ignore the headlines, and focus squarely on the long-term story, I think it’s a good time to buy and hold AAL stock, long-term. A year from now, with the virus in the rearview mirror, I think AAL stock could be back up to $20 a share.
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Source: GagliardiPhotography / Shutterstock.com Since peaking at $30.78 in Feb. 2020, American Airlines (NASDAQ:AAL) is now down to $11.25. While buying American Airlines isn’t for the squeamish, if you can ignore the headlines, and focus squarely on the long-term story, I think it’s a good time to buy and hold AAL stock, long-term. A year from now, with the virus in the rearview mirror, I think AAL stock could be back up to $20 a share.
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Source: GagliardiPhotography / Shutterstock.com Since peaking at $30.78 in Feb. 2020, American Airlines (NASDAQ:AAL) is now down to $11.25. While buying American Airlines isn’t for the squeamish, if you can ignore the headlines, and focus squarely on the long-term story, I think it’s a good time to buy and hold AAL stock, long-term. A year from now, with the virus in the rearview mirror, I think AAL stock could be back up to $20 a share.
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6149.0
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2020-03-24 00:00:00 UTC
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Will American Airlines Stock Fall More Than 50% to $5?
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AAL
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https://www.nasdaq.com/articles/will-american-airlines-stock-fall-more-than-50-to-%245-2020-03-24
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nan
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nan
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips
Airline stocks have been hammered, which is no surprise under the circumstances. The coronavirus from China dealt a painful blow to the stock market, and the airlines industry in particular. American Airlines (NASDAQ:AAL) hasn’t been an exception to that pain, with AAL stock down about 50% this month.
Source: GagliardiPhotography / Shutterstock.com
However, some analysts believe even more pain could be in store. Analysts at Bank of America slapped a $5 price target on American Airlines on Monday morning. After closing north of $10 on Friday, that implies more than 50% downside in the stock price.
Keep in mind, AAL stock has already fallen roughly 60% from its one-year high. That’s better than the 70% tumble in United Airlines (NASDAQ:UAL). However, it trails Southwest Airlines (NYSE:LUV), which is down 38% from its one-year high.
Uncertainty and Disdain
On the one hand, it’s hard to imagine the federal government letting the airline industry go belly up. That includes suppliers like Boeing (NYSE:BA) and General Electric (NYSE:GE), too.
7 Stocks Insiders Are Buying Big Amid the Market Panic
There are simply too many jobs on the line and air travel is a major piece of domestic and international logistics. That being said, Congress has yet to pass any financial relief along to the industry, even though it’s under incredible financial strain.
However, there’s a certain amount of disdain toward the industry.
People are frustrated that airlines have spent billions of dollars in shares buybacks and are now requesting what is essentially a bailout. Some reports have said 96% of the industry’s free cash flow has gone toward corporate buybacks, helping to inflate earnings per share instead of building up a war chest of capital in the event of tough times. Others say Warren Buffett’s Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B) should bail them out. Berkshire is one of the largest shareholders in the industry and is flush with cash.
The whole thing has left investors and observers torn on whether the industry — which now appears careless at best and selfish at worst — really deserves a bailout. The flip side of that is, was it really irresponsible to buy back stock? No one was predicting that the global economy would slam on the brakes due to a worldwide pandemic.
The companies have already signaled to Congress that layoffs are around the corner without aid. That’s no surprise, with Delta Air Lines’ (NYSE:DAL) management saying it’s burning through about $350 million a week at the moment.
All we know now is that the situation is loaded with unknowns. We don’t know if or when the government will step in and to what extent they plan to help.
AAL Stock to $5?
Distressed stocks are a tough one for investors to figure out. Mostly because balance sheet analysis is not the forte of the casual investor. In the case of AAL stock, the company held $3.8 billion worth of cash and short-term investments as of its quarter ending Dec. 31.
We also know that it had current assets of $8.2 billion and current liabilities of $18.3 billion.
That initially raises a red flag on whether American Airlines has the reserves to cover its short-term obligations. A bulk of its current liabilities is in deferred revenue — essentially sales from customers that have not yet received their service (flight). While customers may press for a refund, they are likely to only get credits for future travel.
It doesn’t help that American Airlines hasn’t been free cash flow (FCF) positive for the past three years. Or that this immediate slowdown comes during the first quarter, which is almost always the company’s strongest season of free cash flow. Equally painful is the revenue loss AAL stock will experience in Q2, which is the company’s strongest quarter of sales. The third quarter will likely suffer too, which is American’s second-best quarter of sales.
It doesn’t take a rocket scientist to compute the following: Crimping free cash flow during its best FCF period, plus negatively impacted sales during its two best revenue quarters, plus balance sheet concerns, plus several unknowns relating to federal aid.
So far, that equation has worked out to “sell.”
I don’t know whether $5 is in the cards for AAL stock or not. I do know that the airline industry will exist when this is all said and done, but I don’t know what structural changes lurk around the corner.
All I know is that there are too many unknowns with this one for me to be a buyer.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell did not hold a position in any of the aforementioned securities.
The post Will American Airlines Stock Fall More Than 50% to $5? appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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American Airlines (NASDAQ:AAL) hasn’t been an exception to that pain, with AAL stock down about 50% this month. Keep in mind, AAL stock has already fallen roughly 60% from its one-year high. AAL Stock to $5?
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American Airlines (NASDAQ:AAL) hasn’t been an exception to that pain, with AAL stock down about 50% this month. Keep in mind, AAL stock has already fallen roughly 60% from its one-year high. AAL Stock to $5?
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American Airlines (NASDAQ:AAL) hasn’t been an exception to that pain, with AAL stock down about 50% this month. Keep in mind, AAL stock has already fallen roughly 60% from its one-year high. AAL Stock to $5?
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American Airlines (NASDAQ:AAL) hasn’t been an exception to that pain, with AAL stock down about 50% this month. Keep in mind, AAL stock has already fallen roughly 60% from its one-year high. AAL Stock to $5?
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6150.0
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2020-03-24 00:00:00 UTC
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Is Now the Time to Buy United Airlines Stock?
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AAL
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https://www.nasdaq.com/articles/is-now-the-time-to-buy-united-airlines-stock-2020-03-24
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nan
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nan
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips
What a difference a few months can make. Three months ago, United Airlines (NASDAQ:UAL) was flying high. At the start of December, UAL stock was trading near the $92 level, just $5 off its all-time record highs. Then the coronavirus from China struck. With global travel and tourism hammered, airlines are being hit worse than most companies. UAL plunged. Last week, it closed as low as $21.28 — a 77% drop from the start of December.
Source: travelview / Shutterstock.com
With its stock at levels not seen in a decade, is this a buying opportunity — a chance to scoop up United Airlines at bargain bin prices?
Hoping for a Bailout
Airlines in general are hurting, and United is no exception. Last Friday, United sent an email to employees warning that without financial assistance, it would be forced to undertake mass layoffs by the end of March.
The plummet in share prices across the industry tell the story of how desperate the current situation is for airlines. Since mid-February, the Dow Jones U.S. Airlines Index has fallen 61%. Since the first market crash on Feb. 20, UAL shares have dropped 69%. American Airlines (NASDAQ:AAL) has lost 64%. Delta (NYSE:DAL) is down 63%.
With coronavirus travel restrictions in place, international flights by U.S. airlines have all but halted. Domestic schedules are also beginning to be cut.
7 Stocks Insiders Are Buying Big Amid the Market Panic
Unfortunately for United, bailing out airlines is a touchy subject. Flyers have been enduring belt-tightening measures for years, including shrinking seats, reduced leg room and increasing fees. Meanwhile, rather than improve service, airlines have been pouring their cash into share buyback programs that benefit investors. This hasn’t endeared airlines to consumers, making politicians wary.
The government introduced a $2 trillion coronavirus stimulus bill last week. Despite the potential for political fallout over proving financial assistance to airlines, the bill contained $50 billion specifically earmarked for passenger airlines, and an additional $8 billion for cargo air companies. The bill failed to pass in the Senate over the weekend. That doesn’t mean it’s dead, but immediate relief for airlines isn’t coming and when it does, it may have strings attached.
Recession Next Challenge for Airlines
When the coronavirus pandemic is under control, which could be months or longer, airlines will face another challenge. The economic damage inflicted is likely to result in a recession. In tough times, people don’t indulge in luxuries like vacations. Businesses cut down on trips. Air travel takes a hit. During the Great Recession of 2008, airline stocks declined 68%.
Bottom Line on UAL Stock
InvestorPlace contributor Will Ashworth points out that over the past decade, United Airlines has allocated 80% of its cash flow to stock buybacks. With the economy tanking and travel looking shaky for the foreseeable future, that capital allocation has put UAL in a tenuous position: “UAL has an Altman Z-Score of 1.29. Anything under 1.81 suggests the company could go bankrupt in the next 12-24 months.”
Just one month ago — before the coronavirus crisis hit home in America — analysts were bullish on UAL stock, giving it an overweight rating. Today, it is a consensus hold, reflecting the uncertainty about the fate of United and airlines in general.
The bottom line is there are three big factors that are ultimately going to dictate whether United Airlines survives, and how well its stock performs in the foreseeable future.
The coronavirus is the big one, of course. If the global pandemic goes on, air travel is going to continue to be decimated. The next hurdle to overcome will be the prospect of recession. The primary hope for surviving both of these issues is a government bailout. The first swing at that failed to pass. This doesn’t mean it won’t happen eventually, but it does mean that without that financial security UAL stock remains a risky bet at the moment.
Brad Moon has been writing for InvestorPlace.com since 2012. He also writes about stocks for Kiplinger and has been a senior contributor focusing on consumer technology for Forbes since 2015. As of this writing, he did not hold a position in any of the aforementioned securities.
The post Is Now the Time to Buy United Airlines Stock? appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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American Airlines (NASDAQ:AAL) has lost 64%. Source: travelview / Shutterstock.com With its stock at levels not seen in a decade, is this a buying opportunity — a chance to scoop up United Airlines at bargain bin prices? Anything under 1.81 suggests the company could go bankrupt in the next 12-24 months.” Just one month ago — before the coronavirus crisis hit home in America — analysts were bullish on UAL stock, giving it an overweight rating.
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American Airlines (NASDAQ:AAL) has lost 64%. Three months ago, United Airlines (NASDAQ:UAL) was flying high. Bottom Line on UAL Stock InvestorPlace contributor Will Ashworth points out that over the past decade, United Airlines has allocated 80% of its cash flow to stock buybacks.
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American Airlines (NASDAQ:AAL) has lost 64%. Despite the potential for political fallout over proving financial assistance to airlines, the bill contained $50 billion specifically earmarked for passenger airlines, and an additional $8 billion for cargo air companies. Recession Next Challenge for Airlines When the coronavirus pandemic is under control, which could be months or longer, airlines will face another challenge.
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American Airlines (NASDAQ:AAL) has lost 64%. Since the first market crash on Feb. 20, UAL shares have dropped 69%. Bottom Line on UAL Stock InvestorPlace contributor Will Ashworth points out that over the past decade, United Airlines has allocated 80% of its cash flow to stock buybacks.
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6151.0
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2020-03-24 00:00:00 UTC
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Tuesday Sector Leaders: Services, Industrial
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AAL
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https://www.nasdaq.com/articles/tuesday-sector-leaders%3A-services-industrial-2020-03-24
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nan
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The best performing sector as of midday Tuesday is the Services sector, higher by 9.4%. Within that group, L Brands, Inc (Symbol: LB) and MGM Resorts International (Symbol: MGM) are two large stocks leading the way, showing a gain of 32.3% and 28.0%, respectively. Among the largest ETFs, one ETF closely following services stocks is the iShares U.S. Consumer Services ETF (Symbol: IYC), which is up 6.5% on the day, and down 25.73% year-to-date. L Brands, Inc, meanwhile, is down 31.40% year-to-date, and MGM Resorts International, is down 64.35% year-to-date. Combined, LB and MGM make up approximately 0.4% of the underlying holdings of IYC.
The next best performing sector is the Industrial sector, up 9.3%. Among large Industrial stocks, Norwegian Cruise Line Holdings Ltd (Symbol: NCLH) and American Airlines Group Inc (Symbol: AAL) are the most notable, showing a gain of 30.8% and 28.7%, respectively. One ETF closely tracking Industrial stocks is the Industrial Select Sector SPDR ETF (XLI), which is up 8.1% in midday trading, and down 34.83% on a year-to-date basis. Norwegian Cruise Line Holdings Ltd, meanwhile, is down 78.34% year-to-date, and American Airlines Group Inc, is down 53.66% year-to-date. AAL makes up approximately 0.4% of the underlying holdings of XLI.
Comparing these stocks and ETFs on a trailing twelve month basis, below is a relative stock price performance chart, with each of the symbols shown in a different color as labeled in the legend at the bottom:
Here's a snapshot of how the S&P 500 components within the various sectors are faring in afternoon trading on Tuesday. As you can see, nine sectors are up on the day, while none of the sectors are down.
SECTOR % CHANGE
Services +9.4%
Industrial +9.3%
Energy +9.1%
Materials +8.4%
Consumer Products +7.8%
Financial +7.7%
Utilities +5.6%
Technology & Communications +5.6%
Healthcare +4.1%
10 ETFs With Stocks That Insiders Are Buying »
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Among large Industrial stocks, Norwegian Cruise Line Holdings Ltd (Symbol: NCLH) and American Airlines Group Inc (Symbol: AAL) are the most notable, showing a gain of 30.8% and 28.7%, respectively. AAL makes up approximately 0.4% of the underlying holdings of XLI. Combined, LB and MGM make up approximately 0.4% of the underlying holdings of IYC.
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Among large Industrial stocks, Norwegian Cruise Line Holdings Ltd (Symbol: NCLH) and American Airlines Group Inc (Symbol: AAL) are the most notable, showing a gain of 30.8% and 28.7%, respectively. AAL makes up approximately 0.4% of the underlying holdings of XLI. Within that group, L Brands, Inc (Symbol: LB) and MGM Resorts International (Symbol: MGM) are two large stocks leading the way, showing a gain of 32.3% and 28.0%, respectively.
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Among large Industrial stocks, Norwegian Cruise Line Holdings Ltd (Symbol: NCLH) and American Airlines Group Inc (Symbol: AAL) are the most notable, showing a gain of 30.8% and 28.7%, respectively. AAL makes up approximately 0.4% of the underlying holdings of XLI. Among the largest ETFs, one ETF closely following services stocks is the iShares U.S. Consumer Services ETF (Symbol: IYC), which is up 6.5% on the day, and down 25.73% year-to-date.
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Among large Industrial stocks, Norwegian Cruise Line Holdings Ltd (Symbol: NCLH) and American Airlines Group Inc (Symbol: AAL) are the most notable, showing a gain of 30.8% and 28.7%, respectively. AAL makes up approximately 0.4% of the underlying holdings of XLI. The best performing sector as of midday Tuesday is the Services sector, higher by 9.4%.
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6152.0
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2020-03-24 00:00:00 UTC
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Nasdaq 100 Movers: REGN, UAL
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AAL
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https://www.nasdaq.com/articles/nasdaq-100-movers%3A-regn-ual-2020-03-24
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nan
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In early trading on Tuesday, shares of United Airlines Holdings topped the list of the day's best performing components of the Nasdaq 100 index, trading up 17.8%. Year to date, United Airlines Holdings has lost about 64.9% of its value.
And the worst performing Nasdaq 100 component thus far on the day is Regeneron Pharmaceuticals trading down 1.4%. Regeneron Pharmaceuticals is showing a gain of 19.6% looking at the year to date performance.
Two other components making moves today are Citrix Systems, trading down 0.6%, and American Airlines Group, trading up 16.8% on the day.
VIDEO: Nasdaq 100 Movers: REGN, UAL
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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And the worst performing Nasdaq 100 component thus far on the day is Regeneron Pharmaceuticals trading down 1.4%. Regeneron Pharmaceuticals is showing a gain of 19.6% looking at the year to date performance. VIDEO: Nasdaq 100 Movers: REGN, UAL The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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In early trading on Tuesday, shares of United Airlines Holdings topped the list of the day's best performing components of the Nasdaq 100 index, trading up 17.8%. Year to date, United Airlines Holdings has lost about 64.9% of its value. And the worst performing Nasdaq 100 component thus far on the day is Regeneron Pharmaceuticals trading down 1.4%.
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In early trading on Tuesday, shares of United Airlines Holdings topped the list of the day's best performing components of the Nasdaq 100 index, trading up 17.8%. And the worst performing Nasdaq 100 component thus far on the day is Regeneron Pharmaceuticals trading down 1.4%. Two other components making moves today are Citrix Systems, trading down 0.6%, and American Airlines Group, trading up 16.8% on the day.
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In early trading on Tuesday, shares of United Airlines Holdings topped the list of the day's best performing components of the Nasdaq 100 index, trading up 17.8%. And the worst performing Nasdaq 100 component thus far on the day is Regeneron Pharmaceuticals trading down 1.4%. VIDEO: Nasdaq 100 Movers: REGN, UAL The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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6153.0
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2020-03-24 00:00:00 UTC
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Why Shares of Airlines Are Soaring Today
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AAL
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https://www.nasdaq.com/articles/why-shares-of-airlines-are-soaring-today-2020-03-24
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What happened
Airline stocks have been stuck on the tarmac for the last week or so, with investors waiting to find out if the industry would get the $50 billion in government assistance it has requested to help deal with the COVID-19 coronavirus travel slump. After days of uncertainty, Washington lawmakers today appeared to be finally closing in on passing an economic stimulus package, causing airline stocks to rapidly gain altitude.
Shares of Spirit Airlines (NYSE: SAVE) were up more than 38% on Tuesday morning, with shares of Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), United Airlines Holdings (NASDAQ: UAL), Alaska Air Group (NYSE: ALK), and JetBlue Airways (NASDAQ: JBLU) all up more than 20%. Shares of Southwest Airlines (NYSE: LUV) and Hawaiian Holdings (NASDAQ: HA) were up by double digits.
Image source: Getty Images.
So what
Airlines have been ravaged by the pandemic, with travel demand evaporating overnight and ticket sales unlikely to recover quickly. Delta, for example, expects 2020 second-quarter revenue to be down 80% year over year, and the airline is currently burning through $350 million per week.
No industry can survive revenue declining to near-zero indefinitely, and the way airline shares have been trading over the past month implies investors were beginning to price in a growing chance there could be multiple bankruptcies in the sector. The airlines have asked the government for help, rallying employees to lobby lawmakers in hopes of winning a package of grants and loan guarantees to help weather the storm.
Airline one-month performance data through March 23 by YCharts
The prospects for a bailout have been murky in recent days. But positive headlines out of Washington that Democrats and Republicans are nearing a deal on a stimulus plan that would include aid for hard-hit industries has the markets soaring higher on Tuesday, and airlines are going along for the ride.
Now what
It is worth noting here that nothing is finalized until a bill is signed, and there is reason for skepticism even if momentum seems to be building. Even if the industry gets the assistance package it is seeking, with few or no strings attached, we could be heading into an economic slowdown or recession that will eat into results for all of 2020, if not beyond.
Assuming a deal gets done, I think there is a solid case to buy into the strongest airlines even after Tuesday's price jumps. But investors, beware: The volatility is likely far from over, and one negative headline out of Washington or related to the pandemic could cause the stocks to give up Tuesday's gains just as quickly as we got them.
10 stocks we like better than JetBlue Airways
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and JetBlue Airways wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of March 18, 2020
Lou Whiteman owns shares of Delta Air Lines and Spirit Airlines. The Motley Fool owns shares of and recommends Delta Air Lines, Southwest Airlines, and Spirit Airlines. The Motley Fool recommends Alaska Air Group, Hawaiian Holdings, and JetBlue Airways. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Shares of Spirit Airlines (NYSE: SAVE) were up more than 38% on Tuesday morning, with shares of Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), United Airlines Holdings (NASDAQ: UAL), Alaska Air Group (NYSE: ALK), and JetBlue Airways (NASDAQ: JBLU) all up more than 20%. What happened Airline stocks have been stuck on the tarmac for the last week or so, with investors waiting to find out if the industry would get the $50 billion in government assistance it has requested to help deal with the COVID-19 coronavirus travel slump. No industry can survive revenue declining to near-zero indefinitely, and the way airline shares have been trading over the past month implies investors were beginning to price in a growing chance there could be multiple bankruptcies in the sector.
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Shares of Spirit Airlines (NYSE: SAVE) were up more than 38% on Tuesday morning, with shares of Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), United Airlines Holdings (NASDAQ: UAL), Alaska Air Group (NYSE: ALK), and JetBlue Airways (NASDAQ: JBLU) all up more than 20%. The Motley Fool owns shares of and recommends Delta Air Lines, Southwest Airlines, and Spirit Airlines. The Motley Fool recommends Alaska Air Group, Hawaiian Holdings, and JetBlue Airways.
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Shares of Spirit Airlines (NYSE: SAVE) were up more than 38% on Tuesday morning, with shares of Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), United Airlines Holdings (NASDAQ: UAL), Alaska Air Group (NYSE: ALK), and JetBlue Airways (NASDAQ: JBLU) all up more than 20%. See the 10 stocks *Stock Advisor returns as of March 18, 2020 Lou Whiteman owns shares of Delta Air Lines and Spirit Airlines. The Motley Fool owns shares of and recommends Delta Air Lines, Southwest Airlines, and Spirit Airlines.
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Shares of Spirit Airlines (NYSE: SAVE) were up more than 38% on Tuesday morning, with shares of Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), United Airlines Holdings (NASDAQ: UAL), Alaska Air Group (NYSE: ALK), and JetBlue Airways (NASDAQ: JBLU) all up more than 20%. But investors, beware: The volatility is likely far from over, and one negative headline out of Washington or related to the pandemic could cause the stocks to give up Tuesday's gains just as quickly as we got them. That's right -- they think these 10 stocks are even better buys.
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6154.0
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2020-03-24 00:00:00 UTC
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A Bet on AAL Stock Is a Bet on American Airlines’ Survival
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AAL
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https://www.nasdaq.com/articles/a-bet-on-aal-stock-is-a-bet-on-american-airlines-survival-2020-03-24
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips
If you believe the government is coming to bail out American Airlines (NASDAQ:AAL), now is a great day to buy it.
Source: GagliardiPhotography / Shutterstock.com
At its March 23 opening price of $11 per share, American is worth just $4.3 billion. It had revenue of over $45 billion last year, and net income of almost $1.7 billion. At the end of the year it also had about $3.8 billion in cash, and it recently secured a loan for $1 billion more.
Of course, American Airlines is practically out of business right now. Assuming it costs $50 million per day to keep the doors open, it would run out of cash around June 1.
That’s why the stock is down 64% year-to-date, and why ratings agency Fitch has cut its debt rating from BB- to B+.
Helicopter Money Coming?
CEO Doug Parker told listeners at a JPMorgan Chase (NYSE:JPM) conference on March 10 that American was “ready for this” and predicted it will emerge stronger from the crisis.
7 Stocks to Buy That Have Survived the Recent Carnage
Since then American Airlines has canceled 55,000 flights for April alone, parking 450 planes, and canceling almost all international flights through May 6. The company is trying cargo-only flights.
It offered employees early retirement, but flight attendants are complaining that pilots got a better deal. A baggage handler at DFW Airport has also tested positive for the virus.
Like other carriers, American wants part of a $50 billion proposed industry bailout. Half would come in loans, half in free money, and it could get back $4 billion in taxes previously paid.
Congressional action may be slow, however, because airlines gave away 96% of their cash flow during the last decade, in the form of dividends and stock buybacks.
Buybacks are in particularly bad odor right now because they keep a stock’s price artificially high. They enable huge bonuses to management. And they waste capital that can be used to improve service, pay down debt or just stay on the books for times like this.
Critics complain that American Airlines did $12 billion in such buybacks when times were good, but now wants taxpayer money when times are bad.
Buy the Bonds?
Some relief is coming. The Federal Reserve on March 23 announced new measures to support corporate debt, including new loan facilities and liquidity for the corporate bond market.
American Airlines managed to sell $500 million in new notes Feb. 25, just before the crisis became obvious, at 3.75%. The bonds were sold at par to pay for pension obligations. Within a week they were selling at 87 cents. The problem is that they’re not really trading at that price. If funds that bought the bonds wrote down their value, as they should, they could be shut down when investors try to get out.
These are the kinds of bonds the Federal Reserve is backstopping. If you bought some at 87 cents, before the latest announcement, you have a very fat profit, given that the government is only paying 1% on 30-year money.
The Bottom Line on AAL Stock
As of March 23, AAL stock was still sporting a 3.9% yield on a dividend of 10 cents per quarter.
Forget that. It’s not coming.
Instead, consider buying AAL stock as a speculation. A bailout won’t get you all the way back to $30, the stock’s price a month ago. But it could get you halfway there. You could easily double your money if Republicans can force Democrats to swallow an airline bailout.
Those negotiations are ongoing, despite a failed vote to proceed in the Senate. The present bill includes $500 billion the Treasury has full discretion to distribute.
Passage of the bill, or something like it, would give you a quick profit. My guess is something will pass, and your speculation on AAL stock will pay off.
But that’s just a guess.
Dana Blankenhorn has been a financial and technology journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn. As of this writing he owned shares in JPM.
The post A Bet on AAL Stock Is a Bet on American Airlines’ Survival appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips If you believe the government is coming to bail out American Airlines (NASDAQ:AAL), now is a great day to buy it. The Bottom Line on AAL Stock As of March 23, AAL stock was still sporting a 3.9% yield on a dividend of 10 cents per quarter. Instead, consider buying AAL stock as a speculation.
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The post A Bet on AAL Stock Is a Bet on American Airlines’ Survival appeared first on InvestorPlace. InvestorPlace - Stock Market News, Stock Advice & Trading Tips If you believe the government is coming to bail out American Airlines (NASDAQ:AAL), now is a great day to buy it. The Bottom Line on AAL Stock As of March 23, AAL stock was still sporting a 3.9% yield on a dividend of 10 cents per quarter.
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips If you believe the government is coming to bail out American Airlines (NASDAQ:AAL), now is a great day to buy it. The Bottom Line on AAL Stock As of March 23, AAL stock was still sporting a 3.9% yield on a dividend of 10 cents per quarter. Instead, consider buying AAL stock as a speculation.
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips If you believe the government is coming to bail out American Airlines (NASDAQ:AAL), now is a great day to buy it. The Bottom Line on AAL Stock As of March 23, AAL stock was still sporting a 3.9% yield on a dividend of 10 cents per quarter. Instead, consider buying AAL stock as a speculation.
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6155.0
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2020-03-23 00:00:00 UTC
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Is This the End of Stock Buybacks?
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AAL
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https://www.nasdaq.com/articles/is-this-the-end-of-stock-buybacks-2020-03-23
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nan
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Major U.S. airlines -- American (NASDAQ: AAL), Delta (NYSE: DAL), United (NASDAQ: UAL), and Southwest (NYSE: LUV) -- are drastically cutting flights. In the age of coronavirus, this isn't surprising.
They're also asking for a bailout. It started with a request for $50 billion from the federal government. That number has since been revised down to $29 billion.
In the narrative put out by the airlines, this makes sense: How can an industry with such high capital requirements (gas, upkeep, new planes, etc.), and low profit margins possibly withstand a prolonged drought?
But there's another narrative backed up by cold, hard facts: These airlines have had every chance in the world to prepare and have willfully chosen not to. That reality could lead to the end of buybacks in the industry -- and perhaps others -- for the foreseeable future.
Image source: Getty Images.
The reality: Business has been solid
Between the end of 2014 and 2019, these four major airlines have experienced marked success. Combined, they produced $34.6 billion in free cash flow (FCF). Here's how that all broke down.
Chart by author. Data source: SEC filings. Figures rounded to nearest $0.1 billion.
Some (Delta and Southwest) have done better than others (United and American). That's to be expected.
What can airlines do with extra cash?
When companies have excess free cash flow, they have four general options:
Keep it: Companies can keep the money in the bank or short-term investments.
Reinvest it: Airlines can upgrade planes and facilities, pursue new markets, or pay their employees more.
Pay it out: Shareholders can get dividends.
Buy back stock: By repurchasing shares, the total sharecount shrinks, creating more value for existing shareholders.
For the purposes of this article, we're going to focus on the last one -- stock buybacks. Here's why:
Keep it: When you keep cash on the balance sheets, short-term investors might not like it. But you become much more stable. Interruptions like the one we've seen aren't abnormal (see: 2001), so it's prudent to prepare for a future without needing a government bailout.
Reinvest it: While reinvesting costs money, at least that money then filters through the economy. The companies that provide parts to the airlines pay their employees more, who can buy more things, and so on...
Pay it out: When investors get regular dividends, they can decide what to do with them -- buy more stocks, take the money out for a new house, buy more gifts for the grandkids. The possibilities are limitless.
But buybacks have two ugly consequences we don't talk about enough. First, they often help hide ridiculous executive compensation (more on that below). More importantly, when "black swans" like coronavirus hit, shares of airline companies plummet -- rendering the economic value of share repurchases almost entirely moot.
They spent how much?
Okay, so how much was actually spent on these buybacks over the same timeframe? The answer: $38.6 billion.
Full stop. The airlines have spent more in share repurchases over the past five years than they've taken in via free cash flow. How can they afford to do that? By taking on more debt.
Here's a breakdown for each company.
Chart by author. Data source: SEC filings. Figures rounded to nearest $0.1 billion.
It would be easy to lay the entire blame at the feet of American Airlines. Clearly, American is the most egregious offender by a country-block. But that doesn't absolve Delta, Southwest, or United. The executives at these companies know full well they are in an industry uniquely exposed to black swans (again, does anyone remember September 11th?).
And yet they choose share buybacks. Why? Part of this is to satisfy institutional investors who own a large chunk of shares. But another is to cover up their own excess. Here's a telling calculation put together by using data compiled by Ben Hunt at Epsilon Theory.
AIRLINE CEO STOCK-BASED VALUE (PAYMENTS) PER YEAR AS CEO
Delta Ed Bastian $36 million/year
American Doug Parket $31 million/year
Southwest Gary Kelly $13 million/year
United Oscar Munoz $6 million/year
Data source: Compiled by Ben Hunt using Form 4 documents on the SEC's EDGAR database. All figures rounded to nearest million.
When companies choose to pay their executives with stock-based compensation, that creates more shares outstanding. Existing shareholders -- people like you and me -- are diluted. But if the company uses its excess cash to repurchase shares, share-count actually falls at the same time executives are raking in these bonuses.
What should we do?
All of this leaves the American public -- and federal officials -- in a tight spot. Few want the airlines to disappear, but that's what could happen without some infusion of cash.
At the same time, executives have clearly demonstrated their eyes are set on profit maximization -- which only increases the chances of us finding ourselves in the same situation again.
As Hunt put it in his piece:
Bailout the airlines and their rank-and-file employees? You bet.
Bailout the CEOs and Warren Buffett [note: Buffett is a major shareholder via investments through Berkshire Hathaway]? Not a chance.
The airlines have demonstrated they're willing to accept responsbility for some of these moves. On Saturday, industry leaders said they were willing to suspend buybacks and divided payments for the life of their loans.
That's a solid move, but I don't think its enough. If airlines simply pick up where they left off when these loans are paid back, we'll be right back in this situation in the future. To me, that leaves two -- if unsavory -- options:
Mandate an immediate end to buybacks and dividend payments for at least 10 years, including hard caps on executive compensation. Permission needs to be sought for any major operational changes. In essence, start treating airlines as utilities. (another point made in Hunt's article)
Instead of a bailout, the government agrees to buy shares of these companies at set prices, thus becoming major shareholders with the power to dictate board and management decisions.
It's not fun to play games of chicken in times of crisis. But that's the situation we've found ourselves in. Few would argue against the necessity of airlines. Fewer could reasonably argue airlines have been responsbile stewards of capital.
We need to find a solution that acknowledges both realities -- and fast.
10 stocks we like better than Southwest Airlines
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Southwest Airlines wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of March 18, 2020
Brian Stoffel has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares), Delta Air Lines, and Southwest Airlines and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares) and short January 2021 $200 puts on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Major U.S. airlines -- American (NASDAQ: AAL), Delta (NYSE: DAL), United (NASDAQ: UAL), and Southwest (NYSE: LUV) -- are drastically cutting flights. Delta Ed Bastian $36 million/year American Doug Parket $31 million/year Southwest Gary Kelly $13 million/year United Oscar Munoz $6 million/year Data source: Compiled by Ben Hunt using Form 4 documents on the SEC's EDGAR database. To me, that leaves two -- if unsavory -- options: Mandate an immediate end to buybacks and dividend payments for at least 10 years, including hard caps on executive compensation.
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Major U.S. airlines -- American (NASDAQ: AAL), Delta (NYSE: DAL), United (NASDAQ: UAL), and Southwest (NYSE: LUV) -- are drastically cutting flights. When companies choose to pay their executives with stock-based compensation, that creates more shares outstanding. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares), Delta Air Lines, and Southwest Airlines and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares) and short January 2021 $200 puts on Berkshire Hathaway (B shares).
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Major U.S. airlines -- American (NASDAQ: AAL), Delta (NYSE: DAL), United (NASDAQ: UAL), and Southwest (NYSE: LUV) -- are drastically cutting flights. The companies that provide parts to the airlines pay their employees more, who can buy more things, and so on... Pay it out: When investors get regular dividends, they can decide what to do with them -- buy more stocks, take the money out for a new house, buy more gifts for the grandkids. More importantly, when "black swans" like coronavirus hit, shares of airline companies plummet -- rendering the economic value of share repurchases almost entirely moot.
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Major U.S. airlines -- American (NASDAQ: AAL), Delta (NYSE: DAL), United (NASDAQ: UAL), and Southwest (NYSE: LUV) -- are drastically cutting flights. It started with a request for $50 billion from the federal government. Some (Delta and Southwest) have done better than others (United and American).
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6156.0
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2020-03-23 00:00:00 UTC
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Goldman Sachs: 2 Stocks to Consider Buying (and 1 to Stay Away From)
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https://www.nasdaq.com/articles/goldman-sachs%3A-2-stocks-to-consider-buying-and-1-to-stay-away-from-2020-03-23
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As the battle against COVID-19 wages on, investors are seeking refuge. Nations around the world are taking drastic measures to flatten the curve, but these efforts are expected to hit the economy hard.
Amid the ongoing public health crisis, even the most seasoned Wall Street observers have been spooked. Three months after the virus began its rapid spread, so much remains unknown about COVID-19 and the amount of time that social distancing will be necessary. As a result, investors are turning to less risky plays, but even safer investments like Treasury bonds have been put through the wringer.
With this causing recession fears to mount, investment firm Goldman Sachs notes that some companies have what it takes to outperform in the long run, namely those with strong balance sheets.
Bearing this in mind, we used TipRanks database to get all the details on two of the firm’s stock picks with plenty of cash on hand. On top of Goldman Sachs’ vote of confidence, both have received enough bullish calls from other analysts to earn a “Strong Buy” consensus rating.
That being said, Goldman Sachs reminds investors not all names are poised to weather the storm and emerge as a long-term winner. So, we took advantage of the same tool to learn more about one ticker that has fallen out of favor with not only the firm, but also the rest of the Street. Let’s dive in.
Bunge Limited (BG)
Bunge operates in the agricultural sector, providing grains and oilseeds to food processors as well as crop transportation services. While it hasn’t managed to escape the broader market sell-off, Goldman Sachs sees a turnaround on the horizon.
Adding BG to the firm’s Americas Conviction List (CL), analyst Adam Samuelson points to its strength in the Brazilian market. Corn and soybean sales have already exceeded year-ago and long-term averages for both the 2019 and 2020 harvests. According to Samuelson, this implies that first quarter Agribusiness earnings are slated for a boost. In addition, crush margins are still healthy, and spot margins in Brazil, Argentina and China have improved during the quarter thanks to strong soybean availability. The COVID-19 outbreak also isn’t expected to have a material impact on Q1 operations or margins.
With the company placing a significant focus on reorienting its operations and risk management as well as improving ROIC, Samuelson believes there is “scope for material further asset sales, a resumption in buybacks and other operational levers to achieve its 9%+ ROIC target.” Expounding on this, he stated, “We view BG as a unique self-help story with a meaningful catalyst path ahead including scope for above-consensus Q1 results and the opportunity for management to further outline its internal transformation plan at the investor day.”
Add this to a 6.3% dividend yield and it becomes clear why Samuelson noted, “...we believe longer term investors will be rewarded as the pathway to medium-term earnings and returns improvement crystallizes over the next several months.”
To this end, the analyst reiterated his Buy recommendation and $69 price target. Should the target be met, shares could be in for a 117% twelve-month gain. (To watch Samuelson’s track record, click here)
What does the rest of the Street have to say? As it turns out, other analysts are on the same page. 3 Buys compared to no Holds or Sells issued in the last three months add up to a Strong Buy consensus rating. Not to mention the $68.67 average price target suggests 116% upside potential. (See Bunge stock analysis on TipRanks)
SkyWest (SKYW)
At first glance, airlines might not look like the most compelling opportunities right now. Like the rest of the industry, increasing restrictions on travel have weighed down SkyWest. However, Goldman Sachs believes that the company is ready to fly past its peers in the long-term.
Weighing in on SKYW for Goldman, analyst Catherine O'Brien acknowledges that the travel industry has been dealt a major blow, and while the company does face less revenue risk, shares have been on the decline since the World Health Organization started tracking the number of infections.
Explaining the decline, O’Brien stated, “We believe this is due in part to its higher-than-industry leverage position. However, we believe the company’s leverage is somewhat misunderstood, as the majority of its debt is aligned with its capacity purchase agreements (i.e., it has contracted revenue to cover its interest payments). Furthermore, our illustrative stress test analysis implies the potential for upside from current share price levels.”
It’s also important to mention that most of the airline company’s debt is tied to its Embraer E175 fleet. However, should SKYW fail to secure new capacity purchase agreements for this fleet, “there are essentially no interest coverage considerations” because it will own the aircraft once maturity is reached.
Additionally, O’Brien points out that during the quarter, SKYW won several flying contracts. “We have seen several major airlines consolidate their regional partners, with SkyWest winning additional contracts through this process. If the company secured additional contracts in the future, this would drive incremental organic earnings growth,” she said.
Based on all of the above, O’Brien upgraded her rating from Neutral to Buy. Even though the Goldman Sachs analyst reduced the price target from $73 to $58, this still leaves room for potential upside growth of 187%. (To watch O’Brien’s track record, click here)
With 100% Street support, or 5 Buy ratings to be exact, the message is clear: SKYW is a Strong Buy. At $68, the average price target is more aggressive than O’Brien’s, and puts the upside potential at 236%. (See SkyWest stock analysis on TipRanks)
American Airlines (AAL)
While Goldman Sachs is bullish on SkyWest’s long-term growth prospects, the same can’t be said for its peer American Airlines. In the last month alone, shares have slid 63%, with the firm not expecting the narrative to change anytime soon.
Analyst Catherine O'Brien, who also covers SKYW, restated that the airline industry as a whole has been negatively impacted by COVID-19. However, the current climate has made her less optimistic about AAL’s standing specifically.
“Our Buy rating was predicated on a unique opportunity at American to concentrate growth out of its most profitable hubs through 2021, and detailed analysis on the company’s debt which gave us greater confidence that it could weather the challenges as the most levered name in our airlines coverage universe. Although American has started to execute on its hub connectivity plan starting with DFW in 2019, and there is still room to run with this initiative, we believe progress has likely slowed due to heightened uncertainty surrounding COVID-19,” O’Brien commented.
It should also be noted that AAL’s leverage could create problems for the company. “...although we do not expect American to run into liquidity challenges based on our current forecasts, we believe that the company’s leverage position will likely contribute to higher volatility in the stock price in the near-term. While we admit that this volatility could drive an upside surprise in the future, we do not think the risk/reward profile warrants a Buy rating,” O’Brien explained.
Taking all of this into consideration, O’Brien decided to watch from the sidelines and dropped the rating down from Buy to Neutral. The price target was also cut from $34 to $15, indicating 45% upside potential.
Looking at the consensus breakdown, the bears have it. Based on 3 Buys, 4 Holds and 5 Sells received in the last three months, the word on the Street is that AAL is a Hold. Having said that, its $21.25 average price target implies that shares could soar 105% in the next twelve months. (See American Airlines stock analysis on TipRanks)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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(See SkyWest stock analysis on TipRanks) American Airlines (AAL) While Goldman Sachs is bullish on SkyWest’s long-term growth prospects, the same can’t be said for its peer American Airlines. However, the current climate has made her less optimistic about AAL’s standing specifically. It should also be noted that AAL’s leverage could create problems for the company.
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(See SkyWest stock analysis on TipRanks) American Airlines (AAL) While Goldman Sachs is bullish on SkyWest’s long-term growth prospects, the same can’t be said for its peer American Airlines. However, the current climate has made her less optimistic about AAL’s standing specifically. It should also be noted that AAL’s leverage could create problems for the company.
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(See SkyWest stock analysis on TipRanks) American Airlines (AAL) While Goldman Sachs is bullish on SkyWest’s long-term growth prospects, the same can’t be said for its peer American Airlines. However, the current climate has made her less optimistic about AAL’s standing specifically. It should also be noted that AAL’s leverage could create problems for the company.
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(See SkyWest stock analysis on TipRanks) American Airlines (AAL) While Goldman Sachs is bullish on SkyWest’s long-term growth prospects, the same can’t be said for its peer American Airlines. However, the current climate has made her less optimistic about AAL’s standing specifically. It should also be noted that AAL’s leverage could create problems for the company.
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6157.0
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2020-03-23 00:00:00 UTC
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Even After the Recent Sell-Off, You Should Still Avoid These Airline Stocks Right Now
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AAL
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https://www.nasdaq.com/articles/even-after-the-recent-sell-off-you-should-still-avoid-these-airline-stocks-right-now-2020
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The rapidly spreading COVID-19 pandemic has wreaked havoc on the airline industry over the past month. In recent weeks, the leaders of virtually every major U.S. airline have warned that booking activity has plunged to negligible levels. Some airlines are projecting revenue declines of 80% or more for the second quarter. This has sent airline CFOs scrambling to line up new sources of liquidity and forced airlines to implement unprecedented near-term capacity cuts.
Not surprisingly, airline stocks have plunged because of this crisis. Shares of global airline giants American Airlines (NASDAQ: AAL) and United Airlines (NASDAQ: UAL) have been among the big losers. On a year-to-date basis, they have fallen 64% and 73%, respectively. Nearly all of those declines have come in the past month.
American Airlines and United Airlines Stock Performance, data by YCharts.
However, while some airline stocks could be worth buying due to this steep sell-off, American Airlines and United Airlines don't fit the bill. Both companies entered 2020 with too much debt, making them ill-equipped to absorb the losses they are likely to incur this year -- even with government assistance. Furthermore, it could take a long time for their profitability to recover from this sharp downturn.
Two airlines with a lot of debt
In recent years, American Airlines has maintained the dubious distinction of being the most-indebted airline in the U.S. This came as a result of management's ill-conceived strategy of spending heavily on capex and share buybacks simultaneously.
At the end of 2019, American had a stunning $33.4 billion of debt and lease liabilities, offset by just $3.8 billion of unrestricted cash and short-term investments. That put its net debt at more than four times the company's 2019 adjusted earnings before interest, taxes, depreciation, amortization, and rent.
United Airlines has a significantly better balance sheet, but it still has a little too much debt for comfort. It reported debt and lease liabilities of $20.5 billion at the end of 2019, offset by $4.9 billion of cash and investments.
These heavy debt burdens are problematic because airlines will have to take on additional debt to get through the COVID-19 pandemic. Industry lobbying group Airlines for America has been requesting a mixture of grants (or payroll assistance) and loans to help airlines navigate the current crisis, but so far politicians haven't been willing to go beyond loans or loan guarantees.
American Airlines has by far the most debt of any major U.S. airline. Image source: American Airlines.
Look for a lot of cash burn ahead
With demand evaporating, airlines are set to burn through cash rapidly over the next few months. Last Wednesday, JetBlue Airways said that new bookings had fallen to less than $4 million per day, compared to $22 million for a typical day in March 2019. Meanwhile, the airline has been issuing over $20 million of credits a day for canceled flights: more than 10 times the normal rate. On Friday, Delta Air Lines said it was burning through $50 million a day despite deep cost cuts.
While American Airlines and United Airlines haven't provided quite as much detail, there's no reason to believe they are in better shape than any of their rivals. Both have scheduled deep capacity cuts for the months of April and May and are looking to reduce labor costs. United Airlines recently became the first airline to publicly raise the prospect of mass furloughs, saying that "if Congress doesn't act on sufficient government support by the end of March, our company will begin to take the necessary steps to reduce our payroll in line with the 60% schedule reduction we announced for April."
American and United are similar in size to Delta, so it's reasonable to guess that they are also burning through at least $50 million a day. The good news is that both carriers have plenty of liquidity for now, following recent actions to secure additional loans and credit facilities. As of March 9, United had $8 billion of liquidity; as of March 18, American had $8.4 billion of liquidity.
The bad news is that unless conditions improve, they could burn through more than half of this cushion by midyear. Large-scale furloughs would slow (but not stop) the bleeding. Moreover, furloughs are a double-edged sword, as they would alienate employees in an industry that already suffers from high labor tensions.
In short, there are no good options for airlines. Moreover, American Airlines and United Airlines (especially the former) have less flexibility than most, since they came into this crisis with high debt levels. Barring substantial cash assistance from the federal government, both carriers will exit 2020 with far more debt on the books than they have today, hurting their ability to invest in their businesses and limiting their flexibility to respond to future challenges.
Don't expect a quick rebound in profits
The big increases in debt that are likely at American Airlines and United Airlines this year wouldn't be so disastrous if the carriers could count on a return to favorable business conditions in 2021 and beyond. Unfortunately, it could take a long time for global network carriers like American and United to recover from this global pandemic.
First, the threat from COVID-19 may not be fully contained until a vaccine is available, which probably won't happen until at least late 2021. Even if the spread of COVID-19 slows well before then, many people may be reluctant to get on an airplane until they've been vaccinated.
Second, the national and global response to the pandemic has already plunged the economy into a recession, according to many analysts. It could be a short-lived recession if aggressive fiscal stimulus restarts the economy after the number of COVID-19 cases starts to decline -- but that won't necessarily be the case. A recession could put pressure on unit revenue throughout the airline industry, as lower fares might be necessary to stimulate demand.
Third, global airlines like American and United are particularly reliant on high-fare business travel and sales of pricey premium seats, especially on long-haul routes. If companies that are experiencing profit pressure slash their corporate travel budgets, it would have a particularly big impact on these carriers. Airline executives appear to realize this. Delta Air Lines has already warned staff to expect a slow recovery and that the airline may have to shrink significantly before eventually returning to growth; American Airlines is offering early retirement options to some employees in order to permanently reduce its headcount.
High-margin business travel could take years to fully recover. Image source: United Airlines.
All three factors mean that profitability may remain depressed at American Airlines and United Airlines in the years ahead, even after traffic starts to return. This, combined with their high debt loads, makes these two airline stocks extremely risky. It's possible they will stage a full recovery, but it's more likely that they will remain well below their previous highs for the foreseeable future.
Stick to safer choices
The U.S. government isn't likely to let any major airlines fail due to the COVID-19 pandemic, because of the number of people they employ and their importance to the U.S. economy. Yet a rescue program limited to loans (which is the only option on the table so far) would only be a short-term fix. It might give a brief lift to airline stocks across the board, but heavily indebted companies like American Airlines and United Airlines would then have to figure out how to manage even higher debt loads in a world where profitability could be weak for several years.
Airlines that entered 2020 with strong balance sheets, have lower costs, and primarily serve the short-haul leisure and visiting-friends-and-relatives markets -- where demand tends to hold up better during recessions -- are more attractive. With lower debt and a higher chance of returning to solid profitability within a year or two, those airline stocks are less risky and more likely to stage a strong recovery than shares of American and United.
10 stocks we like better than United Airlines Holdings
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and United Airlines Holdings wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of March 18, 2020
Adam Levine-Weinberg owns shares of American Airlines Group, Delta Air Lines, and JetBlue Airways and is long January 2022 $10 calls on JetBlue Airways. The Motley Fool owns shares of and recommends Delta Air Lines. The Motley Fool recommends JetBlue Airways. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Shares of global airline giants American Airlines (NASDAQ: AAL) and United Airlines (NASDAQ: UAL) have been among the big losers. Barring substantial cash assistance from the federal government, both carriers will exit 2020 with far more debt on the books than they have today, hurting their ability to invest in their businesses and limiting their flexibility to respond to future challenges. Airlines that entered 2020 with strong balance sheets, have lower costs, and primarily serve the short-haul leisure and visiting-friends-and-relatives markets -- where demand tends to hold up better during recessions -- are more attractive.
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Shares of global airline giants American Airlines (NASDAQ: AAL) and United Airlines (NASDAQ: UAL) have been among the big losers. See the 10 stocks *Stock Advisor returns as of March 18, 2020 Adam Levine-Weinberg owns shares of American Airlines Group, Delta Air Lines, and JetBlue Airways and is long January 2022 $10 calls on JetBlue Airways. The Motley Fool owns shares of and recommends Delta Air Lines.
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Shares of global airline giants American Airlines (NASDAQ: AAL) and United Airlines (NASDAQ: UAL) have been among the big losers. However, while some airline stocks could be worth buying due to this steep sell-off, American Airlines and United Airlines don't fit the bill. It might give a brief lift to airline stocks across the board, but heavily indebted companies like American Airlines and United Airlines would then have to figure out how to manage even higher debt loads in a world where profitability could be weak for several years.
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Shares of global airline giants American Airlines (NASDAQ: AAL) and United Airlines (NASDAQ: UAL) have been among the big losers. American Airlines has by far the most debt of any major U.S. airline. Look for a lot of cash burn ahead With demand evaporating, airlines are set to burn through cash rapidly over the next few months.
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6158.0
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2020-03-22 00:00:00 UTC
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Fitch Cuts American Airlines Rating to ‘B+’, Revises Outlook to Negative
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AAL
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https://www.nasdaq.com/articles/fitch-cuts-american-airlines-rating-to-b-revises-outlook-to-negative-2020-03-22
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Fitch Ratings lowered American Airlines Group Inc’s (AAL) rating to ‘B+’ from ‘BB-‘ and revised the company’s outlook to negative from stable, due to the steep plunge in passenger numbers since the coronavirus spread outside of China.
Additional debt raised to bolster liquidity, higher leverage, and reduced financial flexibility were the main factors that contributed to Fitch’s downgrade, according to the rating agency’s report.
American Airlines has a consensus rating of a Moderate Sell with an average price target of $21.25 per share, reflecting an upside potential of about 100% to the current share price.
The airline has “a significant amount of liquidity and the ability to raise more in the near term if needed,” according to Fitch. The rating agency projects that the financial distress the company is facing will be manageable in the next few months, but warned that future downgrades were possible as cash burn will be significant if the drop in demand goes on longer than expected.
Related News:
Delta Air Lines Sees 80% Drop in Second-Quarter Revenue as Coronavirus Stalls Travel Demand
Gilead’s Coronavirus Vaccine Candidate Shows Promise, Says Cowen
Analysts: 2 Coronavirus Stocks to Buy (And 1 to Avoid)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Fitch Ratings lowered American Airlines Group Inc’s (AAL) rating to ‘B+’ from ‘BB-‘ and revised the company’s outlook to negative from stable, due to the steep plunge in passenger numbers since the coronavirus spread outside of China. Additional debt raised to bolster liquidity, higher leverage, and reduced financial flexibility were the main factors that contributed to Fitch’s downgrade, according to the rating agency’s report. The airline has “a significant amount of liquidity and the ability to raise more in the near term if needed,” according to Fitch.
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Fitch Ratings lowered American Airlines Group Inc’s (AAL) rating to ‘B+’ from ‘BB-‘ and revised the company’s outlook to negative from stable, due to the steep plunge in passenger numbers since the coronavirus spread outside of China. Additional debt raised to bolster liquidity, higher leverage, and reduced financial flexibility were the main factors that contributed to Fitch’s downgrade, according to the rating agency’s report. American Airlines has a consensus rating of a Moderate Sell with an average price target of $21.25 per share, reflecting an upside potential of about 100% to the current share price.
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Fitch Ratings lowered American Airlines Group Inc’s (AAL) rating to ‘B+’ from ‘BB-‘ and revised the company’s outlook to negative from stable, due to the steep plunge in passenger numbers since the coronavirus spread outside of China. American Airlines has a consensus rating of a Moderate Sell with an average price target of $21.25 per share, reflecting an upside potential of about 100% to the current share price. Related News: Delta Air Lines Sees 80% Drop in Second-Quarter Revenue as Coronavirus Stalls Travel Demand Gilead’s Coronavirus Vaccine Candidate Shows Promise, Says Cowen Analysts: 2 Coronavirus Stocks to Buy (And 1 to Avoid)
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Fitch Ratings lowered American Airlines Group Inc’s (AAL) rating to ‘B+’ from ‘BB-‘ and revised the company’s outlook to negative from stable, due to the steep plunge in passenger numbers since the coronavirus spread outside of China. Additional debt raised to bolster liquidity, higher leverage, and reduced financial flexibility were the main factors that contributed to Fitch’s downgrade, according to the rating agency’s report. American Airlines has a consensus rating of a Moderate Sell with an average price target of $21.25 per share, reflecting an upside potential of about 100% to the current share price.
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6159.0
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2020-03-22 00:00:00 UTC
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Emirates Suspends Most Passenger Operations Amid Coronavirus Outbreak
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AAL
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https://www.nasdaq.com/articles/emirates-suspends-most-passenger-operations-amid-coronavirus-outbreak-2020-03-22
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nan
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(RTTNews) - Emirates Group said it temporarily suspends most passenger operations by 25 March, but it retains cargo operations, in response to lower travel demand due to coronavirus.
HH Sheikh Ahmed bin Saeed Al Maktoum, Chairman and Chief Executive of Emirates Group said, "The world has literally gone into quarantine due to the COVID-19 outbreak ....we find ourselves in a situation where we cannot viably operate passenger services until countries re-open their borders, and travel confidence returns."
The Dubai-based airline said it will continue to operate its international air cargo links for the transport of essential goods including medical supplies across the world.
Citing requests from governments and customers to support the repatriation of travellers, Emirates said it will continue to operate passenger and cargo flights to the certain countries until further notice, as long as borders remain open, and there is demand. They are the UK, Switzerland, Hong Kong, Thailand, Malaysia, Philippines, Japan, Singapore, South Korea, Australia, South Africa, USA, and Canada.
Meanwhile, Emirates said that it will not cut jobs, but plans to cut most employees' basic salaries by 25% to 50% for three months. Employees will continue to be paid their other allowances during this time. Junior level employees will be exempt from basic salary reduction.
The President of Emirates Tim Clark and President of airport services provider Dnata Gary Chapman plans take a 100% basic salary cut for three months.
As part of its cost-cutting measures, Emirates will postpone or cancel discretionary expenditure, freeze all non-essential recruitment and consultancy work. It is encouraging employees to take paid or unpaid leave in light of reduced flying capacity.
Last week, American Airlines announced a 75% cut to its operations. United Airlines plans to cut 90% of international services scheduled for April.
US airlines are seeking more than $50 billion in financial aid from the U.S. government, as the industry reels from the coronavirus outbreak.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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HH Sheikh Ahmed bin Saeed Al Maktoum, Chairman and Chief Executive of Emirates Group said, "The world has literally gone into quarantine due to the COVID-19 outbreak ....we find ourselves in a situation where we cannot viably operate passenger services until countries re-open their borders, and travel confidence returns." The Dubai-based airline said it will continue to operate its international air cargo links for the transport of essential goods including medical supplies across the world. Citing requests from governments and customers to support the repatriation of travellers, Emirates said it will continue to operate passenger and cargo flights to the certain countries until further notice, as long as borders remain open, and there is demand.
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HH Sheikh Ahmed bin Saeed Al Maktoum, Chairman and Chief Executive of Emirates Group said, "The world has literally gone into quarantine due to the COVID-19 outbreak ....we find ourselves in a situation where we cannot viably operate passenger services until countries re-open their borders, and travel confidence returns." Meanwhile, Emirates said that it will not cut jobs, but plans to cut most employees' basic salaries by 25% to 50% for three months. United Airlines plans to cut 90% of international services scheduled for April.
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(RTTNews) - Emirates Group said it temporarily suspends most passenger operations by 25 March, but it retains cargo operations, in response to lower travel demand due to coronavirus. HH Sheikh Ahmed bin Saeed Al Maktoum, Chairman and Chief Executive of Emirates Group said, "The world has literally gone into quarantine due to the COVID-19 outbreak ....we find ourselves in a situation where we cannot viably operate passenger services until countries re-open their borders, and travel confidence returns." Meanwhile, Emirates said that it will not cut jobs, but plans to cut most employees' basic salaries by 25% to 50% for three months.
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They are the UK, Switzerland, Hong Kong, Thailand, Malaysia, Philippines, Japan, Singapore, South Korea, Australia, South Africa, USA, and Canada. Meanwhile, Emirates said that it will not cut jobs, but plans to cut most employees' basic salaries by 25% to 50% for three months. United Airlines plans to cut 90% of international services scheduled for April.
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6160.0
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2020-03-20 00:00:00 UTC
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Critics Attack Airline Buybacks as Executives Seek Coronavirus Bailout: Here's What They're Missing
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AAL
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https://www.nasdaq.com/articles/critics-attack-airline-buybacks-as-executives-seek-coronavirus-bailout%3A-heres-what-theyre
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nan
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nan
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The airline industry has been hard hit by the COVID-19 pandemic, which globally is expected to cost the carriers more than $100 billion in lost revenue. The transportation grid has come to a near halt: Flights are cancelled, vacations are on hold, and businesses are banning travel.
In response, airlines are seeking government assistance, with U.S. executives in Washington seeking about $50 billion in grants and loan guarantees designed to help prevent layoffs and stabilize balance sheets until demand recovers.
However, that request has been met with pushback, both from labor leaders who advocate direct assistance for workers instead of corporate funds and by critics who note that airlines have for years been allocating funds to stock buybacks and dividends instead of building up their savings.
The biggest U.S. airlines spent 96% of free cash flow over the last decade to buy back shares of their own stock in order to boost executive bonuses and please wealthy investors.
Now, they expect taxpayers to bail them out to the tune of $50 billion. It's the same old story.
— Robert Reich (@RBReich) March 17, 2020
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The airline industry has been hard hit by the COVID-19 pandemic, which globally is expected to cost the carriers more than $100 billion in lost revenue. The transportation grid has come to a near halt: Flights are cancelled, vacations are on hold, and businesses are banning travel. The biggest U.S. airlines spent 96% of free cash flow over the last decade to buy back shares of their own stock in order to boost executive bonuses and please wealthy investors.
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The airline industry has been hard hit by the COVID-19 pandemic, which globally is expected to cost the carriers more than $100 billion in lost revenue. In response, airlines are seeking government assistance, with U.S. executives in Washington seeking about $50 billion in grants and loan guarantees designed to help prevent layoffs and stabilize balance sheets until demand recovers. However, that request has been met with pushback, both from labor leaders who advocate direct assistance for workers instead of corporate funds and by critics who note that airlines have for years been allocating funds to stock buybacks and dividends instead of building up their savings.
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The airline industry has been hard hit by the COVID-19 pandemic, which globally is expected to cost the carriers more than $100 billion in lost revenue. In response, airlines are seeking government assistance, with U.S. executives in Washington seeking about $50 billion in grants and loan guarantees designed to help prevent layoffs and stabilize balance sheets until demand recovers. However, that request has been met with pushback, both from labor leaders who advocate direct assistance for workers instead of corporate funds and by critics who note that airlines have for years been allocating funds to stock buybacks and dividends instead of building up their savings.
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The airline industry has been hard hit by the COVID-19 pandemic, which globally is expected to cost the carriers more than $100 billion in lost revenue. The transportation grid has come to a near halt: Flights are cancelled, vacations are on hold, and businesses are banning travel. In response, airlines are seeking government assistance, with U.S. executives in Washington seeking about $50 billion in grants and loan guarantees designed to help prevent layoffs and stabilize balance sheets until demand recovers.
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6161.0
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2020-03-20 00:00:00 UTC
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Why Airline Shares Climbed, and Then Fell, on Friday
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AAL
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https://www.nasdaq.com/articles/why-airline-shares-climbed-and-then-fell-on-friday-2020-03-20
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nan
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nan
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What happened
Shares of U.S. commercial airlines soared in initial trading Friday morning -- with United Airlines Holdings (NASDAQ: UAL) briefly up 44% and the rest of the carriers all up double digits -- before giving up much of those gains as the day went on.
The industry, and its investors, are currently focused on a proposed government assistance plan designed to get them through the COVID-19 coronavirus pandemic travel slowdown. Expect the stocks to trade up and down based on the prospects of a bailout.
Shares of Spirit Airlines (NYSE: SAVE) opened up 34%, while Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), JetBlue Airways (NASDAQ: JBLU), Hawaiian Holdings (NASDAQ: HA), Alaska Air Group (NYSE: ALK) all opened up 15% or more, and Southwest Airlines (NYSE: LUV) was up 10% early.
Only United was still up double digits as of 3 p.m. EDT, trading up 12%, and a few of the airline stocks have turned negative.
So what
The airlines have been severely disrupted by the pandemic, with the global industry expected to lose more than $100 billion in revenue in 2020 due to travel bans and plummeting demand. The airlines have responded by cutting flights, raising new capital, and freezing hiring, but industry advocates have warned more could be needed to avoid a global round of bankruptcies.
The U.S. airlines have requested about $50 billion in assistance in the form of loan guarantees and direct grants, but that request has hit pushback from labor leaders who advocate direct assistance for workers and critics who note the airlines in recent years have used substantial amounts of free cash to do share buybacks.
Image source: Getty Images.
White House administration officials remain adamant something will be done for the airlines, but the process has taken much longer than expected and has led to continued pressure on airline shares. Early Friday morning optimism about Washington getting something done today has faded as the day has gone on.
United has some extra wind at its back today after Apollo Global Management reportedly bought a portion of the $2 billion one-year loan the airline closed last week. Investors are reading it as a sign a well-respected investor believes the airline can survive without a trip to bankruptcy.
Now what
It's worth noting that the airlines do have billions in unencumbered assets to be used as collateral for loans, and most of the industry's top names have had success raising additional capital in recent weeks. There is a cash runway for most of these companies, perhaps as long as 90 days for some airlines, but at some point, not even the healthiest of companies can survive the status quo.
For the time being, the market is focused on the bailout. I personally think the government has to do it, despite the misgivings. But until we know for sure what is going to happen, it will be hard for this sector to gain altitude.
10 stocks we like better than JetBlue Airways
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and JetBlue Airways wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of March 18, 2020
Lou Whiteman owns shares of Delta Air Lines and Spirit Airlines. The Motley Fool owns shares of and recommends Delta Air Lines, Southwest Airlines, and Spirit Airlines. The Motley Fool recommends Alaska Air Group, Hawaiian Holdings, and JetBlue Airways. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Shares of Spirit Airlines (NYSE: SAVE) opened up 34%, while Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), JetBlue Airways (NASDAQ: JBLU), Hawaiian Holdings (NASDAQ: HA), Alaska Air Group (NYSE: ALK) all opened up 15% or more, and Southwest Airlines (NYSE: LUV) was up 10% early. The airlines have responded by cutting flights, raising new capital, and freezing hiring, but industry advocates have warned more could be needed to avoid a global round of bankruptcies. United has some extra wind at its back today after Apollo Global Management reportedly bought a portion of the $2 billion one-year loan the airline closed last week.
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Shares of Spirit Airlines (NYSE: SAVE) opened up 34%, while Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), JetBlue Airways (NASDAQ: JBLU), Hawaiian Holdings (NASDAQ: HA), Alaska Air Group (NYSE: ALK) all opened up 15% or more, and Southwest Airlines (NYSE: LUV) was up 10% early. The Motley Fool owns shares of and recommends Delta Air Lines, Southwest Airlines, and Spirit Airlines. The Motley Fool recommends Alaska Air Group, Hawaiian Holdings, and JetBlue Airways.
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Shares of Spirit Airlines (NYSE: SAVE) opened up 34%, while Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), JetBlue Airways (NASDAQ: JBLU), Hawaiian Holdings (NASDAQ: HA), Alaska Air Group (NYSE: ALK) all opened up 15% or more, and Southwest Airlines (NYSE: LUV) was up 10% early. What happened Shares of U.S. commercial airlines soared in initial trading Friday morning -- with United Airlines Holdings (NASDAQ: UAL) briefly up 44% and the rest of the carriers all up double digits -- before giving up much of those gains as the day went on. The Motley Fool owns shares of and recommends Delta Air Lines, Southwest Airlines, and Spirit Airlines.
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Shares of Spirit Airlines (NYSE: SAVE) opened up 34%, while Delta Air Lines (NYSE: DAL), American Airlines Group (NASDAQ: AAL), JetBlue Airways (NASDAQ: JBLU), Hawaiian Holdings (NASDAQ: HA), Alaska Air Group (NYSE: ALK) all opened up 15% or more, and Southwest Airlines (NYSE: LUV) was up 10% early. What happened Shares of U.S. commercial airlines soared in initial trading Friday morning -- with United Airlines Holdings (NASDAQ: UAL) briefly up 44% and the rest of the carriers all up double digits -- before giving up much of those gains as the day went on. The industry, and its investors, are currently focused on a proposed government assistance plan designed to get them through the COVID-19 coronavirus pandemic travel slowdown.
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6162.0
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2020-03-20 00:00:00 UTC
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Private Jet Industry Requests Coronavirus Relief Despite Reports of Booming Business
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AAL
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https://www.nasdaq.com/articles/private-jet-industry-requests-coronavirus-relief-despite-reports-of-booming-business-2020
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As Congress considers a coronavirus relief funding package for commercial airlines like American Airlines Group (NASDAQ: AAL) and Delta Air Lines (NYSE: DAL), private jet operators are hoping to get in on the action. The National Business Aviation Association, a group representing the private and corporate jet industry, sent a letter to Senate and House leaders on March 19 requesting access to "the same programs" provided to major carriers, including "medium to long-term liquidity assistance and relief from air transportation excise taxes."
The letter was also signed by groups representing other general aviation classes like helicopter operators and experimental-aircraft owners. It cited "increasing financial uncertainty" and warned that travel restrictions "have the potential to cause even more significant harm to these companies as this crisis continues."
Private and corporate jet operators are hoping to receive financial help from Congress. Image source: Getty Images.
A spike in business
However, many private jet operators have seen business surge as wealthy individuals and corporations avoid commercial flights.
Joshua Herbert, CEO of Magellan Jets, said in a statement that "businesses who traditionally flew their executives on first-class are now finding it safer and more economical to fly ... on a private aircraft." He added that Magellan had seen "an influx in new charter customers from people who would have normally flown commercially."
UK-based PrivateFly also reported "a significant rise in demand for short notice on-demand private jet charter, relating to the Coronavirus."
Uncertainty abounds
However, as corporations cancel nonessential travel and international flights are banned, that could change. Some of the recent spike in business may have been from companies and wealthy individuals attempting to quickly evacuate employees or family members from coronavirus-affected regions.
A bailout for private jet companies serving the wealthy would likely be more politically unpopular than helping financially strapped legacy carriers like American and Delta, which serve the general public and employ tens of thousands of people each.
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John Bromels has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Delta Air Lines. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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As Congress considers a coronavirus relief funding package for commercial airlines like American Airlines Group (NASDAQ: AAL) and Delta Air Lines (NYSE: DAL), private jet operators are hoping to get in on the action. The National Business Aviation Association, a group representing the private and corporate jet industry, sent a letter to Senate and House leaders on March 19 requesting access to "the same programs" provided to major carriers, including "medium to long-term liquidity assistance and relief from air transportation excise taxes." Joshua Herbert, CEO of Magellan Jets, said in a statement that "businesses who traditionally flew their executives on first-class are now finding it safer and more economical to fly ... on a private aircraft."
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As Congress considers a coronavirus relief funding package for commercial airlines like American Airlines Group (NASDAQ: AAL) and Delta Air Lines (NYSE: DAL), private jet operators are hoping to get in on the action. The National Business Aviation Association, a group representing the private and corporate jet industry, sent a letter to Senate and House leaders on March 19 requesting access to "the same programs" provided to major carriers, including "medium to long-term liquidity assistance and relief from air transportation excise taxes." A spike in business However, many private jet operators have seen business surge as wealthy individuals and corporations avoid commercial flights.
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As Congress considers a coronavirus relief funding package for commercial airlines like American Airlines Group (NASDAQ: AAL) and Delta Air Lines (NYSE: DAL), private jet operators are hoping to get in on the action. The National Business Aviation Association, a group representing the private and corporate jet industry, sent a letter to Senate and House leaders on March 19 requesting access to "the same programs" provided to major carriers, including "medium to long-term liquidity assistance and relief from air transportation excise taxes." A spike in business However, many private jet operators have seen business surge as wealthy individuals and corporations avoid commercial flights.
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As Congress considers a coronavirus relief funding package for commercial airlines like American Airlines Group (NASDAQ: AAL) and Delta Air Lines (NYSE: DAL), private jet operators are hoping to get in on the action. A spike in business However, many private jet operators have seen business surge as wealthy individuals and corporations avoid commercial flights. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.
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6163.0
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2020-03-20 00:00:00 UTC
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When the All-Clear Sounds, LUV Stock Should Be Your First Buy
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AAL
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https://www.nasdaq.com/articles/when-the-all-clear-sounds-luv-stock-should-be-your-first-buy-2020-03-20
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips
The chart of Southwest Air (NYSE:LUV) looks like a disaster until you compare it with those of other airlines. Since the start of the year LUV stock is down by 35%. It opens for trade March 20 at a little more than $30. One month ago, it cost $57.
Source: madamF / Shutterstock.com
The other airlines have fared much, much worse. Delta Airlines (NYSE:DAL) and American Airlines (NYSE:AAL) are both down 60%. United Air Holdings (NYSE:UAL) has lost 75% of its value.
The difference is cash. At the end of 2019 Southwest had $4 billion in cash and short-term notes on its books. Its long-term debt was just $1.8 billion. With most flights grounded due to Coronavirus and employees who need to be paid, that’s a huge advantage.
Conservative in the Best Possible Way
While known for innovative uniforms and flight maps, Southwest is also conservative in the best possible way.
10 of the Best Long-Term Stocks to Buy in a Bear Market
A Trefis dashboard on the industry shows Southwest needing to retire just $654 million in debt this year, and none in 2021. Delta will owe $3.2 billion over that time, United $2.8 billion, and American ng $6.3 billion. Southwest’s operating lease payments are also much lower than those of its main competitors.
Even if the U.S. airline industry must close for a month, Southwest will survive it. So will its employees. They got the equivalent of six weeks’ pay even after 2019 profits fell.
On March 16 Southwest was already planning on reducing schedules 20%, with load factors already as low as 50%. CEO Gary Kelly is taking a pay cut. He admits this is the biggest challenge the industry has faced since the 9/11 attacks, and that it “might get worse.”
Meanwhile, as customers rush home to self-quarantine, Southwest continues to offer bargain fares as low as $49. Prices haven’t been this low since the aircrew wore hot pants. This could increase the airlines’ goodwill, the kind it gets from re-creating marriage proposals or replacing lost teddy bears.
The Bad News
Not all the news from Southwest is good or even relatively good. Flight attendants are reporting skin rashes and other conditions from their new uniforms. Most of these reports are going to the airline’s union rather than directly to the company. Some customers are complaining publicly about the airline’s cancellation policies.
The airline is still tied to the Boeing (NYSE:BA) 737. It flies no other jet. Customers have been taking advantage of this when flights are rearranged.
A bad report on safety from the Federal Aviation Administration (FAA) is being supported by the company’s mechanics, who say it’s protecting Boeing. The result was that planes flew that hadn’t been proven safe.
The Bottom Line on LUV Stock
While Southwest stock has entered oversold territory it may go lower.
That’s because we’re now in the panic section of the downturn, with traders dumping shares they don’t have to, confident they’ll be able to buy them for less down the road.
This follows last week’s forced selling of leveraged positions and the previous week’s advice to “buy the dip,” which now sounds ridiculous. The capitulation is leaving enormous amounts of cash on the sidelines of the market, waiting for an all-clear signal that has not yet come.
When the all-clear approaches, Southwest will be one of the stocks you’ll want. When Boeing’s problems are solved and the Coronavirus panic has eased, Southwest will be able to take advantage. That’s what it did in previous industry downturns. That’s what it will do this time.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of the environmental thriller Bridget O’Flynn and the Bear, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this story.
The post When the All-Clear Sounds, LUV Stock Should Be Your First Buy appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Delta Airlines (NYSE:DAL) and American Airlines (NYSE:AAL) are both down 60%. 10 of the Best Long-Term Stocks to Buy in a Bear Market A Trefis dashboard on the industry shows Southwest needing to retire just $654 million in debt this year, and none in 2021. He admits this is the biggest challenge the industry has faced since the 9/11 attacks, and that it “might get worse.” Meanwhile, as customers rush home to self-quarantine, Southwest continues to offer bargain fares as low as $49.
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Delta Airlines (NYSE:DAL) and American Airlines (NYSE:AAL) are both down 60%. InvestorPlace - Stock Market News, Stock Advice & Trading Tips The chart of Southwest Air (NYSE:LUV) looks like a disaster until you compare it with those of other airlines. The post When the All-Clear Sounds, LUV Stock Should Be Your First Buy appeared first on InvestorPlace.
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Delta Airlines (NYSE:DAL) and American Airlines (NYSE:AAL) are both down 60%. InvestorPlace - Stock Market News, Stock Advice & Trading Tips The chart of Southwest Air (NYSE:LUV) looks like a disaster until you compare it with those of other airlines. 10 of the Best Long-Term Stocks to Buy in a Bear Market A Trefis dashboard on the industry shows Southwest needing to retire just $654 million in debt this year, and none in 2021.
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Delta Airlines (NYSE:DAL) and American Airlines (NYSE:AAL) are both down 60%. InvestorPlace - Stock Market News, Stock Advice & Trading Tips The chart of Southwest Air (NYSE:LUV) looks like a disaster until you compare it with those of other airlines. Delta will owe $3.2 billion over that time, United $2.8 billion, and American ng $6.3 billion.
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6164.0
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2020-03-20 00:00:00 UTC
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Investors Can Do Better Than GE Stock in This Market
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AAL
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https://www.nasdaq.com/articles/investors-can-do-better-than-ge-stock-in-this-market-2020-03-20
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips
History suggests that General Electric (NYSE:GE) stock is a buy here. As I write this, General Electric stock trades at $6.60. The stock has bottomed at those levels before.
Source: testing / Shutterstock.com
During the financial crisis, in March 2009, GE stock touched a closing low of $6.40. It would clear $10 before the month was out, and finish 2009 above $14. On Dec. 12, 2018, during the market’s last correction, GE closed at $6.45. By February, the stock was back above $10.
After a sell-off of nearly 50% in little over a month, General Electric stock is re-testing those past lows. And no doubt some investors believe history will repeat.
I’m one of those investors — but not because I’m a bull on GE. Rather, as I’ve argued consistently during this sell-off, I believe U.S. stocks as a whole will bounce back. That rising tide should lift most boats, including General Electric.
10 Stocks to Invest In for a Post-Coronavirus Whipsaw
But I also argued last month, with GE still in the double-digits, that the stock wasn’t the best play for investors looking to buy the dip. I still believe that’s the case.
General Electric simply isn’t what it was in its glory days. The current situation creates real challenges, both short-term and long-term. There are quality stocks all over the market available at a steep discount to where they traded just weeks ago. Many, and maybe even most, of those stocks have a stronger case than GE stock right now.
A Smaller GE
Under chief executive officer Larry Culp and before he arrived in 2018, GE has been shrinking itself. At this point, the business is basically down to only a few segments: Power, Renewable Energy, Aviation, Healthcare, and GE Capital. (There’s a small portion of the Lighting segment left, and GE Digital as well.)
GE Power has been struggling for years. The turnaround effort in that business is not going to be helped by what increasingly looks like a short-term, worldwide shutdown. Renewable Energy has potential, but burned almost $1 billion in cash in 2019, according to the Form 10-K filed with the U.S. Securities and Exchange Commission.
It’s Aviation, Healthcare, and Capital that really drive equity value here. And that’s not good news.
GE Healthcare actually should get some help from the current situation. General Electric said just this week that it is producing ventilators around the clock to meet demand. CT scanners and ultrasound machines may see a spike in demand as well.
But that’s only one segment. In the other two businesses, disaster looms.
The Aviation Shutdown
GE Aviation is facing years of challenges at this point. Revenue already was pressured by the grounding of the Boeing (NYSE:BA) 737 MAX. Demand for aircraft — and for the engines GE makes — now seems headed to zero.
The likes of American Airlines (NYSE:AAL) and Delta Air Lines (NYSE:DAL) are parking their aircraft. Boeing is looking for a bailout from the federal government. The aerospace industry seems to be collapsing.
That’s a near-term problem for GE Aviation. It could be an even larger problem for GE Capital. GE Capital Aviation Services is the largest commercial airline financing company in the world.
That’s obviously not a good business to be in right now. And after GE Capital suffered billions in losses during the global financial crisis, there’s now the risk it will lose more as the airline industry shuts down.
Add to that short-term losses in aircraft engine manufacturing and high-margin sales of engine parts, and the impact on GE stock will be significant.
Better Plays Than GE Stock
To be sure, this doesn’t mean General Electric is going bankrupt. The aircraft industry will recover at some point. So will the economy and the stock market.
But it does mean that what at best was going to be a multi-year turnaround under Culp is going to take even longer. And it does mean that GE stock should be falling in this environment, as there are material near-term pressures on the business. Lower interest rates — and a declining stock market — will even exacerbate the company’s still-significant pension problem.
Look around this market. There are many stocks that have fallen sharply, with basically zero short-term impact.
In recent days, I’ve highlighted Facebook (NASDAQ:FB) as a company who may get a short-term boost from homebound users — yet whose stock is down 30%.
Nvidia (NASDAQ:NVDA) has dropped 40%, but remains the best-in-class play in a semiconductor industry where megatrends will drive demand for years when the economy recovers.
Those are just two examples. There are quality companies on sale across this market who will see enormous growth in the recovery.
Yet even once normalcy returns, General Electric may need to shrink still further. Simply put, that’s not the kind of company investors should be buying right now, even if GE stock probably is too cheap.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.
The post Investors Can Do Better Than GE Stock in This Market appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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The likes of American Airlines (NYSE:AAL) and Delta Air Lines (NYSE:DAL) are parking their aircraft. And after GE Capital suffered billions in losses during the global financial crisis, there’s now the risk it will lose more as the airline industry shuts down. In recent days, I’ve highlighted Facebook (NASDAQ:FB) as a company who may get a short-term boost from homebound users — yet whose stock is down 30%.
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The likes of American Airlines (NYSE:AAL) and Delta Air Lines (NYSE:DAL) are parking their aircraft. InvestorPlace - Stock Market News, Stock Advice & Trading Tips History suggests that General Electric (NYSE:GE) stock is a buy here. At this point, the business is basically down to only a few segments: Power, Renewable Energy, Aviation, Healthcare, and GE Capital.
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The likes of American Airlines (NYSE:AAL) and Delta Air Lines (NYSE:DAL) are parking their aircraft. InvestorPlace - Stock Market News, Stock Advice & Trading Tips History suggests that General Electric (NYSE:GE) stock is a buy here. 10 Stocks to Invest In for a Post-Coronavirus Whipsaw But I also argued last month, with GE still in the double-digits, that the stock wasn’t the best play for investors looking to buy the dip.
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The likes of American Airlines (NYSE:AAL) and Delta Air Lines (NYSE:DAL) are parking their aircraft. InvestorPlace - Stock Market News, Stock Advice & Trading Tips History suggests that General Electric (NYSE:GE) stock is a buy here. Many, and maybe even most, of those stocks have a stronger case than GE stock right now.
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6165.0
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2020-03-20 00:00:00 UTC
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Only One Thing Matters for American Airlines Stock Right Now
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AAL
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https://www.nasdaq.com/articles/only-one-thing-matters-for-american-airlines-stock-right-now-2020-03-20
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips
Airline stocks like American Airlines (NASDAQ:AAL) have been wiped out in this selloff. Since Feb. 12, AAL stock has lost 62% of its value.
Source: GagliardiPhotography / Shutterstock.com
American is not alone. Among the four major U.S. airlines, Southwest Airlines (NYSE:LUV) is the “winner” over the stretch, with a 40% decline. Delta Air Lines (NYSE:DAL) has matched AAL’s drop. United Airlines (NASDAQ:UAL) has lost three-fourths of its value.
After those declines, some investors might believe the worst is priced in for AAL stock, and the sector. They should rethink that opinion. It absolutely can get worse. In fact, for American, another bankruptcy remains a potential outcome — in which case, the downside is another 100%.
On its own, it will at least take American many months, and likely several years, to convince the market its financial position is sound. In the meantime, AAL stock is going to trade on hopes that a savior is on the way.
Yes, American Can Go Bankrupt (Again)
At a conference last week, American tried to calm investor nerves about its financial position. The company disclosed that it has $7.3 billion in liquidity (cash on hand, plus short-term borrowing capacity). As American noted, that’s more than any other airline in the world.
10 Stocks to Invest In for a Post-Coronavirus Whipsaw
But American also has much more debt than any of its fellow majors. Short- and long-term debt totaled over $24 billion at the end of 2019. The figure for Southwest is less than $3 billion.
As Barron’s noted last weekend, American’s debt load is the highest among U.S. carriers relative to underlying profits, too. This isn’t a case where American has more debt simply because it’s bigger.
That $7.3 billion might — emphasis on might — be enough to get American through what will be an enormously difficult 2020. American is offering voluntary leave to employees to cut costs. Fuel expenses will be dramatically lower for what flights still operate. American is going to lose money this year, but it might not lose $7 billion — or, more importantly, burn that much in cash.
The company is reportedly looking to raise more cash as well. Bloomberg reported this week that American is looking for a one-year credit facility in the “billions of dollars.” It would appear likely that the facility would be backed by assets, including what the company has said are over $10 billion worth of aircraft.
Still, the massive debt load means that just making it through 2020 isn’t enough. The company has another $3 billion of debt maturing in 2022 and 2023. If volumes stay low — driven by either persistent travel fears and/or a global recession — American is going to keep losing money. It can’t do so forever. It can’t even do so for all that long.
How That Plays on AAL Stock
And as long as those fears continue, AAL stock is not going to see a consistent rally. There will be bounces, to be sure: the stock already has had a few short-lived rallies during this long decline. But the stock still has a market capitalization of $6 billion. It’s not as if simply avoiding a near-term bankruptcy means its equity value will rise.
That aside, American’s reputation with investors has to be significantly tarnished at this point. This week, I highlighted the disastrous share repurchases made by Delta at past highs, using cash that instead should have gone to the balance sheet.
American has been far, far worse. As detailed in its Form 10-K filed with the U.S. Securities and Exchange Commission (p. 43), between July 2014 and the end of 2019, American spent $12.4 billion buying back its own stock.
That was a truly disastrous step. It was a step taken by a company that seemed to forget the history of the industry in which it operated. In a quote that will be infamous for years, chief executive officer Doug Parker even said in 2017, “I don’t think we’re ever going to lose money again … We have an industry that’s going to be profitable in good and bad times.”
That foolish optimism isn’t responsible for American’s current predicament. But it’s why American’s ability to respond is so limited. Instead of delivering the balance sheet, and de-risking its stock, American’s board of directors choose to buy back stock. That $12.4 billion certainly would come in handy right about now.
A Federal White Knight
And so AAL stock is in a sector that has been hammered — meaning investors have other choices that have seen similar, if not larger, selloffs. It has a management team and board of directors that has proven it can’t be trusted.
There is a case for nibbling at the sector given these declines, but even that case is difficult. Investors making that case will be hard-pressed to choose the most indebted, most dangerous stock among the four U.S. majors.
So what saves AAL stock?
It might be the federal government. The industry has asked for a $58 billion bailout, which may include airplane manufacturer Boeing (NYSE:BA) as well.
Hopes for that bailout may well drive trading in airline stocks over the coming weeks. It’s not just a matter of if the bailout comes. It’s on what terms. Do the likes of American get zero- or low-interest loans? Or is this a structure closer to that of General Motors (NYSE:GM), in which the federal government wound up becoming a significant shareholder?
For all the negativity I hold toward AAL stock, I can see the case for a trade in the name based on one assumption. If the terms are generous, the stock has the biggest potential for a rally. The reason why is the same reason for its decline: its leverage.
The Trade
Southwest is highly unlikely to go bankrupt, as it continues its history of savvy capital allocation. (It’s the only U.S. carrier to have avoided bankruptcy; American went bankrupt in 2011 and exited in late 2013.) And so a bailout would help LUV stock less than it would AAL stock. Bankruptcy risk isn’t priced into LUV, at least not to the same extent.
For American, however, a generous package could drive a huge rally. It would presumably take that near-term risk off the table, allow for breathing room and perhaps put a bottom under the stock. And given the Trump Administration’s clear focus on the U.S. stock market, such a package wouldn’t be a surprise.
A bailout doesn’t erase the long-term risks. It doesn’t excuse the disastrous decisions made by American management. But it could drive a short-term pop — and a big one. And so traders might want to consider AAL stock. The rest of us, however, should look to better operators with our hard-earned money.
After spending time at a retail brokerage, Vince Martin has covered the financial industry for close to a decade for InvestorPlace.com and other outlets. As of this writing, he did not hold a position in any of the aforementioned securities.
The post Only One Thing Matters for American Airlines Stock Right Now appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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A Federal White Knight And so AAL stock is in a sector that has been hammered — meaning investors have other choices that have seen similar, if not larger, selloffs. InvestorPlace - Stock Market News, Stock Advice & Trading Tips Airline stocks like American Airlines (NASDAQ:AAL) have been wiped out in this selloff. Since Feb. 12, AAL stock has lost 62% of its value.
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips Airline stocks like American Airlines (NASDAQ:AAL) have been wiped out in this selloff. Since Feb. 12, AAL stock has lost 62% of its value. Delta Air Lines (NYSE:DAL) has matched AAL’s drop.
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips Airline stocks like American Airlines (NASDAQ:AAL) have been wiped out in this selloff. How That Plays on AAL Stock And as long as those fears continue, AAL stock is not going to see a consistent rally. Since Feb. 12, AAL stock has lost 62% of its value.
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips Airline stocks like American Airlines (NASDAQ:AAL) have been wiped out in this selloff. And so a bailout would help LUV stock less than it would AAL stock. Since Feb. 12, AAL stock has lost 62% of its value.
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6166.0
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2020-03-19 00:00:00 UTC
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American Airlines CEO Says The Coronavirus Crisis Is Worse Than 9/11: Is He Right?
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AAL
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https://www.nasdaq.com/articles/american-airlines-ceo-says-the-coronavirus-crisis-is-worse-than-9-11%3A-is-he-right-2020-03
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The CEO of American Airlines Holdings (NASDAQ: AAL) said Thursday that the COVID-19 pandemic's impact on airlines will be worse than the attacks of Sept. 11, 2001, urging lawmakers to move quickly to provide assistance for the U.S. airline industry.
Doug Parker, who as CEO of America West Airlines in 2001 had a firsthand look at the financial devastation caused by a terrorist attack using commercial airplanes, said that there is no indication when the dramatic plunge in travel demand due to the pandemic will end.
Parker, now CEO of American, spoke with CNBC while in Washington lobbying for an airline assistance package. He asked not to be directly quoted given the on-going discussions.
The airlines are seeking $50 billion in aid, including about $25 billion in immediate grants and a similar amount in loans. Parker said that the relief package would be enough to sustain current U.S. airline operations for about six months if business does not deteriorate further.
Is he right?
It's tough to make an apples-to-apples comparison of the two crises. Following the attacks of Sept. 11, U.S. airspace was completely shut down for two days. Civilian air traffic was allowed to resume on Sept. 13, but airlines reported dramatic reductions in demand for months to come.
There were 90.6 million seats available for sale on U.S. airlines in August 2001, according to the Bureau of Transportation Statistics, but that fell to 67.5 million for September. It took until July 2005 for the monthly level to hit pre-9/11 numbers.
An American Airlines Boeing 777 tail. Image source: American Airlines.
At least near-term, the current numbers appear to be far worse. In a letter to American employees obtained by Reuters, company president Robert Isom said the airline has seen "unprecedented declines in future bookings and customer demand" in recent days. The airline has cut 75% of international flying and 30% of domestic in April, parking about 450 planes.
"While these steps are unparalleled in our history, we expect demand to fall even more before it gets better," Isom wrote. "More network reductions are being worked in real-time as we see bookings decline."
In a letter to Washington leaders dated March 16, United Airlines Holdings (NASDAQ: UAL) CEO Oscar Munoz agreed that the financial impact for the airlines will be far worse than 9/11.
"March is typically our busiest month of the year. This year, in just the first two weeks of March, we have welcomed more than one million fewer customers on board our aircraft than the same period last year," Munoz said. "We're also currently projecting that revenue in March will be $1.5 billion lower than last March. The bad news is that it's getting worse. We expect both the number of customers and revenue to decline sharply in the days and weeks ahead."
Will it end the same?
In the weeks following the Sept. 11 attacks, the Treasury Department set up the Air Transportation Stabilization Board to dole out about $10 billion in federal loan guarantees designed to keep the airlines flying. It didn't do much to help. Only seven, mostly smallish, passenger and cargo airlines had loan applications approved, and the company that is today United Airlines Holdings (NASDAQ: UAL) was denied.
Of the recipients, only Parker's America West survived, going on to first buy US Airways out of bankruptcy and then merging with American and taking the name when that company came out of bankruptcy in late 2011.
In the ten years that followed the terrorist attacks, all major airlines except Southwest Airlines (NYSE: LUV) ended up in bankruptcy, and a series of mergers that followed saw Northwest Airlines, Continental, US Airways, America West, and AirTran disappear from the skies.
The survivors are much healthier now than they have been at any time since airlines were deregulated in the late 1970s, but no business can withstand the dramatic revenue declines airlines are now facing. Delta Air Lines (NYSE: DAL) said Wednesday it expects March revenue to decline by $2 billion year over year and said April is expected to fall even more.
Airline stocks year-to-date data by YCharts
The major airlines all have significant unencumbered assets they can use as collateral for loans -- American on Thursday said it secured a fresh $1 billion loan, raising its total liquidity to about $8.4 billion -- but investors and creditors are mindful of the aftermath of 9/11, worrying that bankruptcies are inevitable. The airlines are pushing for a massive government package to reassure lenders and counterparties they will be able to remain flying and to keep sources of additional liquidity open and available.
All eyes turn to Washington
In 2017, Parker famously told investors that given the structural improvements to the airline industry in recent years, "I don't think we're ever going to lose money again." He likely regrets that quote now, but in his defense, the pandemic's impact on travel is far worse than what any recession has ever caused.
It's too soon to say for sure if the novel coronavirus will indeed do more damage to the U.S. airline industry than Sept 11. We won't know that until we know how long the pandemic rages, and how quickly travel demand returns once it has subsided. But at least for the smaller airlines, the odds of a major disruption are increasing by the day without some sort of government backstop.
In his letter, American president Isom told employees "we are in the fight of our lives, and we will win." The industry is fortunate it came into 2020 as healthy as it has ever been. We'll know in the weeks and months to come if it was healthy enough to withstand the COVID-19 pandemic.
10 stocks we like better than United Airlines Holdings
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Lou Whiteman owns shares of Delta Air Lines. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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The CEO of American Airlines Holdings (NASDAQ: AAL) said Thursday that the COVID-19 pandemic's impact on airlines will be worse than the attacks of Sept. 11, 2001, urging lawmakers to move quickly to provide assistance for the U.S. airline industry. Doug Parker, who as CEO of America West Airlines in 2001 had a firsthand look at the financial devastation caused by a terrorist attack using commercial airplanes, said that there is no indication when the dramatic plunge in travel demand due to the pandemic will end. In a letter to American employees obtained by Reuters, company president Robert Isom said the airline has seen "unprecedented declines in future bookings and customer demand" in recent days.
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The CEO of American Airlines Holdings (NASDAQ: AAL) said Thursday that the COVID-19 pandemic's impact on airlines will be worse than the attacks of Sept. 11, 2001, urging lawmakers to move quickly to provide assistance for the U.S. airline industry. In a letter to Washington leaders dated March 16, United Airlines Holdings (NASDAQ: UAL) CEO Oscar Munoz agreed that the financial impact for the airlines will be far worse than 9/11. In the ten years that followed the terrorist attacks, all major airlines except Southwest Airlines (NYSE: LUV) ended up in bankruptcy, and a series of mergers that followed saw Northwest Airlines, Continental, US Airways, America West, and AirTran disappear from the skies.
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The CEO of American Airlines Holdings (NASDAQ: AAL) said Thursday that the COVID-19 pandemic's impact on airlines will be worse than the attacks of Sept. 11, 2001, urging lawmakers to move quickly to provide assistance for the U.S. airline industry. In the ten years that followed the terrorist attacks, all major airlines except Southwest Airlines (NYSE: LUV) ended up in bankruptcy, and a series of mergers that followed saw Northwest Airlines, Continental, US Airways, America West, and AirTran disappear from the skies. Airline stocks year-to-date data by YCharts The major airlines all have significant unencumbered assets they can use as collateral for loans -- American on Thursday said it secured a fresh $1 billion loan, raising its total liquidity to about $8.4 billion -- but investors and creditors are mindful of the aftermath of 9/11, worrying that bankruptcies are inevitable.
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The CEO of American Airlines Holdings (NASDAQ: AAL) said Thursday that the COVID-19 pandemic's impact on airlines will be worse than the attacks of Sept. 11, 2001, urging lawmakers to move quickly to provide assistance for the U.S. airline industry. Doug Parker, who as CEO of America West Airlines in 2001 had a firsthand look at the financial devastation caused by a terrorist attack using commercial airplanes, said that there is no indication when the dramatic plunge in travel demand due to the pandemic will end. We expect both the number of customers and revenue to decline sharply in the days and weeks ahead."
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6167.0
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2020-03-19 00:00:00 UTC
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Grounded for Now, UAL Stock Could Take Flight in the Summer
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AAL
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https://www.nasdaq.com/articles/grounded-for-now-ual-stock-could-take-flight-in-the-summer-2020-03-19
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nan
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nan
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips
As the novel coronavirus outbreak has spread across the globe, air travel demand has fallen off a cliff, both by choice and by force. United Airlines (NYSE:UAL) has taken a nose-dive with UAL stock has fallen 70% in the wake of the coronavirus crisis.
Source: travelview / Shutterstock.com
It’s safe to say that airline stocks everywhere have been grounded.
It may seem like a doomsday scenario for United Airlines and the other three big U.S. airliners: Delta (NYSE:DAL), American (NYSE:AAL), and Southwest (NYSE:LUV). In many respects, it is. Air travel demand has come to a screeching halt. Revenues, profits, and cash flows at all of these companies will tank over the next few months.
But, this is a temporary doomsday scenario.
By 2021, COVID-19 will likely be contained, air travel demand will rebound, and revenues, profits, and cash flows will rebound to healthy levels.
In the meantime, while the damage will be severe in 2020, many airliners have amassed sufficient liquidity to withstand the damage without leading to insolvency. The U.S. government also seems keen to step in and help the industry avoid bankruptcy.
10 of the Best Long-Term Stocks to Buy in a Bear Market
All in all, then, United Airlines will survive this doomsday scenario, and come through the other side in 2021 with a fairly healthy business. Ultimately, that means UAL stock — which presently trades at a valuation which prices in a high chance of insolvency — could fly higher in the back-half of 2020.
Air Travel Demand will Rebound
When it comes to the coronavirus crisis impacting the airline industry, there are two important truths to note.
First, while COVID-19 is a big, scary, and volatile thing that won’t go away overnight, it is a temporary headwind. That is, like all other epidemics and pandemics before it, this too shall pass. Indeed, my modeling suggests that — so long as the world continues to practice strict social distancing — “peak coronavirus” will happen in April or May. The virus, and hysteria related to the virus, should fade by summer.
Second, once the outbreak is under control and consumer hysteria fades, air travel demand will bounce back rather quickly. That’s because air travel has become an essential part of the consumer and corporate life. You fly to go see grandma, you fly to New York for a conference, and you fly to the Caribbean for a family vacation. Flying today is less of a “discretionary expenditure” than it was a few years, or a few decades, back.
Plus, even when flying was more of a discretionary expenditure back in 2001 (during the Sept. 11th attacks) or in 2008 (during the Financial Crisis), air travel demand only took a hit for a year or two, before rebounding swiftly.
The same dynamic will play out this time around. COVID-19 fears will kill airline demand in 2020. Easing of those fears will spark a rebound in 2021. Most airline operators will consequently report 2021 numbers that look a lot like their 2019 numbers.
That’s great news for United. The company reported about $12 in adjusted profits per share in 2019. I think that $10 in earnings per share is totally doable in 2021. The stock normally trades at 7.5-times forward earnings. Applying that average multiple to a reasonable 2021 profit projection, you arrive at a 2020 price target for UAL stock of $75.
That’s more than double the current stock price.
United Can Survive
The bigger question surrounding United isn’t whether or not airline demand will rebound in 2021 — it’s whether or not United can weather the storm in 2020.
I think they can.
The airline industry has been largely profitable for the past decade, the longest streak of profitability ever for the industry. During this record-long profitability streak, United built up ample resources to help fight against a crisis like this. For example, United today has $8 billion in liquidity alongside $20 billion in unencumbered assets.
That’s as much liquidity and borrowing power as the company has had… ever.
And, according to management, even in a worst-case scenario where revenues essentially collapse by 20% or more in every single month for the rest of the year, United will still maintain liquidity levels north of $3 billion (which is what management considers the necessary amount to run the airline).
In other words, United appears to have what it takes on its balance sheet to keep the lights on in 2020 while air travel demand plummets. Even if they don’t, the U.S. government appears more than willing to help out in a big way, with U.S. President Donald Trump recently saying: “We’re going to back the airlines 100%.”
All in all, then, insolvency does not appear to a significant risk for United in 2020.
Bottom Line on UAL Stock
United Airlines stock is trading like bankruptcy is imminent, and/or that air travel demand won’t rebound in 2021. But, at present, neither of those things seem likely. United has enough liquidity and unencumbered assets to keep the lights on in 2020, and history shows that air travel demand should recover as soon as the virus fades (which will almost certainly be before 2021).
Net net, UAL stock — while still exceptionally risky and grounded for the time being — could be a big winner in the second half of 2020 as coronavirus concerns fade.
Luke Lango is a Markets Analyst for InvestorPlace. He has been professionally analyzing stocks for several years, previously working at various hedge funds and currently running his own investment fund in San Diego. A Caltech graduate, Luke has consistently been recognized as one of the best stock pickers in the world by various other analysts and platforms, and has developed a reputation for leveraging his technology background to identify growth stocks that deliver outstanding returns. Luke is also the founder of Fantastic, a social discovery company backed by an LA-based internet venture firm. As of this writing, he did not hold a position in any of the aforementioned securities.
The post Grounded for Now, UAL Stock Could Take Flight in the Summer appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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It may seem like a doomsday scenario for United Airlines and the other three big U.S. airliners: Delta (NYSE:DAL), American (NYSE:AAL), and Southwest (NYSE:LUV). 10 of the Best Long-Term Stocks to Buy in a Bear Market All in all, then, United Airlines will survive this doomsday scenario, and come through the other side in 2021 with a fairly healthy business. Ultimately, that means UAL stock — which presently trades at a valuation which prices in a high chance of insolvency — could fly higher in the back-half of 2020.
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It may seem like a doomsday scenario for United Airlines and the other three big U.S. airliners: Delta (NYSE:DAL), American (NYSE:AAL), and Southwest (NYSE:LUV). By 2021, COVID-19 will likely be contained, air travel demand will rebound, and revenues, profits, and cash flows will rebound to healthy levels. Second, once the outbreak is under control and consumer hysteria fades, air travel demand will bounce back rather quickly.
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It may seem like a doomsday scenario for United Airlines and the other three big U.S. airliners: Delta (NYSE:DAL), American (NYSE:AAL), and Southwest (NYSE:LUV). InvestorPlace - Stock Market News, Stock Advice & Trading Tips As the novel coronavirus outbreak has spread across the globe, air travel demand has fallen off a cliff, both by choice and by force. United Can Survive The bigger question surrounding United isn’t whether or not airline demand will rebound in 2021 — it’s whether or not United can weather the storm in 2020.
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It may seem like a doomsday scenario for United Airlines and the other three big U.S. airliners: Delta (NYSE:DAL), American (NYSE:AAL), and Southwest (NYSE:LUV). United Airlines (NYSE:UAL) has taken a nose-dive with UAL stock has fallen 70% in the wake of the coronavirus crisis. Ultimately, that means UAL stock — which presently trades at a valuation which prices in a high chance of insolvency — could fly higher in the back-half of 2020.
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6168.0
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2020-03-18 00:00:00 UTC
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3 Contrarian ETFs to Consider During the Coronavirus
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AAL
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https://www.nasdaq.com/articles/3-contrarian-etfs-to-consider-during-the-coronavirus-2020-03-18
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nan
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nan
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips
Currently, the markets are in a frenzy due to the coronavirus from China pandemic. Investment markets hate uncertainty, and this environment qualifies. However, coronavirus investing now might make you wealthier tomorrow — especially in something like contrarian ETFs.
The current spreading of and reactions to the virus have created fear and massive visits to the stores to stock up on a variety of products. With self-quarantine and compromised supply chains, consumers are rushing to buy staples, household items and non-perishable food. Large events are being cancelled as workers are advised to work from home.
These factors are creating economic stress on the environment which may lead to a recession in the near future.
Brave investors and those with a long time horizon might want to begin dipping their toes in the most battered sectors. Historically, investors who are courageous during times of economic downturns, and buy into the markets near the bottom, have been richly rewarded.
There’s no way to know where the bottom of the market is, but for investors with a long time horizon, willing to begin buying, there are many sectors that will likely be worth much more in 5 to 10 years than they are worth today.
7 Vacation Stocks to Leave at Port Now
Or, if you’re not up to picking a sector fund or two, consider using a low fee investment manager to divvy up your resources across the board. Investing near market bottoms is a great way to grow your wealth long term.
Some of the industries that are and will be hardest hit by the coronavirus outbreak may be the best performers going forward. After all, the travel and hospitality industries will be battered as consumers stay home. But at some point, consumers will resume their vacations and business trips.
Will all that in mind, here are three contrarian ETFs for coronavirus investing that might be worth a look.
Contrarian ETFs to Consider: U.S. Global Jets ETF (JETS)
JETS)" width="300" height="169">
Source: Shutterstock
With airlines cutting routes and passengers staying home, the formerly strong U.S. Global Jets ETF (NYSEARCA:JETS) is being slammed by coronavirus worries. Even Warren Buffett is buying up shares of Delta. With the possibility of a government bailout, this sector is a great contrarian ETF to play the coronavirus market drop.
This all airline ETF is down about 60% within the last month and may fall even further. Yet, it’s likely that once the coronavirus is under control and economic spending resumes investors will resume travel. That said, this all airline stock ETF is a perfect way to play the coronavirus infected airline industry.
The fund tracks the U.S. Global Jets Index, and currently has 38 total holdings. The fund is fundamentally strong with an average return on equity of 46.88, a low price-earnings (P/E) ratio of 7.17 and price to book value of 1.71. Moreover, the airlines are major companies with a weighted average market cap of $15.93 billion.
Currently, the top five holdings of JETS are American Airlines (NASDAQ:AAL), Delta Air Lines (NYSE:DAL), Southwest Airlines (NYSE:LUV), United Airlines (NASDAQ:UAL) and JetBlue (NASDAQ:JBLU). These holdings comprise more than 50% of the portfolio assets.
Although no one can predict the market bottom, slowly buying shares in JETS offers a pure airline stock play for contrarian investors. Coronavirus investing takes courage, but may pay off handsomely in years to come.
Financial Select Sector SPDR Fund (XLF)
XLF)" width="300" height="169">
Source: Shutterstock
The Financial Select Sector SPDR Fund (NYSEARCA:XLF) is down roughly 40% this month. And while the financial sector has been on a tear in recent years, this pull back might provide an opportunity to buy bargain financial stocks. The ETF tracks the Financial Select Sector index which includes diversified financial services companies, insurance firms, banks, mortgage real estate trusts, consumer finance companies and more.
Clearly, an economic slowdown is in progress — and a recession may follow. During times of economic downturn, consumers refrain from borrowing, buying homes and may even default on loans. This type of scenario will temporarily hurt the financial services industries. Although, as the economy rebounds, so will this sector.
XLF has a current yield of 2.16%, after it’s huge decline. The 67 total holdings within the portfolio are distributed with 38% in banks, 20% in capital markets, 18% in insurance companies and the remainder in diversified and consumer finance firms. The 0.13% expense ratio is also quite reasonable.
Fidelity MSCI Information Technology Index (FTEC)
FTEC)" width="300" height="169">
Source: Shutterstock
The Fidelity MSCI Information Technology Index (NYSEARCA:FTEC) has fallen along with the rest of the stock market after stellar performance for many years. With historical earnings growth of 21% and a 1.1% yield, the industry is compelling.
From the mid-February high of $80.99, the ETF is down more than 30%. With expected supply chain bottlenecks, this industry is expected to experience further pain. Although, even now, it’s not as cheaply valued as some of the other ETFs we’ve mentioned. An advantage of FTEC is the low the 0.084% expense ratio..
FTEC tracks the performance of the MSCI USA IMI Information Technology Index. This benchmark follows the information technology index with well-known companies such as Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Visa (NYSE:V) and Mastercard (NYSE:MA) in its top positions. Be aware that this fund, like some if its competing technology ETFs, is highly concentrated in the top two holdings: Apple and Microsoft, which make up 36% of the fund.
So for investors looking to buy technology stocks on sale, it may be the time to explore a technology ETF.
An alternative to this market capitalization weight ETF is the Invesco S&P 500 Equal Weight Technology ETF (NYSEARCA:RYT). This fund weights technology companies equally and not by market capitalization. This will even out the concentration with the fund, of the biggest tech companies.
Barbara A. Friedberg, MBA, MS is a veteran portfolio manager, expert investor, and former university finance instructor. She is editor/author of Personal Finance; An Encyclopedia of Modern Money Management and two additional money books. She is CEO of Robo-Advisor Pros.com, a robo-advisor review and information website. Additionally, Friedberg is publisher of the well-regarded investment website Barbara Friedberg Personal Finance.com. Follow her on twitter @barbfriedberg and @roboadvisorpros. As of this writing, she does not hold a position in any of the aforementioned securities.
The post 3 Contrarian ETFs to Consider During the Coronavirus appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Currently, the top five holdings of JETS are American Airlines (NASDAQ:AAL), Delta Air Lines (NYSE:DAL), Southwest Airlines (NYSE:LUV), United Airlines (NASDAQ:UAL) and JetBlue (NASDAQ:JBLU). 7 Vacation Stocks to Leave at Port Now Or, if you’re not up to picking a sector fund or two, consider using a low fee investment manager to divvy up your resources across the board. Although no one can predict the market bottom, slowly buying shares in JETS offers a pure airline stock play for contrarian investors.
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Currently, the top five holdings of JETS are American Airlines (NASDAQ:AAL), Delta Air Lines (NYSE:DAL), Southwest Airlines (NYSE:LUV), United Airlines (NASDAQ:UAL) and JetBlue (NASDAQ:JBLU). Financial Select Sector SPDR Fund (XLF) XLF)" width="300" height="169"> Source: Shutterstock The Financial Select Sector SPDR Fund (NYSEARCA:XLF) is down roughly 40% this month. The ETF tracks the Financial Select Sector index which includes diversified financial services companies, insurance firms, banks, mortgage real estate trusts, consumer finance companies and more.
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Currently, the top five holdings of JETS are American Airlines (NASDAQ:AAL), Delta Air Lines (NYSE:DAL), Southwest Airlines (NYSE:LUV), United Airlines (NASDAQ:UAL) and JetBlue (NASDAQ:JBLU). Financial Select Sector SPDR Fund (XLF) XLF)" width="300" height="169"> Source: Shutterstock The Financial Select Sector SPDR Fund (NYSEARCA:XLF) is down roughly 40% this month. The ETF tracks the Financial Select Sector index which includes diversified financial services companies, insurance firms, banks, mortgage real estate trusts, consumer finance companies and more.
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Currently, the top five holdings of JETS are American Airlines (NASDAQ:AAL), Delta Air Lines (NYSE:DAL), Southwest Airlines (NYSE:LUV), United Airlines (NASDAQ:UAL) and JetBlue (NASDAQ:JBLU). Historically, investors who are courageous during times of economic downturns, and buy into the markets near the bottom, have been richly rewarded. Contrarian ETFs to Consider: U.S.
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6169.0
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2020-03-18 00:00:00 UTC
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Don’t Buy American Airlines Stock Until Travel Demand ‘Lifts Off’
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AAL
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https://www.nasdaq.com/articles/dont-buy-american-airlines-stock-until-travel-demand-lifts-off-2020-03-18
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nan
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nan
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips
With more travel restrictions likely on the way, American Airlines (NASDAQ:AAL) stock is likely to drop even further in the next week or two.
Source: GagliardiPhotography / Shutterstock.com
As a result, now is not the best time to buy shares. But by the beginning of April, the spread of the coronavirus from China will probably decelerate in much of the U.S. and Europe, causing travel restrictions to ease.
By mid-May, as the weather really heats up, fears of air travel are also likely to ease. Meanwhile, it appears that the government will prevent major airlines, including American, from going bankrupt.
At some point in April, the weakness of the shares could, depending on events, provide risk-tolerant investors with a good buying opportunity.
Increasing Travel Restrictions
On Sunday, March 14, President Donald Trump announced that travelers without U.S. citizenship would not be allowed to enter the country if they had recently been to the United Kingdom and Ireland.
7 Vacation Stocks to Leave at Port Now
The decision came after he announced similar bans on entries to the U.S. of non-citizens who had been to 26 other countries in Europe. Importantly for AAL stock, Trump added that he was “considering restrictions on travel within the United States,” CNN reported.
Research firm Stifel says it believes that the U.S. will eventually restrict travel from Central and South America, and the firm thinks that domestic travel restrictions could also be imposed.
As long as such travel restrictions are still in place, demand for flights will be extremely low. Further, the restrictions will keep investors very bearish toward airline stocks. Thus, with more restrictions likely ahead, it’s not a good time to buy airline stocks.
What’s Up With the Coronavirus?
In China and South Korea, the spread of the coronavirus greatly decelerated after about six weeks. The virus began meaningfully circulating in China at the beginning of January, and its spread began decelerating in mid-February. It arrived in South Korea at the end of January and began greatly decelerating there around mid-March.
So in Western Europe and the U.S., where the virus arrived in earnest at the end of February, the spread will likely greatly ease at the beginning of April.
As I’ve noted in the past, the virus seems to proliferate much more slowly in warmer weather, so the warmer weather coming in a few weeks should also help decelerate the outbreak.
Oh, and warmer weather will play another role, too. Sunny skies should lead to a rebound in demand for air travel, at least in the U.S.
The Government Is Likely to Have the Airlines’ Back
Treasury Secretary Steven Mnuchin has indicated that the administration will look to prevent airlines from going out of business. And Trump and Mnuchin are both pro-business Republicans.
Consequently, investors probably don’t have to worry about the administration taking a page from President Barack Obama’s playbook.
But there is a small chance that Congressional Democrats and Republicans won’t be able to agree on a deal to keep airlines from going under.
The Bottom Line on AAL Stock
With new travel restrictions likely coming soon, now is not a good time to buy American Airlines stock.
Given the above points, shares will probably drop further before the end of March. But the stock could become attractive around the beginning of April, ahead of the likely lifting of travel restrictions and the deceleration of the coronavirus.
However, before buying AAL stock, non-speculative investors should wait for either Congressional approval of financial backing for the airlines industry or assurances from analysts that American Airlines is no longer in any danger of going bankrupt.
As of this writing, Larry Ramer did not own any of the aforementioned securities. Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.
The post Don’t Buy American Airlines Stock Until Travel Demand ‘Lifts Off’ appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips With more travel restrictions likely on the way, American Airlines (NASDAQ:AAL) stock is likely to drop even further in the next week or two. Importantly for AAL stock, Trump added that he was “considering restrictions on travel within the United States,” CNN reported. The Bottom Line on AAL Stock With new travel restrictions likely coming soon, now is not a good time to buy American Airlines stock.
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The Bottom Line on AAL Stock With new travel restrictions likely coming soon, now is not a good time to buy American Airlines stock. InvestorPlace - Stock Market News, Stock Advice & Trading Tips With more travel restrictions likely on the way, American Airlines (NASDAQ:AAL) stock is likely to drop even further in the next week or two. Importantly for AAL stock, Trump added that he was “considering restrictions on travel within the United States,” CNN reported.
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips With more travel restrictions likely on the way, American Airlines (NASDAQ:AAL) stock is likely to drop even further in the next week or two. The Bottom Line on AAL Stock With new travel restrictions likely coming soon, now is not a good time to buy American Airlines stock. Importantly for AAL stock, Trump added that he was “considering restrictions on travel within the United States,” CNN reported.
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The Bottom Line on AAL Stock With new travel restrictions likely coming soon, now is not a good time to buy American Airlines stock. InvestorPlace - Stock Market News, Stock Advice & Trading Tips With more travel restrictions likely on the way, American Airlines (NASDAQ:AAL) stock is likely to drop even further in the next week or two. Importantly for AAL stock, Trump added that he was “considering restrictions on travel within the United States,” CNN reported.
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6170.0
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2020-03-18 00:00:00 UTC
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Oversold Conditions For American Airlines Group (AAL)
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AAL
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https://www.nasdaq.com/articles/oversold-conditions-for-american-airlines-group-aal-2020-03-18
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nan
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nan
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Legendary investor Warren Buffett advises to be fearful when others are greedy, and be greedy when others are fearful. One way we can try to measure the level of fear in a given stock is through a technical analysis indicator called the Relative Strength Index, or RSI, which measures momentum on a scale of zero to 100. A stock is considered to be oversold if the RSI reading falls below 30.
In trading on Wednesday, shares of American Airlines Group Inc (Symbol: AAL) entered into oversold territory, hitting an RSI reading of 28.2, after changing hands as low as $11.80 per share. By comparison, the current RSI reading of the S&P 500 ETF (SPY) is 33.4. A bullish investor could look at AAL's 28.2 RSI reading today as a sign that the recent heavy selling is in the process of exhausting itself, and begin to look for entry point opportunities on the buy side. The chart below shows the one year performance of AAL shares:
Looking at the chart above, AAL's low point in its 52 week range is $11.80 per share, with $35.24 as the 52 week high point — that compares with a last trade of $12.12.
Find out what 9 other oversold stocks you need to know about »
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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In trading on Wednesday, shares of American Airlines Group Inc (Symbol: AAL) entered into oversold territory, hitting an RSI reading of 28.2, after changing hands as low as $11.80 per share. A bullish investor could look at AAL's 28.2 RSI reading today as a sign that the recent heavy selling is in the process of exhausting itself, and begin to look for entry point opportunities on the buy side. The chart below shows the one year performance of AAL shares: Looking at the chart above, AAL's low point in its 52 week range is $11.80 per share, with $35.24 as the 52 week high point — that compares with a last trade of $12.12.
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A bullish investor could look at AAL's 28.2 RSI reading today as a sign that the recent heavy selling is in the process of exhausting itself, and begin to look for entry point opportunities on the buy side. The chart below shows the one year performance of AAL shares: Looking at the chart above, AAL's low point in its 52 week range is $11.80 per share, with $35.24 as the 52 week high point — that compares with a last trade of $12.12. In trading on Wednesday, shares of American Airlines Group Inc (Symbol: AAL) entered into oversold territory, hitting an RSI reading of 28.2, after changing hands as low as $11.80 per share.
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In trading on Wednesday, shares of American Airlines Group Inc (Symbol: AAL) entered into oversold territory, hitting an RSI reading of 28.2, after changing hands as low as $11.80 per share. A bullish investor could look at AAL's 28.2 RSI reading today as a sign that the recent heavy selling is in the process of exhausting itself, and begin to look for entry point opportunities on the buy side. The chart below shows the one year performance of AAL shares: Looking at the chart above, AAL's low point in its 52 week range is $11.80 per share, with $35.24 as the 52 week high point — that compares with a last trade of $12.12.
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In trading on Wednesday, shares of American Airlines Group Inc (Symbol: AAL) entered into oversold territory, hitting an RSI reading of 28.2, after changing hands as low as $11.80 per share. A bullish investor could look at AAL's 28.2 RSI reading today as a sign that the recent heavy selling is in the process of exhausting itself, and begin to look for entry point opportunities on the buy side. The chart below shows the one year performance of AAL shares: Looking at the chart above, AAL's low point in its 52 week range is $11.80 per share, with $35.24 as the 52 week high point — that compares with a last trade of $12.12.
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6171.0
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2020-03-18 00:00:00 UTC
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Coronavirus Has Cash-Rich Airlines Scrambling
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AAL
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https://www.nasdaq.com/articles/coronavirus-has-cash-rich-airlines-scrambling-2020-03-18
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nan
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Top U.S. airlines like American Airlines (NASDAQ: AAL) and United Airlines (NASDAQ: UAL) hold enormous sums of cash and short-term investments on their balance sheets. They also supplement their liquidity with credit lines that allow them to draw billions of dollars.
With all of this readily accessible cash, you might think that these airlines could handle whatever curveballs nature and the economy might throw at them. Yet the escalating COVID-19 pandemic has sent the airlines into panic mode. Industry trade group Airlines for America recently requested that the federal government provide over $50 billion of aid to U.S. passenger airlines, with more than half of that coming in the form of grants and a suspension of excise taxes.
To some extent, this simply reflects the enormous revenue declines that airlines are expecting: particularly global carriers like American and United. However, airlines' reliance on advance ticket sales to help fund their businesses will also cause them to burn through huge sums of cash in a very short time.
Access to a lot of cash
In recent years, American Airlines and United Airlines have both maintained large cash balances as protection against an industry downturn. At an industry conference last week, American Airlines CEO Doug Parker said that his company had $7.3 billion of liquidity: more than any other airline in the world. That includes more than $4 billion of cash and investments and $3.2 billion available through revolving credit facilities.
As it happened, Parker's information was slightly out of date. A day earlier, United Airlines had borrowed $2 billion through a new 364-day term loan. That gave United approximately $6 billion of cash and short-term investments and total liquidity of $8 billion, including its $2 billion revolving credit facility.
United Airlines had $8 billion of liquidity as of last week. Image source: United Airlines.
Yet while $7 billion to $8 billion of liquidity might seem like a lot, it won't last very long the way things are going right now.
Revenue is evaporating
The most obvious reason why American Airlines and United Airlines face a looming cash crunch is that air travel demand is plummeting. Over the past week, a slew of airlines have said that net bookings have plunged to near zero or even into negative territory. With many countries closing their borders to nonresidents and public health authorities urging people to avoid all nonessential travel, it's no surprise that cancellations have started to outpace new bookings.
United Airlines President Scott Kirby said last week that the airline was planning for a worst-case scenario where revenue might plunge 70% in April and May before recovering slowly.
That estimate now seems more like a best-case scenario. In a message to employees sent last weekend, Kirby and company CEO Oscar Munoz said that United now plans to slash its capacity by 50% for April and May. Moreover, they wrote, "Even with those cuts, we're expecting load factors to drop into the 20-30% range -- and that's if things don't get worse." That implies a roughly 85% year-over-year plunge in traffic before things bottom out.
American Airlines hasn't provided the same level of detail. Still, given that it recently announced the suspension of virtually all long-haul flying through May 6, it's reasonable to guess that it's seeing similar booking trends.
Quarterly expenses typically exceed $10 billion for both American and United. To be fair, fuel costs have fallen by about 50% over the past few months (providing more than $1 billion of quarterly savings for each company), discretionary expenses can be slashed, and schedule cuts will reduce variable expenses. However, unless they implement mass furloughs to radically reduce labor costs -- which they have been trying to avoid -- American Airlines and United Airlines will post multibillion-dollar losses next quarter, due to the enormous revenue declines they face.
Working capital: another headache
The big operating losses that American Airlines, United Airlines, and their airline industry peers will incur next quarter are only part of the problem. Unfortunately, the airlines are also likely to experience a significant negative working capital movement that will accelerate their cash burn.
This stems from the fact that airlines typically sell many of their tickets months in advance. As of the end of 2019, American Airlines and United Airlines both reported advance ticket sales of $4.8 billion on their balance sheets. Typically, those figures swell during the first half of the year as advance bookings for summer travel pour in. In 2019, both carriers reported increases of more than $1.5 billion in outstanding advance ticket sales between the beginning of the year and June 30.
That usual pattern isn't likely to hold in 2020. Bookings have ground to a halt this month, so much of the (greatly diminished) revenue American and United will report over the next few months will come out of their existing pools of advance ticket sales. To put it another way, cash ticket sales will plummet even more than reported revenue, aggravating the airlines' cash outflows.
Image source: American Airlines.
This explains recent changes to United Airlines' refund policy. United recently announced that for international flights that have been disrupted by more than six hours due to schedule cuts, customers will receive a travel credit good for 12 months and a full refund only if they haven't used the credit by the end of that 12-month period. While virtually every customer would prefer an immediate refund, this policy will prevent the advance ticket sales balance from falling even faster by delaying refunds into 2021.
Looking ahead
With cash inflows slowing to near zero and expenses declining only modestly in the short term, American Airlines and United Airlines could start burning more than $500 million a week. At that rate, they could run through most of their existing liquidity by mid-May.
The Trump Administration has seemed receptive to the airline industry's call for financial support. However, it will take time to negotiate a bill, move it through Congress, and start to disburse money. In the meantime, American and United will likely need to raise additional capital, most likely by issuing secured debt backed by unencumbered aircraft and other assets.
Investors should also expect to see some big fare sales once the COVID-19 pandemic appears to be getting under control and demand starts to return. Airlines will be eager to bolster their cash balances by selling tickets for future travel, even if the fares are much lower than normal. That could extend the period of reported losses for many airlines, but crucially, it could get cash flow back to breakeven faster.
The big unanswered question is how long it will take for air travel demand to come back in a meaningful way. That will depend largely on when the rate of new COVID-19 cases in the U.S. starts to taper off. If we reach that point in two or three months, American Airlines and United Airlines should be able to survive with only a modest amount of federal aid. But if air travel demand remains virtually nonexistent for six months or more, these airlines and their employees will need a lot of help to get by.
10 stocks we like better than United Airlines Holdings
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Adam Levine-Weinberg owns shares of American Airlines Group. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Top U.S. airlines like American Airlines (NASDAQ: AAL) and United Airlines (NASDAQ: UAL) hold enormous sums of cash and short-term investments on their balance sheets. However, airlines' reliance on advance ticket sales to help fund their businesses will also cause them to burn through huge sums of cash in a very short time. With many countries closing their borders to nonresidents and public health authorities urging people to avoid all nonessential travel, it's no surprise that cancellations have started to outpace new bookings.
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Top U.S. airlines like American Airlines (NASDAQ: AAL) and United Airlines (NASDAQ: UAL) hold enormous sums of cash and short-term investments on their balance sheets. That gave United approximately $6 billion of cash and short-term investments and total liquidity of $8 billion, including its $2 billion revolving credit facility. As of the end of 2019, American Airlines and United Airlines both reported advance ticket sales of $4.8 billion on their balance sheets.
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Top U.S. airlines like American Airlines (NASDAQ: AAL) and United Airlines (NASDAQ: UAL) hold enormous sums of cash and short-term investments on their balance sheets. Working capital: another headache The big operating losses that American Airlines, United Airlines, and their airline industry peers will incur next quarter are only part of the problem. As of the end of 2019, American Airlines and United Airlines both reported advance ticket sales of $4.8 billion on their balance sheets.
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Top U.S. airlines like American Airlines (NASDAQ: AAL) and United Airlines (NASDAQ: UAL) hold enormous sums of cash and short-term investments on their balance sheets. Access to a lot of cash In recent years, American Airlines and United Airlines have both maintained large cash balances as protection against an industry downturn. United Airlines had $8 billion of liquidity as of last week.
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6172.0
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2020-03-18 00:00:00 UTC
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Delta Air Lines Stock Isn’t a Buy — Yet
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AAL
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https://www.nasdaq.com/articles/delta-air-lines-stock-isnt-a-buy-yet-2020-03-18
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips
18th-century British nobleman Baron Rothschild famously said, “The time to buy is when there’s blood in the streets.” For Delta Air Lines (NYSE:DAL) stock, there’s definitely blood in the streets.
Source: VanderWolf Images/Shutterstock.com
DAL stock has fallen nearly 40% in less than a month. Fears of bankruptcy are swirling. Travel bans are going to crush 2020 revenue and profits. Delta already has announced significant moves in response, but with DAL stock down 6.7% Monday, it’s clear those moves haven’t yet calmed investors.
Contrarian-minded investors might be tempted to step into the declines. More than a few did on Friday, as Delta stock rose nearly 14%. But this doesn’t look like a buying opportunity. At least not yet.
7 Vacation Stocks to Leave at Port Now
There are real risks here, and a valuation that is not as cheap as headline multiples suggest. It can get worse before it gets better, and I’d bet it likely will.
Industry Fears Re-Emerge
The airline industry is a notoriously difficult one for investors. Berkshire Hathaway (NYSE:BRK.A,NYSE:BRK.B) chairman Warren Buffett infamously criticized the industry for decades after a loss-making investment in the preferred stock of USAir, which is now part of American Airlines (NASDAQ:AAL).
As Buffett detailed over the years, airlines are low-margin, commodity-priced businesses with relatively high fixed costs. That is, and has been, a recipe for disaster when times get tough. Indeed, Southwest Airlines (NYSE:LUV) is the only major U.S. carrier that has never gone bankrupt.
Delta itself went bankrupt in 2005 before exiting the process in 2007. Now, there are fears that the industry’s underlying weakness are returning to the fore.
Revenue is going to plunge this year. The airline said last Tuesday that capacity was going to drop 15%. By Friday, the outlook was much worse: an internal memo said capacity would come down 40%. Delta Chief Executive Officer Ed Bastian wrote that “the speed of the demand fall-off is unlike anything we’ve ever seen.”
Even a 40% cut almost certainly won’t be enough. United Airlines (NYSE:UAL) last week outlined a “dire scenario” in which revenue drops 70% in April and only recovers to a 20% decline by the end of the year. Just a few days later, that scenario hardly looks dire. Indeed, it may prove conservative.
Whatever the actual numbers, revenue declines are likely to outpace capacity declines. And this is the problem with the industry that Buffett long identified. When times are good, the industry posts solid, but not necessarily world-beating profits. When trouble hits, however, “dire” scenarios become reality in short order.
Profits Get Wiped Out
In 2019, Delta had an impressive year. Revenue of $47 billion was an all-time record. Adjusted earnings per share rose 30% year-over-year, to $7.31.
But 2019 numbers show the risk in 2020. In a record revenue year, amid a strong economy, Delta generated $4.2 billion in free cash flow. That’s less than 9% of revenue.
Cut revenue by 20% and even assuming costs come down, that free cash flow almost certainly gets wiped out. Lower fuel costs thanks to plunging crude prices do help: Delta last week estimated a $2 billion benefit for the full year. (Fewer flights, however, obviously mean that benefit will be lower than expected.) Parking aircraft and freezing hiring can help as well.
Still, Delta is headed for significant short-term pain and a mid-term impact. It took a couple of years after both the attacks of September 11th and the financial crisis for industry passenger volumes to return to their highs. The effect of the coronavirus are expected to be similar.
Delta isn’t likely to go bankrupt immediately. The company said last week it should close this quarter with “at least” $5 billion in liquidity (cash plus borrowing availability). It can borrow against its airplanes as well. The company has brought overall debt down in recent years, which leaves it better-positioned than some rivals (notably American) to manage a multi-year soft patch.
The problem for DAL stock is that avoiding bankruptcy isn’t necessarily enough to suggest upside for the stock.
The Case Against DAL Stock
Even after these declines, Delta still has a market capitalization over $30 billion. And there’s a case that the stock isn’t necessarily that cheap at this point.
Relative to earnings, the stock admittedly looks like a steal. It trades at less than 5x 2019 adjusted EPS.
But, again, this is a highly cyclical business. And it suddenly looks like 2019 earnings were a peak. If that’s indeed the case, DAL stock should trade at a compressed multiple relative to those profits.
Even that ignores the near-term problem: the news is going to get worse. Travel stocks are plunging across the board. There’s little sign of a bottom in this market more broadly. Many companies with better, stronger, business models and less direct exposure to the coronavirus have seen their stock prices drop ~40% as well. I’m loath to necessarily pick Delta stock out as the winner — at least right now.
The Long-Term Case
All that said, at some point normalcy will return. And taking the long view, the news for DAL stock isn’t quite as bad as this analysis has so far suggested.
Indeed, Buffett himself turned bullish on the industry in 2016; Berkshire Hathaway owns 11% of the company. And the ‘Oracle of Omaha’ said just last week that he isn’t selling any of his airline stocks.
I too saw value in the industry at the start of the year, calling the U.S. Global Jets ETF (NYSEARCA:JETS) my pick as the Best ETF of 2020. That obviously was a poor call: JETS has been halved so far this year.
But the reason for optimism toward the industry was that rational behavior had returned. Damaging fare wars were out of favor. Delta wasn’t the only company to significant reduce its debt. Millennial customers continue to prefer experiences like travel to material possessions.
The risk now is twofold. First, that a prolonged impact will lead to financial distress that in turn requires potentially high-cost help from the federal government. The industry said Monday it was seeking $50 billion in such funds.
Second, that a post-coronavirus economy will see a return to irrational behavior. As Buffett himself put in 1989, the commodity nature of the business means “it’s impossible to be a lot smarter than your dumbest competitor.” In high times, the industry was smart. Will that continue in a time of struggle or desperation?
Be Careful
I don’t believe Delta will go bankrupt. I do believe DAL stock will rally, at least at some point. But an investor can’t just look at a 5x trailing price-to-earnings multiple and a short-term impact, and assume this sell-off is unjustified or will end anytime soon.
Even if the coronavirus stops spreading and life returns to something close to normalcy in the coming months, there are going to be ripple effects for the industry. In the meantime, with a market capitalization still over $30 billion, a significant debt load, and trouble ahead, the short-term bottom isn’t necessarily in for DAL stock.
Vince Martin has covered the financial industry for close to a decade for InvestorPlace.com and other outlets. He has no positions in any securities mentioned.
The post Delta Air Lines Stock Isn’t a Buy — Yet appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Berkshire Hathaway (NYSE:BRK.A,NYSE:BRK.B) chairman Warren Buffett infamously criticized the industry for decades after a loss-making investment in the preferred stock of USAir, which is now part of American Airlines (NASDAQ:AAL). United Airlines (NYSE:UAL) last week outlined a “dire scenario” in which revenue drops 70% in April and only recovers to a 20% decline by the end of the year. The company has brought overall debt down in recent years, which leaves it better-positioned than some rivals (notably American) to manage a multi-year soft patch.
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Berkshire Hathaway (NYSE:BRK.A,NYSE:BRK.B) chairman Warren Buffett infamously criticized the industry for decades after a loss-making investment in the preferred stock of USAir, which is now part of American Airlines (NASDAQ:AAL). In a record revenue year, amid a strong economy, Delta generated $4.2 billion in free cash flow. In the meantime, with a market capitalization still over $30 billion, a significant debt load, and trouble ahead, the short-term bottom isn’t necessarily in for DAL stock.
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Berkshire Hathaway (NYSE:BRK.A,NYSE:BRK.B) chairman Warren Buffett infamously criticized the industry for decades after a loss-making investment in the preferred stock of USAir, which is now part of American Airlines (NASDAQ:AAL). InvestorPlace - Stock Market News, Stock Advice & Trading Tips 18th-century British nobleman Baron Rothschild famously said, “The time to buy is when there’s blood in the streets.” For Delta Air Lines (NYSE:DAL) stock, there’s definitely blood in the streets. The problem for DAL stock is that avoiding bankruptcy isn’t necessarily enough to suggest upside for the stock.
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Berkshire Hathaway (NYSE:BRK.A,NYSE:BRK.B) chairman Warren Buffett infamously criticized the industry for decades after a loss-making investment in the preferred stock of USAir, which is now part of American Airlines (NASDAQ:AAL). The problem for DAL stock is that avoiding bankruptcy isn’t necessarily enough to suggest upside for the stock. The Case Against DAL Stock Even after these declines, Delta still has a market capitalization over $30 billion.
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6173.0
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2020-03-17 00:00:00 UTC
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Boeing May Be Looking for Billions in Loan Guarantees
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AAL
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https://www.nasdaq.com/articles/boeing-may-be-looking-for-billions-in-loan-guarantees-2020-03-17
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Boeing Co. (NYSE: BA) may be seeking "tens of billions" in government loan guarantees as it continues to struggle amid the 737 Max crisis and COVID-19 pandemic impacts, according to a Reuters report.
Last week, the company reported that 2020 net order cancellations stood at 28 through February, compared to new orders received of 49 for the first two months of 2019. Bloomberg also reported last week that Boeing was planning to draw down the full amount of its $13.825 billion loan from a group of banks, as it was dealing with cash burn.
Image source: Getty Images.
Liquidity crunch
Now the company is reportedly in talks with government officials saying it seeks "significant government support to meet liquidity needs." Earlier in the day Tuesday, U.S. President Donald Trump said the government was prepared to support the domestic aviation industry.
Disruption from the coronavirus spread continues to grow, with the airline industry particularly impacted. Domestic carriers including Delta Air Lines (NYSE: DAL), United Airlines Holdings (NASDAQ: UAL), American Airlines Group (NASDAQ: AAL) and Southwest Airlines Co. (NYSE: LUV) have all recently announced capacity reductions ranging from 20% to 75%.
In efforts that will impact Boeing directly, airlines are also looking to cut costs and preserve cash. Delta CEO, Ed Bastian, sent a memo to employees on Friday saying that due to the capacity reductions, it was deferring new aircraft deliveries, and reducing capital expenditure plans by at least $2 billion for the year.
10 stocks we like better than Boeing
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Howard Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Domestic carriers including Delta Air Lines (NYSE: DAL), United Airlines Holdings (NASDAQ: UAL), American Airlines Group (NASDAQ: AAL) and Southwest Airlines Co. (NYSE: LUV) have all recently announced capacity reductions ranging from 20% to 75%. Boeing Co. (NYSE: BA) may be seeking "tens of billions" in government loan guarantees as it continues to struggle amid the 737 Max crisis and COVID-19 pandemic impacts, according to a Reuters report. Bloomberg also reported last week that Boeing was planning to draw down the full amount of its $13.825 billion loan from a group of banks, as it was dealing with cash burn.
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Domestic carriers including Delta Air Lines (NYSE: DAL), United Airlines Holdings (NASDAQ: UAL), American Airlines Group (NASDAQ: AAL) and Southwest Airlines Co. (NYSE: LUV) have all recently announced capacity reductions ranging from 20% to 75%. Boeing Co. (NYSE: BA) may be seeking "tens of billions" in government loan guarantees as it continues to struggle amid the 737 Max crisis and COVID-19 pandemic impacts, according to a Reuters report. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines.
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Domestic carriers including Delta Air Lines (NYSE: DAL), United Airlines Holdings (NASDAQ: UAL), American Airlines Group (NASDAQ: AAL) and Southwest Airlines Co. (NYSE: LUV) have all recently announced capacity reductions ranging from 20% to 75%. Boeing Co. (NYSE: BA) may be seeking "tens of billions" in government loan guarantees as it continues to struggle amid the 737 Max crisis and COVID-19 pandemic impacts, according to a Reuters report. See the 10 stocks *Stock Advisor returns as of December 1, 2019 Howard Smith has no position in any of the stocks mentioned.
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Domestic carriers including Delta Air Lines (NYSE: DAL), United Airlines Holdings (NASDAQ: UAL), American Airlines Group (NASDAQ: AAL) and Southwest Airlines Co. (NYSE: LUV) have all recently announced capacity reductions ranging from 20% to 75%. Boeing Co. (NYSE: BA) may be seeking "tens of billions" in government loan guarantees as it continues to struggle amid the 737 Max crisis and COVID-19 pandemic impacts, according to a Reuters report. See the 10 stocks *Stock Advisor returns as of December 1, 2019 Howard Smith has no position in any of the stocks mentioned.
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6174.0
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2020-03-17 00:00:00 UTC
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Why Airline Shares Are Declining Today
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AAL
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https://www.nasdaq.com/articles/why-airline-shares-are-declining-today-2020-03-17
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What happened
Airline stocks continued their plunge at the open on Tuesday before coming back somewhat on hopes that U.S. lawmakers would follow through on pledges to provide the industry with some sort of financial relief.
Shares of Hawaiian Holdings (NASDAQ: HA) were down more than 13%, while shares of Delta Air Lines (NYSE: DAL) and United Airlines Holdings (NASDAQ: UAL) were both down single-digits. Shares of American Airlines Group (NASDAQ: AAL) have been up 16% and down 7% on a volatile day.
So what
The airline sector has been hit hard by the COVID-19 coronavirus outbreak, with global travel demand evaporating overnight. The airlines have reacted by freezing hiring, cutting schedules, and grounding aircraft, but there is a growing fear that government action is needed to avoid a flood of bankruptcy filings.
Image source: Getty Images.
White House officials have expressed support for some sort of an industry backstop, with talk of upward of $50 billion in grants and loan guarantees. But the industry has also received significant pushback from lawmakers who see it as a bailout for companies ill prepared for bad times. And some union leaders have pushed Congress to assist workers directly instead of giving money to corporations.
The uncertainty has prevented airline stocks from rallying on the assistance talk, and has investors continuing to try to pick winners and losers in the sector. American remains on close watch because the company has the most debt among U.S. airlines. Hawaiian, meanwhile, is a niche carrier highly dependent on vacation travel to its home state and can ill afford a prolonged downturn that eats into consumer spending.
Now what
It is important to note that the airlines all have some runway ahead of them, and I still believe the industry can weather the storm without bankruptcies. The argument for an assistance package now is that you don't want to wait until it is needed, and that makes sense. But we are not on the verge of collapse, and investors should not treat the stocks as if they are.
If nothing else, a show of government support should help reassure airline suppliers, creditors, and counterparties that the companies can make it through the downturn, which should help the airlines negotiate extensions, raise new debt, and take other actions to get through the crisis.
Still, nothing short of headlines that the pandemic has been contained and the economy is recovering will truly reassure investors, and that is likely still a long way off. Expect continued volatility in the days and weeks to come.
10 stocks we like better than Hawaiian Holdings
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Hawaiian Holdings wasn't one of them! That's right -- they think these 10 stocks are even better buys.
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*Stock Advisor returns as of December 1, 2019
Lou Whiteman owns shares of Delta Air Lines. The Motley Fool owns shares of and recommends Delta Air Lines. The Motley Fool recommends Hawaiian Holdings. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Shares of American Airlines Group (NASDAQ: AAL) have been up 16% and down 7% on a volatile day. What happened Airline stocks continued their plunge at the open on Tuesday before coming back somewhat on hopes that U.S. lawmakers would follow through on pledges to provide the industry with some sort of financial relief. The airlines have reacted by freezing hiring, cutting schedules, and grounding aircraft, but there is a growing fear that government action is needed to avoid a flood of bankruptcy filings.
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Shares of American Airlines Group (NASDAQ: AAL) have been up 16% and down 7% on a volatile day. See the 10 stocks *Stock Advisor returns as of December 1, 2019 Lou Whiteman owns shares of Delta Air Lines. The Motley Fool owns shares of and recommends Delta Air Lines.
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Shares of American Airlines Group (NASDAQ: AAL) have been up 16% and down 7% on a volatile day. Shares of Hawaiian Holdings (NASDAQ: HA) were down more than 13%, while shares of Delta Air Lines (NYSE: DAL) and United Airlines Holdings (NASDAQ: UAL) were both down single-digits. The uncertainty has prevented airline stocks from rallying on the assistance talk, and has investors continuing to try to pick winners and losers in the sector.
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Shares of American Airlines Group (NASDAQ: AAL) have been up 16% and down 7% on a volatile day. Shares of Hawaiian Holdings (NASDAQ: HA) were down more than 13%, while shares of Delta Air Lines (NYSE: DAL) and United Airlines Holdings (NASDAQ: UAL) were both down single-digits. * David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Hawaiian Holdings wasn't one of them!
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6175.0
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2020-03-17 00:00:00 UTC
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American Airlines Might Be This Year’s Boldest Contrarian Investment
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AAL
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https://www.nasdaq.com/articles/american-airlines-might-be-this-years-boldest-contrarian-investment-2020-03-17
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips
Friday’s 6% price jump in must have felt like a breath of fresh air for American Airlines (NASDAQ:AAL) stockholders. After all, the shares have been in a steady decline since early 2018. And, the coronavirus from China has steepened that price decline in February and March.
Source: GagliardiPhotography / Shutterstock.com
However, the one-day 6% price increase might have given investors false hope. A turnaround might not be in the offing. Conditions don’t look favorable for the airline industry. On the other hand, contrarian investors are supposed to buy when there’s blood on the streets, right?
So, is it time to buy the stock or not?
Deep Flight Cuts
You may have heard that President Trump has restricted travel to the United States from Ireland and parts of the United Kingdom. Furthermore, he was considering restricting travel to California and Washington, saying, “Is it a possibility? Yes, if somebody gets a little bit out of control, if an area gets too hot.”
There’s no way to know for certain whether travel restrictions will be imposed on U.S. states. It’s also difficult to accurately predict whether more international travel bans will be enacted. These are “known unknowns,” which have been priced into airline stocks.
7 Top-Tier Dividend Stocks for 2020
Current and potential further travel restrictions have caused American Airlines and United Airlines (NASDAQ:UAL) to announce that they’ll be cutting flights from their schedules. United plans to cut around 50% of the airline’s flight capacity during April and May with the expectation that these flight cuts will “extend into the summer travel period.”
How does American measure up to United in this respect? One could say, better and worse. American Airlines plans to reduce the company’s international flight capacity by a whopping 75% through May 6. However, the company’s domestic-flight-capacity cut would be a comparatively smaller 20% in April and 30% in May.
No Soft Landing
These flight cuts are testing contrarians’ mettle as airline-stock prices are low but have the potential to go much lower. The coronavirus has tragically caused 6,500 confirmed deaths and around 170,000 illnesses worldwide according to one estimate. It’s hard to imagine that there won’t be more travel restrictions and flight cancellations ahead.
Stifel analyst Joseph DeNardi seems to concur that the challenges will persist. He observed, “Things are getting worse,” and predicted, “Given recent trends and chatter that some form of a domestic travel ban is likely, our estimates now assume United stops flying in 2Q20.”
That’s directed towards United Airlines, but we can reasonably assume that a domestic U.S. travel ban would also wreak havoc on American Airlines. According to a recent estimate from the International Air Transport Association, global revenue losses for passenger-airline companies could reach an astounding $113 billion this year.
It has been reported that American, United and possibly other airlines are currently seeking government aid. Allegedly, United Airlines chief executive officer Oscar Munoz “has spent the last two days in Washington, D.C., meeting with senior officials in the Trump Administration and senior members of the U.S. House and Senate in both parties to understand what government policies they may be considering and explain to them the impact that the coronavirus has had on our business.”
That’s a long-winded way of saying that the airlines need help now, and badly. Who really knows when they’ll get that help, and how much help they’ll get? That’s yet another unpredictable factor. President Trump did just pledge to “back the airlines 100%” and said, “We’ll be backstopping the airlines and helping them very much.” However, he hasn’t yet attached a precise dollar amount or time frame to that pledge.
The Takeaway on AAL Stock
There are just too many “known unknowns” to take a chance on AAL stock with any real confidence. It’s fine to be a contrarian. However, only highly risk-tolerant investors should go anywhere near this one. And if you do, please be aware that profits might not come for quite a while.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets. As of this writing, he did not hold a position in any of the aforementioned securities.
The post American Airlines Might Be This Year’s Boldest Contrarian Investment appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips Friday’s 6% price jump in must have felt like a breath of fresh air for American Airlines (NASDAQ:AAL) stockholders. The Takeaway on AAL Stock There are just too many “known unknowns” to take a chance on AAL stock with any real confidence. He observed, “Things are getting worse,” and predicted, “Given recent trends and chatter that some form of a domestic travel ban is likely, our estimates now assume United stops flying in 2Q20.” That’s directed towards United Airlines, but we can reasonably assume that a domestic U.S. travel ban would also wreak havoc on American Airlines.
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips Friday’s 6% price jump in must have felt like a breath of fresh air for American Airlines (NASDAQ:AAL) stockholders. The Takeaway on AAL Stock There are just too many “known unknowns” to take a chance on AAL stock with any real confidence. 7 Top-Tier Dividend Stocks for 2020 Current and potential further travel restrictions have caused American Airlines and United Airlines (NASDAQ:UAL) to announce that they’ll be cutting flights from their schedules.
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips Friday’s 6% price jump in must have felt like a breath of fresh air for American Airlines (NASDAQ:AAL) stockholders. The Takeaway on AAL Stock There are just too many “known unknowns” to take a chance on AAL stock with any real confidence. 7 Top-Tier Dividend Stocks for 2020 Current and potential further travel restrictions have caused American Airlines and United Airlines (NASDAQ:UAL) to announce that they’ll be cutting flights from their schedules.
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips Friday’s 6% price jump in must have felt like a breath of fresh air for American Airlines (NASDAQ:AAL) stockholders. The Takeaway on AAL Stock There are just too many “known unknowns” to take a chance on AAL stock with any real confidence. 7 Top-Tier Dividend Stocks for 2020 Current and potential further travel restrictions have caused American Airlines and United Airlines (NASDAQ:UAL) to announce that they’ll be cutting flights from their schedules.
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6176.0
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2020-03-17 00:00:00 UTC
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Here's How Much Money Buffett's Portfolio Has Lost in 3 Weeks
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https://www.nasdaq.com/articles/heres-how-much-money-buffetts-portfolio-has-lost-in-3-weeks-2020-03-17
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When it comes to buy-and-hold investing, Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) CEO Warren Buffett is king. Over the course of almost seven decades, Buffett has built up a net worth of around $80 billion, and helped to create in excess of $400 billion in value for shareholders of Berkshire Hathaway stock. And he's done this entirely by researching a handful of sectors, picking out businesses with perceived competitive advantages, and, most important, hanging on for the long haul.
But the thing about buy-and-hold investing is that Buffett's resolve is regularly tested. That's because the benchmark S&P 500 (SNPINDEX: ^GSPC) has undergone a correction – officially, a non-rounded decline of at least 10% from a recent high – an average of every 1.85 years since the beginning of 1950. Buffett has invested through the likes of the Black Monday decline in October 1987, the dot-com bubble, the Great Recession, and now coronavirus disease 2019 (COVID-19). Though Buffett's resolve results in big-time gains over the long run, there's substantial short-term pain to be felt during bear markets.
Since the S&P 500 hit its all-time closing high on Feb. 19, 2020, through what's now being referred to as "Black Thursday" on March 12, 2020, the benchmark index is off almost 27% in a mere 16 trading sessions. It's the quickest we've ever seen a bear market take shape, and it's cost the Oracle of Omaha quite a bit of money.
Berkshire Hathaway CEO Warren Buffett at his company's annual shareholder meeting. Image source: The Motley Fool.
The bear market is wreaking havoc on Berkshire Hathaway's investment portfolio
Before the stock market rolling over, Berkshire Hathaway's portfolio, consisting of 52 securities, was worth approximately $257 billion. But as of the closing bell on March 12, Buffett's portfolio had shrunk in value to roughly $173 billion. On a nominal basis, Buffett has seen $86 billion in value erased as the stock market has plunged. And for Buffett, the pain has come from seemingly every industry and sector he has exposure to.
For example, tech behemoth Apple (NASDAQ: AAPL) and money-center giant Bank of America (NYSE: BAC) represent Berkshire Hathaway's two largest holdings by market value. When the S&P 500 was at its peak, Apple accounted for $79.3 billion in value and somewhere around 31% of Buffett's total portfolio. As of this past Thursday, March 12, Buffett's holding in Apple was worth $60.9 billion. Apple has been hit by supply chain disruptions in China, and may see similar struggles worldwide.
The same is true for Bank of America, which has seen its peak value in Buffett's portfolio fall from $31.9 billion to $19 billion. The big concern surrounding Bank of America being its reliance on net interest income. As the Federal Reserve looks to cut rates in order to spur lending activity, this'll work against BofA's earning potential. Combined, Apple and Bank of America account for $31.3 billion of Berkshire's $86 billion in "lost" value.
On a percentage basis, perhaps no Buffett stocks have been hit harder than airlines and oil stocks. American Airlines Group (NASDAQ: AAL) is down 53% over a span of 16 trading sessions, with its downside being fueled by a huge drop-off in consumer demand and President Trump's ban on inbound flights from Europe. Not to mention, American Airlines Group is the most-indebted of all major airlines, with close to $30 billion in net debt.
Image source: Getty Images.
Meanwhile, Occidental Petroleum (NYSE: OXY) has been a massive drag for Buffett. Inclusive of its recent dividend, Occidental's stock has declined by 70% since Feb. 19. With Saudi Arabia and Russia gearing up for an all-out crude-pricing war, the price for a barrel of crude has nosedived. This ultimately caused Occidental to slash its dividend by 86% and significantly pare back its capital spending plans. This rapid decline the price of oil is especially worrisome with the company carrying around $41.4 billion in total debt on its balance sheet.
Short-term pain translates to long-term gains for Warren Buffett
But don't think for a moment that the Oracle of Omaha is panicked. This is, in fact, just the sort of market correction he's likely been waiting for to deploy some of Berkshire Hathaway's record cash hoard, which totaled $128 billion in its most recent quarter. Said Buffett in the company's 2018 shareholder letter:
In the years ahead, we hope to move much of our excess liquidity into businesses that Berkshire will permanently own. The immediate prospects for that, however, are not good: Prices are sky-high for businesses possessing decent long-term prospects.
The thing is, prices are no longer "sky-high for businesses possessing decent long-term prospects." This means Buffett will have undoubtedly gone shopping. Of course we won't find out the full details of what's been purchased until Berkshire Hathaway files its 13F with the Securities and Exchange Commission in mid-May.
Image source: Getty Images.
Nevertheless, Buffett has offered plenty of clues as to what might be on his buy list. For instance, Buffett has pretty much been unwavering on his view that banks are his favorite industry. The Oracle of Omaha has built up what's currently a $5.2 billion position in money-center stalwart JPMorgan Chase (NYSE: JPM) since the third quarter of 2018. Whereas Berkshire owns stakes nearing 10% in a number of major money-center banks, Berkshire's stake in JPMorgan Chase is a modest 1.9%. Considering the aforementioned Fed rate cuts, as well as CEO Jamie Dimon's recent emergency heart surgery, there have been a number of events that have snowballed to send JPMorgan's stock lower. That just seems like the perfect recipe for Buffett to step in and buy, especially considering JPMorgan Chase's high-quality loan portfolio.
I could also see Buffett bucking auto industry concerns and modestly upping his stake in General Motors (NYSE: GM). Even though auto demand was already on the downswing well before coronavirus became a worldwide issue, the unprecedented mitigation measures taken by China to stem its spread, combined with a United Auto Workers' strike in 2019, have been a special one-two punch for General Motors that may offer an opportunity for patient investors. Plus, General Motors' dividend yield of 6.6% is probably calling Buffett's name.
The point is that, while Buffett is getting clobbered right now, his plan to buy high-quality businesses with competitive advantages and hold them for long periods of time works very well. The idea of buying and holding might seem unpalatable right now, but it can pay literal and metaphorical dividends over the long run.
10 stocks we like better than JPMorgan Chase
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and JPMorgan Chase wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of December 1, 2019
Sean Williams owns shares of Bank of America. The Motley Fool owns shares of and recommends Apple and Berkshire Hathaway (B shares) and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short March 2020 $225 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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American Airlines Group (NASDAQ: AAL) is down 53% over a span of 16 trading sessions, with its downside being fueled by a huge drop-off in consumer demand and President Trump's ban on inbound flights from Europe. For example, tech behemoth Apple (NASDAQ: AAPL) and money-center giant Bank of America (NYSE: BAC) represent Berkshire Hathaway's two largest holdings by market value. Considering the aforementioned Fed rate cuts, as well as CEO Jamie Dimon's recent emergency heart surgery, there have been a number of events that have snowballed to send JPMorgan's stock lower.
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American Airlines Group (NASDAQ: AAL) is down 53% over a span of 16 trading sessions, with its downside being fueled by a huge drop-off in consumer demand and President Trump's ban on inbound flights from Europe. When it comes to buy-and-hold investing, Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) CEO Warren Buffett is king. Whereas Berkshire owns stakes nearing 10% in a number of major money-center banks, Berkshire's stake in JPMorgan Chase is a modest 1.9%.
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American Airlines Group (NASDAQ: AAL) is down 53% over a span of 16 trading sessions, with its downside being fueled by a huge drop-off in consumer demand and President Trump's ban on inbound flights from Europe. Over the course of almost seven decades, Buffett has built up a net worth of around $80 billion, and helped to create in excess of $400 billion in value for shareholders of Berkshire Hathaway stock. The bear market is wreaking havoc on Berkshire Hathaway's investment portfolio Before the stock market rolling over, Berkshire Hathaway's portfolio, consisting of 52 securities, was worth approximately $257 billion.
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American Airlines Group (NASDAQ: AAL) is down 53% over a span of 16 trading sessions, with its downside being fueled by a huge drop-off in consumer demand and President Trump's ban on inbound flights from Europe. The bear market is wreaking havoc on Berkshire Hathaway's investment portfolio Before the stock market rolling over, Berkshire Hathaway's portfolio, consisting of 52 securities, was worth approximately $257 billion. Inclusive of its recent dividend, Occidental's stock has declined by 70% since Feb. 19.
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6177.0
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2020-03-16 00:00:00 UTC
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Kohl's Looks Beyond Coronavirus, Strikes a Deal With Lands' End
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AAL
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https://www.nasdaq.com/articles/kohls-looks-beyond-coronavirus-strikes-a-deal-with-lands-end-2020-03-16
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Even as COVID-19 upends the retail landscape, some merchants are continuing to build long-term sales potential while confronting the immediate effects of the pandemic. Apparel retailer Kohl's (NYSE: KSS) announced Monday that it's struck up a new partnership with venerable casual clothing manufacturer Lands' End (NASDAQ: LE).
According to a company press release, Kohl's intends to offer Lands' End's "entire assortment of women's, men's, kids, and home merchandise" on its website by the fall of 2020. Lands' End will fulfill and ship all orders coming through the site. Kohl's will also begin selling seasonal Lands' End merchandise in 150 of its stores by the fall.
Image source: Getty Images.
The Lands' End deal fits within the strategy employed by Kohl's CEO Michelle Gass to lift traffic in stores by refreshing the chain's inventory with widely followed third-party brands. Last fall, Kohl's introduced a slew of new in-store offerings, including apparel from fashion retailer Nine West and merchandise from sports-licensing retailer Fanatics.
For Lands' End, the partnership represents its return to retailing prominence, as it's spent the last few years extricating its products from struggling Sears stores. During this period, Lands' End has increased its own e-commerce sales, drawing on its roots as a direct-to-consumer mail-order catalog. It's also branched out into workwear, providing uniforms for customers like Delta and American Airlines. These self-sufficient moves notwithstanding, Lands' End will benefit from an omnichannel link with Kohl's by gaining the ability to introduce its classic products to a new generation of customers.
While Monday's announcement could signal the beginning of a mutually beneficial, long-term relationship, neither company benefited from the news. Both Kohl's and Lands' End shares fell by double-digits in morning trading as investors sold tickers in the retail sector amid yet another steep plunge in the broader market.
10 stocks we like better than Kohl's
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Kohl's wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of December 1, 2019
Asit Sharma has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Delta Air Lines. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Apparel retailer Kohl's (NYSE: KSS) announced Monday that it's struck up a new partnership with venerable casual clothing manufacturer Lands' End (NASDAQ: LE). The Lands' End deal fits within the strategy employed by Kohl's CEO Michelle Gass to lift traffic in stores by refreshing the chain's inventory with widely followed third-party brands. Both Kohl's and Lands' End shares fell by double-digits in morning trading as investors sold tickers in the retail sector amid yet another steep plunge in the broader market.
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Apparel retailer Kohl's (NYSE: KSS) announced Monday that it's struck up a new partnership with venerable casual clothing manufacturer Lands' End (NASDAQ: LE). Both Kohl's and Lands' End shares fell by double-digits in morning trading as investors sold tickers in the retail sector amid yet another steep plunge in the broader market. See the 10 stocks *Stock Advisor returns as of December 1, 2019 Asit Sharma has no position in any of the stocks mentioned.
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Apparel retailer Kohl's (NYSE: KSS) announced Monday that it's struck up a new partnership with venerable casual clothing manufacturer Lands' End (NASDAQ: LE). According to a company press release, Kohl's intends to offer Lands' End's "entire assortment of women's, men's, kids, and home merchandise" on its website by the fall of 2020. Both Kohl's and Lands' End shares fell by double-digits in morning trading as investors sold tickers in the retail sector amid yet another steep plunge in the broader market.
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Kohl's will also begin selling seasonal Lands' End merchandise in 150 of its stores by the fall. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market. The Motley Fool owns shares of and recommends Delta Air Lines.
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6178.0
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2020-03-16 00:00:00 UTC
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US Airlines Seek More Than $50 Bln In Government Aid
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AAL
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https://www.nasdaq.com/articles/us-airlines-seek-more-than-%2450-bln-in-government-aid-2020-03-16
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nan
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(RTTNews) - US airlines are seeking more than $50 billion in financial aid from the government, as the industry reels from the coronavirus outbreak.
Airlines for America, the trade group representing all the leading U.S. passenger and cargo airlines, has requested the aid be in the form of loans, grants and tax relief.
The rapid spread of COVID-19, along with the government and business-imposed restrictions on air travel, are having an unprecedented and debilitating impact on U.S. airlines, the trade group said.
"This is a today problem, not a tomorrow problem. It requires urgent action," said Airlines for America President and CEO Nicholas Calio.
The group, which represents carriers including Delta, United, American and Southwest, said that the U.S. airlines are in continuous conversations with the Administration, Congress and labor unions in an effort to secure financial assistance from the federal government to protect and preserve the 750,000 jobs of men and women who are directly employed by U.S. airlines, as well the 10 million jobs supported by the airline industry.
According to the group's document, the airlines are looking for $25 billion in grants for passenger airlines and $4 billion in grants to cargo carriers. They also are asking the same amounts in loans or loan guarantees.
The aid, if received, would be the industry's first bailout since the wake of terror attacks of September 11, 2001, which temporarily grounded all U.S. flights and led to a long slump in domestic travel. The U.S. airlines reportedly had received $5 billion in direct aid and $10 billion in loan guarantees.
"...we're going to back the airlines 100 percent. It's not their fault. It's nobody's fault, unless you go to the original source," President Donald Trump said during a press conference in the White House.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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(RTTNews) - US airlines are seeking more than $50 billion in financial aid from the government, as the industry reels from the coronavirus outbreak. The rapid spread of COVID-19, along with the government and business-imposed restrictions on air travel, are having an unprecedented and debilitating impact on U.S. airlines, the trade group said. The aid, if received, would be the industry's first bailout since the wake of terror attacks of September 11, 2001, which temporarily grounded all U.S. flights and led to a long slump in domestic travel.
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Airlines for America, the trade group representing all the leading U.S. passenger and cargo airlines, has requested the aid be in the form of loans, grants and tax relief. According to the group's document, the airlines are looking for $25 billion in grants for passenger airlines and $4 billion in grants to cargo carriers. The U.S. airlines reportedly had received $5 billion in direct aid and $10 billion in loan guarantees.
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Airlines for America, the trade group representing all the leading U.S. passenger and cargo airlines, has requested the aid be in the form of loans, grants and tax relief. The group, which represents carriers including Delta, United, American and Southwest, said that the U.S. airlines are in continuous conversations with the Administration, Congress and labor unions in an effort to secure financial assistance from the federal government to protect and preserve the 750,000 jobs of men and women who are directly employed by U.S. airlines, as well the 10 million jobs supported by the airline industry. According to the group's document, the airlines are looking for $25 billion in grants for passenger airlines and $4 billion in grants to cargo carriers.
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(RTTNews) - US airlines are seeking more than $50 billion in financial aid from the government, as the industry reels from the coronavirus outbreak. Airlines for America, the trade group representing all the leading U.S. passenger and cargo airlines, has requested the aid be in the form of loans, grants and tax relief. The U.S. airlines reportedly had received $5 billion in direct aid and $10 billion in loan guarantees.
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6179.0
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2020-03-16 00:00:00 UTC
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Delta Announces Layoffs of Contractors
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https://www.nasdaq.com/articles/delta-announces-layoffs-of-contractors-2020-03-16
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On Friday, Delta Air Lines (NYSE: DAL) announced overall capacity cuts of 40% over the next few months. This announcement was followed over the weekend by capacity cuts from other domestic airlines including American Airlines Group (NASDAQ: AAL) and United Airlines Holdings (NASDAQ: UAL).
Delta CEO, Ed Bastian, sent out a memo to employees on Friday addressing the growing COVID-19 impact on the airline. WSBTV in Atlanta reports that over 800 contract worker will also be affected by the crisis. The contract worker provider, AgileOne, a workforce solutions company, reportedly said the workers will have the opportunity to be placed in other positions in its network.
Image source: Getty Images.
Industry in turmoil
In his memo to employees, Bastian stressed the magnitude of the situation, saying "the speed of the demand fall-off is unlike anything we've seen – and we've seen a lot in our business." He focused on the need for cash preservation and removing costs from the business.
Included in the cost reduction plan was the immediate suspension of 100% of Bastian's salary for six months, an overall capacity reduction of 40% for the next several months, along with the idling of as many as 300 aircraft to support the revised schedules.
The layoff of the contract workers was part of the plan for "substantially reducing the use of consultants and contractors." Also included is the plan to delay the acceptance of new aircraft deliveries as part of an overall goal to reduce capital expenditures by a minimum of $2 billion for the year.
10 stocks we like better than Delta Air Lines
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Delta Air Lines wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of December 1, 2019
Howard Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Delta Air Lines. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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This announcement was followed over the weekend by capacity cuts from other domestic airlines including American Airlines Group (NASDAQ: AAL) and United Airlines Holdings (NASDAQ: UAL). Delta CEO, Ed Bastian, sent out a memo to employees on Friday addressing the growing COVID-19 impact on the airline. Industry in turmoil In his memo to employees, Bastian stressed the magnitude of the situation, saying "the speed of the demand fall-off is unlike anything we've seen – and we've seen a lot in our business."
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This announcement was followed over the weekend by capacity cuts from other domestic airlines including American Airlines Group (NASDAQ: AAL) and United Airlines Holdings (NASDAQ: UAL). On Friday, Delta Air Lines (NYSE: DAL) announced overall capacity cuts of 40% over the next few months. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.
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This announcement was followed over the weekend by capacity cuts from other domestic airlines including American Airlines Group (NASDAQ: AAL) and United Airlines Holdings (NASDAQ: UAL). 10 stocks we like better than Delta Air Lines When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. See the 10 stocks *Stock Advisor returns as of December 1, 2019 Howard Smith has no position in any of the stocks mentioned.
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This announcement was followed over the weekend by capacity cuts from other domestic airlines including American Airlines Group (NASDAQ: AAL) and United Airlines Holdings (NASDAQ: UAL). On Friday, Delta Air Lines (NYSE: DAL) announced overall capacity cuts of 40% over the next few months. Delta CEO, Ed Bastian, sent out a memo to employees on Friday addressing the growing COVID-19 impact on the airline.
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6180.0
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2020-03-16 00:00:00 UTC
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Why Shares of Airlines Are Falling Today
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AAL
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https://www.nasdaq.com/articles/why-shares-of-airlines-are-falling-today-2020-03-16
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nan
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What happened
Shares of airline stocks continued their descent on Monday, battered by a fresh round of capacity cuts and talk of financial collapse. Shares of United Airlines Holdings (NASDAQ: UAL) opened down more than 18% and Delta Air Lines (NYSE: DAL) was down 15%, with shares of American Airlines Group (NASDAQ: AAL), Southwest Airlines (NYSE: LUV), JetBlue Airways (NASDAQ: JBLU), and Hawaiian Holdings (NASDAQ: HA) all down 10% or more.
So what
The COVID-19 coronavirus outbreak has caused global travel demand to evaporate and has left airlines scrambling to cut costs as quickly as possible. Over the weekend American and United each announced dramatic capacity reductions, following a similar announcement by Delta on Friday.
Image source: Getty Images.
The outbreak is expected to cost global airlines more than $100 billion in revenue, and with U.S. school districts shutting down and local governments urging citizens to practice social distancing for weeks to months to come, travel is unlikely to normalize quickly. United said the virus-related revenue impact for March alone could be as high as $1.5 billion.
With so much uncertainty, many industry watchers are fearing the worst. Australian consulting firm CAPA - Centre for Aviation put out a report Monday warning that absent government intervention, "most" of the world's airlines could be in bankruptcy by the end of May.
"Coordinated government and industry action is needed -- now -- if catastrophe is to be avoided," CAPA wrote.
Now what
The longer this goes, the more dangerous it is for the airlines. Fortunately, all of the large companies have shown in recent days they still have access to liquidity, and the airlines have billions in unencumbered assets they can borrow against. The U.S. government has said it is preparing to act to try to prop up the industry.
I still believe the U.S. airlines can weather the storm without bankruptcies, but with each passing day the threat is growing, especially for smaller carriers like JetBlue and Hawaiian. And even if the companies can survive without bankruptcy, it is going to be hard for the stocks to find a bottom until some signs emerge that the outbreak is under control and travel can return to normal.
10 stocks we like better than JetBlue Airways
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and JetBlue Airways wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of December 1, 2019
Lou Whiteman owns shares of Delta Air Lines. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines. The Motley Fool recommends Hawaiian Holdings and JetBlue Airways. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Shares of United Airlines Holdings (NASDAQ: UAL) opened down more than 18% and Delta Air Lines (NYSE: DAL) was down 15%, with shares of American Airlines Group (NASDAQ: AAL), Southwest Airlines (NYSE: LUV), JetBlue Airways (NASDAQ: JBLU), and Hawaiian Holdings (NASDAQ: HA) all down 10% or more. What happened Shares of airline stocks continued their descent on Monday, battered by a fresh round of capacity cuts and talk of financial collapse. The outbreak is expected to cost global airlines more than $100 billion in revenue, and with U.S. school districts shutting down and local governments urging citizens to practice social distancing for weeks to months to come, travel is unlikely to normalize quickly.
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Shares of United Airlines Holdings (NASDAQ: UAL) opened down more than 18% and Delta Air Lines (NYSE: DAL) was down 15%, with shares of American Airlines Group (NASDAQ: AAL), Southwest Airlines (NYSE: LUV), JetBlue Airways (NASDAQ: JBLU), and Hawaiian Holdings (NASDAQ: HA) all down 10% or more. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines. The Motley Fool recommends Hawaiian Holdings and JetBlue Airways.
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Shares of United Airlines Holdings (NASDAQ: UAL) opened down more than 18% and Delta Air Lines (NYSE: DAL) was down 15%, with shares of American Airlines Group (NASDAQ: AAL), Southwest Airlines (NYSE: LUV), JetBlue Airways (NASDAQ: JBLU), and Hawaiian Holdings (NASDAQ: HA) all down 10% or more. The outbreak is expected to cost global airlines more than $100 billion in revenue, and with U.S. school districts shutting down and local governments urging citizens to practice social distancing for weeks to months to come, travel is unlikely to normalize quickly. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines.
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Shares of United Airlines Holdings (NASDAQ: UAL) opened down more than 18% and Delta Air Lines (NYSE: DAL) was down 15%, with shares of American Airlines Group (NASDAQ: AAL), Southwest Airlines (NYSE: LUV), JetBlue Airways (NASDAQ: JBLU), and Hawaiian Holdings (NASDAQ: HA) all down 10% or more. The outbreak is expected to cost global airlines more than $100 billion in revenue, and with U.S. school districts shutting down and local governments urging citizens to practice social distancing for weeks to months to come, travel is unlikely to normalize quickly. See the 10 stocks *Stock Advisor returns as of December 1, 2019 Lou Whiteman owns shares of Delta Air Lines.
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6181.0
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2020-03-16 00:00:00 UTC
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Boeing’s 737 Max Is Critical to Its Future
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AAL
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https://www.nasdaq.com/articles/boeings-737-max-is-critical-to-its-future-2020-03-16
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nan
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InvestorPlace - Stock Market News, Stock Advice & Trading Tips
The airline industry faces weeks, if not months, of suffering as demand dries up. Countries around the world — especially South Korea, Japan, Iran and Italy — have an urgency to slow the spread of the new coronavirus from China.
Source: vaalaa / Shutterstock.com
Not only does this bode poorly for airline stocks, but it is also hurting Boeing’s (NYSE:BA) prospects, too. After Boeing stock traded at 52-week lows at the end of last week, should investors consider buying shares?
To evaluate Boeing stock as a long-term rebound play, investors need to first weigh in the 737 Max troubles. After all, predicting the recovery in airline traffic is close to impossible.
Investors may only monitor the rate at which the virus is spreading globally. Then, they may start guessing when flights in restricted areas will resume.
Boeing Stock Faces 737 Max Headwinds
In a House of Representatives probe, the committee found that Boeing’s 737 Max suffered from technical problems and a lack of transparency.
7 Drowning Energy Stocks to Avoid for Now
Furthermore, the Federal Aviation Authority (FAA) gave an insufficient review of the plane. Although the report is damaging, giving the FAA more control over the certification process may help avoid another disaster.
Investors still do not know when Boeing will resume sales of the 737 Max. And the longer the plane is grounded, the more money Boeing stands to lose. Despite the uncertainties, the FAA will eventually conduct a certification test flight. When that eventually happens, Boeing stock will start to stabilize.
The company will still report weak results for at least the next 2-3 quarters. Yet the market is forward thinking and will value the company based on future sales expectations.
Bankruptcy Risks for Airlines
By the time the FAA certifies the 737 Max and Boeing then resumes sales, some of the airlines may declare bankruptcy. United Kingdom airline Flybe filed for bankruptcy on March 5.
But this airline is likely the exception. Southwest Airlines (NYSE:LUV), American Airlines (NASDAQ:AAL) and JetBlue Airways (NASDAQ:JBLU) may face a cash crunch and frighten their investors.
Yet given their role in keeping prices low, the government and the companies in the airline industry will likely help these firms. The airlines will need temporary access to a credit facility. And once business resumes back to normal levels, they will also order 737 Max planes as originally planned.
Balance Sheet Woes
Boeing secured $12 billion in a bank loan to offset the negative cash flow from the lack of 737 Max sales. The firm needs the funds to compensate buyers of the grounded units. It also needs the debt raise to sustain its dividend of $8.22 a year. This decision will sway loyal income investors not to sell Boeing stock.
Still, this move only slows the drop in its stock price. Until the unit production ramps up, cash flow will keep dropping, adding more to its quarterly losses.
The best-case scenario for Boeing is that the world curbs the spread of the coronavirus, air traffic improves and the FAA certifies the 737 Max. In this case, Boeing stock may rebound back to the $300 level. Markets would price in strong airplane sales. A 10-year discounted cash flow revenue exit model may assume revenue growth by at least 2%. At a 9% discount rate and 2-times terminal revenue multiple, the stock is worth $325 a share.
The worst-case scenario is that flights fall as more countries ban air travel. For example, a few countries banned travel to South Korea as of Feb. 29. Add further delays to the 737 Max certification and Boeing stock may have further to fall.
In this scenario, investors may choose a 5-year DCF revenue exit model. On March 12, Boeing stock fell 18% to $155. Fundamentally, assume revenue falls by 45% this year but rebounds in fiscal 2022. In that scenario, Boeing stock is worth around $120 a share in the worst case.
Expect growing volatility in Boeing stock as markets decide on the medium-term prospects ahead.
Chris Lau is a contributing author for InvestorPlace.com and numerous other financial sites. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. He shares his stock picks so readers get original insight that helps improve investment returns. As of this writing, Chris did not hold a position in any of the aforementioned securities.
The post Boeing’s 737 Max Is Critical to Its Future appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Source: vaalaa / Shutterstock.com Not only does this bode poorly for airline stocks, but it is also hurting Boeing’s (NYSE:BA) prospects, too. Southwest Airlines (NYSE:LUV), American Airlines (NASDAQ:AAL) and JetBlue Airways (NASDAQ:JBLU) may face a cash crunch and frighten their investors. 7 Drowning Energy Stocks to Avoid for Now Furthermore, the Federal Aviation Authority (FAA) gave an insufficient review of the plane.
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Source: vaalaa / Shutterstock.com Not only does this bode poorly for airline stocks, but it is also hurting Boeing’s (NYSE:BA) prospects, too. Southwest Airlines (NYSE:LUV), American Airlines (NASDAQ:AAL) and JetBlue Airways (NASDAQ:JBLU) may face a cash crunch and frighten their investors. InvestorPlace - Stock Market News, Stock Advice & Trading Tips The airline industry faces weeks, if not months, of suffering as demand dries up.
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Source: vaalaa / Shutterstock.com Not only does this bode poorly for airline stocks, but it is also hurting Boeing’s (NYSE:BA) prospects, too. Southwest Airlines (NYSE:LUV), American Airlines (NASDAQ:AAL) and JetBlue Airways (NASDAQ:JBLU) may face a cash crunch and frighten their investors. InvestorPlace - Stock Market News, Stock Advice & Trading Tips The airline industry faces weeks, if not months, of suffering as demand dries up.
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Source: vaalaa / Shutterstock.com Not only does this bode poorly for airline stocks, but it is also hurting Boeing’s (NYSE:BA) prospects, too. Southwest Airlines (NYSE:LUV), American Airlines (NASDAQ:AAL) and JetBlue Airways (NASDAQ:JBLU) may face a cash crunch and frighten their investors. Investors still do not know when Boeing will resume sales of the 737 Max.
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6182.0
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2020-03-13 00:00:00 UTC
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U.S. Airlines Seek Government Support For Coronavirus Losses
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AAL
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https://www.nasdaq.com/articles/u.s.-airlines-seek-government-support-for-coronavirus-losses-2020-03-13
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nan
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nan
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Some United States based airlines are in talks with government officials for potential assistance after getting hit by disruptions and cancellations with the spread of COVID-19, according to Reuters. United Airlines Holdings (NASDAQ: UAL), American Airlines Group (NASDAQ: AAL), and Delta Air Lines (NYSE: DAL) confirmed the discussions Friday.
Last week, the International Air Transport Association (IATA), a trade association for the world's airlines, estimated that there could be up to $113 billion in lost revenue from passenger airlines alone, in one "extensive spread" scenario of the coronavirus.
Image source: Getty Images.
Pursuing potential aid
Reuters reported seeing an email from United Airlines sent to employees, saying its chief executive officer, Oscar Munoz "has spent the last two days in Washington, D.C., meeting with senior officials in the Trump Administration and senior members of the U.S. House and Senate in both parties to understand what government policies they may be considering and explain to them the impact that the coronavirus has had on our business."
American Airline and Delta also confirmed being in talks for aid. Delta CEO Ed Bastian announced a 40% cut in capacity to deal with lack of demand, along with a cut in his salary, a hiring freeze, and other cash preservation methods. Bastian could not specify what form the assistance might take, but Reuters reports seeing a memo where Bastian believes there will be assistance forthcoming "to help us through this period."
Many large events are being cancelled to prevent the spread of the virus, including eliminating attendance at the popular Berkshire Hathaway Inc. (NYSE: BRK.A) (NYSE: BRK.B) annual shareholder meeting, CEO Warren Buffett announced today.
Speaking to reporters Friday, U.S. Treasury Secretary Steven Mnuchin said the Trump administration was prepared to assist the domestic industry with needed liquidity.
10 stocks we like better than United Airlines Holdings
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Howard Smith owns shares of Berkshire Hathaway (B shares). The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares) and Delta Air Lines and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short March 2020 $225 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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United Airlines Holdings (NASDAQ: UAL), American Airlines Group (NASDAQ: AAL), and Delta Air Lines (NYSE: DAL) confirmed the discussions Friday. Some United States based airlines are in talks with government officials for potential assistance after getting hit by disruptions and cancellations with the spread of COVID-19, according to Reuters. Pursuing potential aid Reuters reported seeing an email from United Airlines sent to employees, saying its chief executive officer, Oscar Munoz "has spent the last two days in Washington, D.C., meeting with senior officials in the Trump Administration and senior members of the U.S. House and Senate in both parties to understand what government policies they may be considering and explain to them the impact that the coronavirus has had on our business."
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United Airlines Holdings (NASDAQ: UAL), American Airlines Group (NASDAQ: AAL), and Delta Air Lines (NYSE: DAL) confirmed the discussions Friday. Many large events are being cancelled to prevent the spread of the virus, including eliminating attendance at the popular Berkshire Hathaway Inc. (NYSE: BRK.A) (NYSE: BRK.B) annual shareholder meeting, CEO Warren Buffett announced today. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares) and Delta Air Lines and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short March 2020 $225 calls on Berkshire Hathaway (B shares).
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United Airlines Holdings (NASDAQ: UAL), American Airlines Group (NASDAQ: AAL), and Delta Air Lines (NYSE: DAL) confirmed the discussions Friday. Pursuing potential aid Reuters reported seeing an email from United Airlines sent to employees, saying its chief executive officer, Oscar Munoz "has spent the last two days in Washington, D.C., meeting with senior officials in the Trump Administration and senior members of the U.S. House and Senate in both parties to understand what government policies they may be considering and explain to them the impact that the coronavirus has had on our business." The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares) and Delta Air Lines and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short March 2020 $225 calls on Berkshire Hathaway (B shares).
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United Airlines Holdings (NASDAQ: UAL), American Airlines Group (NASDAQ: AAL), and Delta Air Lines (NYSE: DAL) confirmed the discussions Friday. Some United States based airlines are in talks with government officials for potential assistance after getting hit by disruptions and cancellations with the spread of COVID-19, according to Reuters. See the 10 stocks *Stock Advisor returns as of December 1, 2019 Howard Smith owns shares of Berkshire Hathaway (B shares).
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6183.0
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2020-03-13 00:00:00 UTC
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Interesting AAL Put And Call Options For May 1st
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AAL
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https://www.nasdaq.com/articles/interesting-aal-put-and-call-options-for-may-1st-2020-03-13
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Investors in American Airlines Group Inc (Symbol: AAL) saw new options become available this week, for the May 1st expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the AAL options chain for the new May 1st contracts and identified one put and one call contract of particular interest.
The put contract at the $10.00 strike price has a current bid of $1.20. If an investor was to sell-to-open that put contract, they are committing to purchase the stock at $10.00, but will also collect the premium, putting the cost basis of the shares at $8.80 (before broker commissions). To an investor already interested in purchasing shares of AAL, that could represent an attractive alternative to paying $14.54/share today.
Because the $10.00 strike represents an approximate 31% discount to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the put contract would expire worthless. The current analytical data (including greeks and implied greeks) suggest the current odds of that happening are 99%. Stock Options Channel will track those odds over time to see how they change, publishing a chart of those numbers on our website under the contract detail page for this contract. Should the contract expire worthless, the premium would represent a 12.00% return on the cash commitment, or 89.39% annualized — at Stock Options Channel we call this the YieldBoost.
Below is a chart showing the trailing twelve month trading history for American Airlines Group Inc, and highlighting in green where the $10.00 strike is located relative to that history:
Turning to the calls side of the option chain, the call contract at the $20.00 strike price has a current bid of 30 cents. If an investor was to purchase shares of AAL stock at the current price level of $14.54/share, and then sell-to-open that call contract as a "covered call," they are committing to sell the stock at $20.00. Considering the call seller will also collect the premium, that would drive a total return (excluding dividends, if any) of 39.61% if the stock gets called away at the May 1st expiration (before broker commissions). Of course, a lot of upside could potentially be left on the table if AAL shares really soar, which is why looking at the trailing twelve month trading history for American Airlines Group Inc, as well as studying the business fundamentals becomes important. Below is a chart showing AAL's trailing twelve month trading history, with the $20.00 strike highlighted in red:
Considering the fact that the $20.00 strike represents an approximate 38% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. The current analytical data (including greeks and implied greeks) suggest the current odds of that happening are 96%. On our website under the contract detail page for this contract, Stock Options Channel will track those odds over time to see how they change and publish a chart of those numbers (the trading history of the option contract will also be charted). Should the covered call contract expire worthless, the premium would represent a 2.06% boost of extra return to the investor, or 15.37% annualized, which we refer to as the YieldBoost.
The implied volatility in the put contract example is 433%, while the implied volatility in the call contract example is 305%.
Meanwhile, we calculate the actual trailing twelve month volatility (considering the last 252 trading day closing values as well as today's price of $14.54) to be 49%. For more put and call options contract ideas worth looking at, visit StockOptionsChannel.com.
Top YieldBoost Calls of the Nasdaq 100 »
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Of course, a lot of upside could potentially be left on the table if AAL shares really soar, which is why looking at the trailing twelve month trading history for American Airlines Group Inc, as well as studying the business fundamentals becomes important. Below is a chart showing AAL's trailing twelve month trading history, with the $20.00 strike highlighted in red: Considering the fact that the $20.00 strike represents an approximate 38% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. Investors in American Airlines Group Inc (Symbol: AAL) saw new options become available this week, for the May 1st expiration.
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Below is a chart showing AAL's trailing twelve month trading history, with the $20.00 strike highlighted in red: Considering the fact that the $20.00 strike represents an approximate 38% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. Investors in American Airlines Group Inc (Symbol: AAL) saw new options become available this week, for the May 1st expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the AAL options chain for the new May 1st contracts and identified one put and one call contract of particular interest.
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Below is a chart showing AAL's trailing twelve month trading history, with the $20.00 strike highlighted in red: Considering the fact that the $20.00 strike represents an approximate 38% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. Investors in American Airlines Group Inc (Symbol: AAL) saw new options become available this week, for the May 1st expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the AAL options chain for the new May 1st contracts and identified one put and one call contract of particular interest.
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At Stock Options Channel, our YieldBoost formula has looked up and down the AAL options chain for the new May 1st contracts and identified one put and one call contract of particular interest. Below is a chart showing AAL's trailing twelve month trading history, with the $20.00 strike highlighted in red: Considering the fact that the $20.00 strike represents an approximate 38% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. Investors in American Airlines Group Inc (Symbol: AAL) saw new options become available this week, for the May 1st expiration.
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6184.0
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2020-03-13 00:00:00 UTC
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Why Airline Stocks Are Gaining Altitude Today
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AAL
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https://www.nasdaq.com/articles/why-airline-stocks-are-gaining-altitude-today-2020-03-13
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nan
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What happened
The airline sector, which has been hard hit by a COVID-19 coronavirus-related travel slump, got a boost Friday morning after a key administration figure pledged to support the industry during this downturn. Shares of Hawaiian Holdings (NASDAQ: HA) and Delta Air Lines (NYSE: DAL) were both up more than 10% Friday morning, and shares of JetBlue Airways (NASDAQ: JBLU), Southwest Airlines (NYSE: LUV), American Airlines Group (NASDAQ: AAL), and United Airlines Holdings (NASDAQ: UAL) all spiked higher at the open.
So what
Airline stocks have been on a downward trajectory for much of the last few weeks as near-term travel demand has all but evaporated and with bookings for key travel seasons including Easter, spring break, and summer all on the decline. Corporate travel has also dried up as many large businesses have prohibited nonessential travel and have called off major conferences.
Image source: Getty Images.
The International Air Transport Association, which last week estimated the novel coronavirus outbreak would cost global airlines more than $100 billion in lost revenue, warned on Thursday that government-imposed travel bans could leave some airlines vulnerable to failure.
The airlines have been trying to react as quickly as they can, cutting capacity, initiating hiring freezes, and deferring voluntary pension payments and capital expenditures. They are also working to firm up their liquidity, with United raising $2 billion earlier this week and Delta ($1 billion) and American ($500 million) each raising funds earlier in March.
Treasury Secretary Steven Mnuchin, during an appearance on CNBC Friday morning designed to calm markets, said the airline industry is the "next priority on my list" for assistance, after the banking system, pledging the government will support the industry and work to avoid failures.
Now what
Mnuchin's words are some comfort. But lawmakers have been saying for more than a week that they planned to provide assistance to travel companies, including a potential tax holiday for the sector, but so far nothing concrete has materialized.
Fortunately, the U.S. aviation industry is healthier now than it has been during previous downturns, and there is a strong case to be made that the companies can avoid bankruptcy even if there is no government assistance.
The stocks are going to remain volatile until there is some indication that the outbreak is under control, and with it some clarity on the exact impact to airline balance sheets and operations.
Airline stock data by YCharts.
Even with Friday's bounce, airline shares are still down between 28% and 56% year to date. That's likely oversold, and could even create a buying opportunity for an investor with interest in the industry and a lot of cash on the sidelines. But with the outbreak still raging, and an increasing number of schools and corporations making contingency plans at least through the end of March, it is too soon to call a bottom on these stocks.
10 stocks we like better than Delta Air Lines
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Delta Air Lines wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of December 1, 2019
Lou Whiteman owns shares of Delta Air Lines. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines. The Motley Fool recommends Hawaiian Holdings and JetBlue Airways. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Shares of Hawaiian Holdings (NASDAQ: HA) and Delta Air Lines (NYSE: DAL) were both up more than 10% Friday morning, and shares of JetBlue Airways (NASDAQ: JBLU), Southwest Airlines (NYSE: LUV), American Airlines Group (NASDAQ: AAL), and United Airlines Holdings (NASDAQ: UAL) all spiked higher at the open. What happened The airline sector, which has been hard hit by a COVID-19 coronavirus-related travel slump, got a boost Friday morning after a key administration figure pledged to support the industry during this downturn. But lawmakers have been saying for more than a week that they planned to provide assistance to travel companies, including a potential tax holiday for the sector, but so far nothing concrete has materialized.
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Shares of Hawaiian Holdings (NASDAQ: HA) and Delta Air Lines (NYSE: DAL) were both up more than 10% Friday morning, and shares of JetBlue Airways (NASDAQ: JBLU), Southwest Airlines (NYSE: LUV), American Airlines Group (NASDAQ: AAL), and United Airlines Holdings (NASDAQ: UAL) all spiked higher at the open. They are also working to firm up their liquidity, with United raising $2 billion earlier this week and Delta ($1 billion) and American ($500 million) each raising funds earlier in March. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines.
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Shares of Hawaiian Holdings (NASDAQ: HA) and Delta Air Lines (NYSE: DAL) were both up more than 10% Friday morning, and shares of JetBlue Airways (NASDAQ: JBLU), Southwest Airlines (NYSE: LUV), American Airlines Group (NASDAQ: AAL), and United Airlines Holdings (NASDAQ: UAL) all spiked higher at the open. The International Air Transport Association, which last week estimated the novel coronavirus outbreak would cost global airlines more than $100 billion in lost revenue, warned on Thursday that government-imposed travel bans could leave some airlines vulnerable to failure. Treasury Secretary Steven Mnuchin, during an appearance on CNBC Friday morning designed to calm markets, said the airline industry is the "next priority on my list" for assistance, after the banking system, pledging the government will support the industry and work to avoid failures.
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Shares of Hawaiian Holdings (NASDAQ: HA) and Delta Air Lines (NYSE: DAL) were both up more than 10% Friday morning, and shares of JetBlue Airways (NASDAQ: JBLU), Southwest Airlines (NYSE: LUV), American Airlines Group (NASDAQ: AAL), and United Airlines Holdings (NASDAQ: UAL) all spiked higher at the open. That's right -- they think these 10 stocks are even better buys. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines.
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6185.0
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2020-03-13 00:00:00 UTC
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The COVID-19 Pandemic Slams Into Airlines: Are There Any Bargains?
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AAL
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https://www.nasdaq.com/articles/the-covid-19-pandemic-slams-into-airlines%3A-are-there-any-bargains-2020-03-13
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Just a few weeks ago, the global COVID-19 outbreak didn't seem to be hurting U.S. airlines much. Airlines suspended their flights to China and reduced capacity on some other routes to Asia in February, but a drop in oil prices was offsetting the impact of this disruption. As recently as Feb. 24, United Airlines (NASDAQ: UAL) -- which has by far the most exposure to China of any U.S. airline -- still expected to achieve its Q1 earnings guidance, which called for adjusted earnings per share between $0.75 and $1.25.
Unfortunately, the outbreak has turned into a full-blown pandemic in March. At the beginning of the month, there were only 70 confirmed cases in the U.S. By contrast, more than 200 new cases have been confirmed every day recently.
As a result, air travel demand has evaporated over the past two weeks. Not surprisingly, airline stocks have plunged in response, with many losing about half of their value in less than a month.
Monthly Airline Stock Performance, data by YCharts.
Let's take a look at how the COVID-19 crisis is impacting airlines like United, American Airlines (NASDAQ: AAL), Southwest Airlines (NYSE: LUV), Alaska Air Group (NYSE: ALK), and JetBlue Airways (NASDAQ: JBLU) -- and whether investors should consider investing in any of them at today's discounted prices.
Demand is cratering and rules are changing
The first big impact of the COVID-19 outbreak on the U.S. airline industry was the suspension of all flights to and from China in early February. This followed a Trump administration order barring most foreign nationals who had recently visited China from entering the U.S.
As the pandemic has swept across the globe, airlines have canceled their flights to other key hotspots, such as Italy and South Korea. Even in the domestic market (and on international routes to countries with smaller COVID-19 outbreaks), there has been a sharp drop in demand, forcing airlines to reduce capacity where possible.
United Airlines has been the most forthcoming about what it is seeing. Earlier this week, United President Scott Kirby said that the airline has experienced a 100% decline in net bookings to Europe and Asia in recent days, with cancellations fully offsetting new bookings. Gross bookings (excluding cancellations) are down 70% in the Asia-Pacific region and 50% in Europe. In the domestic market, gross bookings are down 25% and net bookings are down 70%.
With demand evaporating, United now expects to post a loss in Q1. It is also planning for a dire scenario where revenue could plunge 70% in April and May and recover slowly in the months thereafter. (It doesn't see that as the most likely outcome, but it is within the realm of possibility.) As a result, United has cut domestic and international capacity 10% and 20%, respectively, for April. It expects to make even deeper cuts in May and won't start to restore canceled flights to its schedule until it sees firm signs of improving demand.
Other airlines have corroborated this general picture. For example, JetBlue CEO Robin Hayes recently stated that demand has plunged faster than the 30% drop seen immediately after the 9/11 attacks. JetBlue, Alaska, and Southwest all expect to miss their Q1 unit revenue forecasts by at least 5 percentage points, with all of the shortfall coming in March. And every major U.S. airline is cutting capacity, albeit not as radically as United.
Image source: Southwest Airlines.
Just in the past couple of days, the U.S. announced a 30-day ban on travel from Europe to the U.S., excluding U.S. citizens and permanent residents. Additionally, the FAA agreed to suspend "use-it-or-lose-it" rules for takeoff and landing slots at the three federally slot-controlled airports through the end of May. (Typically, airlines must use the slots at least 80% of the time to avoid losing them.) These developments will likely spur further flight cancellations.
In short, Q1 is shaping up to be a bad quarter for airlines, and Q2 will be much worse. Jet fuel prices have fallen by about $0.90 per gallon since the beginning of 2020 -- enough to offset a roughly 10% revenue decline for most airlines. Flight reductions and other cost-cutting measures could potentially offset another 10% to 20% revenue loss. But if airlines see a short-term revenue decline of up to 70%, there's no way they will be able to reduce their costs enough to remain profitable.
Balance-sheet strength is critical
The good news for airlines is that the steep plunge in demand they are experiencing right now isn't likely to last very long. There's a wide range of opinions among public health experts, but the pandemic could start to subside in as little as three months (as has been seen in China), or by sometime in 2021 at the latest. The key for U.S. airlines is being able to ride out a severe demand slump that is temporary but of unknown duration.
That means investors hunting for bargains in the airline industry should focus their search on the companies with the best balance sheets: Southwest Airlines, JetBlue Airways, and Alaska Air.
Image source: Alaska Airlines.
As seen in the slide above, Southwest and JetBlue stand out in the industry for the strength of their balance sheets. Alaska is a close No. 3, having reduced its debt-to-cap ratio to 41% by the end of 2019 -- 4 percentage points better than its position as of midyear. By contrast, American Airlines has by far the biggest debt load in the industry. It is one of the least profitable U.S. airlines to boot. While American has a substantial cash buffer, it could still suffer greatly if demand doesn't bounce back by the summer.
Additionally, Southwest Airlines, JetBlue Airways, and Alaska Air all have substantial cash balances. As of a week or two ago, they had $5.3 billion, $1.2 billion, and $1.6 billion in cash and investments, respectively. Including existing revolving credit facilities, Southwest has liquidity equal to 28% of its 2019 revenue. For JetBlue, the figure is 22%, and for Alaska it's 23%. All three airlines also have billions of dollars of unencumbered aircraft that they could mortgage if necessary.
In short, while Southwest, JetBlue, and Alaska could experience some near-term losses, they have ample resources to make it through the coming COVID-19 downturn. Importantly, they should be able to make it through without taking any actions that would impair their long-term earnings prospects.
A clear choice
Aside from having stronger balance sheets than their industry peers, Southwest Airlines, Alaska Air, and JetBlue Airways have the advantage of primarily serving domestic routes (and Latin America to a lesser extent). They have no direct exposure to Europe and Asia, the markets where demand has fallen the most.
Market conditions could change on a dime, but it's reasonable to expect domestic travel demand to continue faring better than international demand during the crisis. It also may recover more quickly after the rate of new cases starts to slow, as "visiting friends and relatives" traffic tends to be more resilient than business and leisure demand, and many travelers will be more comfortable committing to shorter trips initially.
Thus, while the COVID-19 pandemic will hurt Southwest, Alaska, and JetBlue, it doesn't pose an existential threat to any of them. By 2021 (or 2022 at the latest), they should be back to business as usual. And while they may lose money in the meantime, the scale of their losses is likely to be far smaller than the decline in their share prices over the past month.
As a result, shares of all three low-fare carriers look like great investment opportunities for patient investors willing to endure plenty of volatility in the weeks and months ahead. By contrast, American Airlines and United Airlines face a much greater risk of long-term damage, depending on the severity and duration of the COVID-19 air travel downturn.
10 stocks we like better than JetBlue Airways
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and JetBlue Airways wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of December 1, 2019
Adam Levine-Weinberg owns shares of Alaska Air Group, American Airlines Group, and JetBlue Airways and is long January 2022 $10 calls on JetBlue Airways and long January 2021 $40 calls on Southwest Airlines. The Motley Fool owns shares of and recommends Southwest Airlines. The Motley Fool recommends Alaska Air Group and JetBlue Airways. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Let's take a look at how the COVID-19 crisis is impacting airlines like United, American Airlines (NASDAQ: AAL), Southwest Airlines (NYSE: LUV), Alaska Air Group (NYSE: ALK), and JetBlue Airways (NASDAQ: JBLU) -- and whether investors should consider investing in any of them at today's discounted prices. This followed a Trump administration order barring most foreign nationals who had recently visited China from entering the U.S. As the pandemic has swept across the globe, airlines have canceled their flights to other key hotspots, such as Italy and South Korea. A clear choice Aside from having stronger balance sheets than their industry peers, Southwest Airlines, Alaska Air, and JetBlue Airways have the advantage of primarily serving domestic routes (and Latin America to a lesser extent).
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Let's take a look at how the COVID-19 crisis is impacting airlines like United, American Airlines (NASDAQ: AAL), Southwest Airlines (NYSE: LUV), Alaska Air Group (NYSE: ALK), and JetBlue Airways (NASDAQ: JBLU) -- and whether investors should consider investing in any of them at today's discounted prices. Additionally, Southwest Airlines, JetBlue Airways, and Alaska Air all have substantial cash balances. See the 10 stocks *Stock Advisor returns as of December 1, 2019 Adam Levine-Weinberg owns shares of Alaska Air Group, American Airlines Group, and JetBlue Airways and is long January 2022 $10 calls on JetBlue Airways and long January 2021 $40 calls on Southwest Airlines.
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Let's take a look at how the COVID-19 crisis is impacting airlines like United, American Airlines (NASDAQ: AAL), Southwest Airlines (NYSE: LUV), Alaska Air Group (NYSE: ALK), and JetBlue Airways (NASDAQ: JBLU) -- and whether investors should consider investing in any of them at today's discounted prices. That means investors hunting for bargains in the airline industry should focus their search on the companies with the best balance sheets: Southwest Airlines, JetBlue Airways, and Alaska Air. See the 10 stocks *Stock Advisor returns as of December 1, 2019 Adam Levine-Weinberg owns shares of Alaska Air Group, American Airlines Group, and JetBlue Airways and is long January 2022 $10 calls on JetBlue Airways and long January 2021 $40 calls on Southwest Airlines.
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Let's take a look at how the COVID-19 crisis is impacting airlines like United, American Airlines (NASDAQ: AAL), Southwest Airlines (NYSE: LUV), Alaska Air Group (NYSE: ALK), and JetBlue Airways (NASDAQ: JBLU) -- and whether investors should consider investing in any of them at today's discounted prices. As a result, air travel demand has evaporated over the past two weeks. Additionally, Southwest Airlines, JetBlue Airways, and Alaska Air all have substantial cash balances.
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6186.0
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2020-03-12 00:00:00 UTC
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American Airlines Pilot Based In North Texas Tests Positive For Coronavirus
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AAL
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https://www.nasdaq.com/articles/american-airlines-pilot-based-in-north-texas-tests-positive-for-coronavirus-2020-03-12
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(RTTNews) - An American Airlines pilot based in Dallas-Fort Worth has tested positive for the coronavirus, the airline said in a statement.
"American's Chief Medical Officer and leaders from our pilots' office have been in touch with our Dallas Fort Worth based pilot who tested positive for COVID-19. We are in close contact with the Centers for Disease Control and Prevention (CDC) and public health officials and are coordinating with them on all required health and safety measures," American Airlines said.
Separately, American Airlines Group (AAL) announced additional adjustments to its schedule in response to decreased travel demand due to coronavirus (COVID-19).
The airline plans to reduce international capacity for the summer season by 34% versus the previous selling schedule, including a 50% reduction in April trans-Atlantic capacity.
The airline plans to continue to operate flights to and from Europe for up to seven days to ensure customers and employees can return home.
It plans to reduce service to South America, including a suspension of flights to Argentina.
It is expected that suspended flights will resume as early as May 7.
The airline announced that it has offered to waive change fees for customers who purchased tickets prior to March 11 for travel to Europe, including the United Kingdom, through May 31.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Separately, American Airlines Group (AAL) announced additional adjustments to its schedule in response to decreased travel demand due to coronavirus (COVID-19). The airline plans to continue to operate flights to and from Europe for up to seven days to ensure customers and employees can return home. The airline announced that it has offered to waive change fees for customers who purchased tickets prior to March 11 for travel to Europe, including the United Kingdom, through May 31.
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Separately, American Airlines Group (AAL) announced additional adjustments to its schedule in response to decreased travel demand due to coronavirus (COVID-19). (RTTNews) - An American Airlines pilot based in Dallas-Fort Worth has tested positive for the coronavirus, the airline said in a statement. "American's Chief Medical Officer and leaders from our pilots' office have been in touch with our Dallas Fort Worth based pilot who tested positive for COVID-19.
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Separately, American Airlines Group (AAL) announced additional adjustments to its schedule in response to decreased travel demand due to coronavirus (COVID-19). (RTTNews) - An American Airlines pilot based in Dallas-Fort Worth has tested positive for the coronavirus, the airline said in a statement. The airline plans to reduce international capacity for the summer season by 34% versus the previous selling schedule, including a 50% reduction in April trans-Atlantic capacity.
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Separately, American Airlines Group (AAL) announced additional adjustments to its schedule in response to decreased travel demand due to coronavirus (COVID-19). (RTTNews) - An American Airlines pilot based in Dallas-Fort Worth has tested positive for the coronavirus, the airline said in a statement. "American's Chief Medical Officer and leaders from our pilots' office have been in touch with our Dallas Fort Worth based pilot who tested positive for COVID-19.
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6187.0
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2020-03-12 00:00:00 UTC
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International Airline Group Warns of Severe Consequences to Trump's Travel Ban
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AAL
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https://www.nasdaq.com/articles/international-airline-group-warns-of-severe-consequences-to-trumps-travel-ban-2020-03-13
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An international travel group has warned that the latest round of travel restrictions put in place by the United States to counter the spread of the COVID-19 coronavirus could push some airlines to the brink, calling on governments to weigh the financial implications of new restrictions.
On Wednesday night, U.S. President Donald Trump announced plans to halt passenger traffic from Europe for 30 days beginning March 13. The ban applies to foreign nationals who have been in certain European countries within 14 days of their scheduled arrival in the U.S. It's similar to restrictions already put in place by Israel, Spain, and Kuwait.
Image source: Getty Images.
The International Air Transport Association (IATA), which last week estimated the novel coronavirus outbreak would cost global airlines more than $100 billion in lost revenue, said that these new, more severe restrictions were not included in that estimate. In a statement, IATA head Alexandre de Juniac called on governments to limit restrictions to what has been recommended by the World Health Organization, and to weigh the risk of permanent damage to the industry when considering bans.
Juniac said:
Governments must impose the measures they consider necessary to contain the virus. And they must be fully prepared to provide support to buffer the economic dislocation that this will cause. In normal times, air transport is a catalyst for economic growth and development. Suspending travel on such a broad scale will create negative consequences across the economy. Governments must recognize this and be ready to support.
European airlines were already showing signs of stress before the ban was announced. Last week, British domestic carrier Flybe collapsed and transatlantic discounter Norwegian Air Shuttle said Thursday it would suspend 4,000 flights and temporarily suspend about half of its workforce.
U.S. airlines are generally thought to be in better shape than international carriers, but if nothing else, their balance sheets are sure to be bruised by the outbreak-related travel slowdown and restrictions. Shares of U.S. carriers have all fallen dramatically in recent weeks, with shares of American Airlines Group (NASDAQ: AAL), United Airlines Holdings (NASDAQ: UAL), Hawaiian Holdings (NASDAQ: HA), and Spirit Airlines (NYSE: SAVE) all down more than 50% year to date.
In 2019 there were about 200,000 scheduled flights between the U.S. and countries included in the latest travel plan, equivalent to about 550 flights per day. About 46 million passengers flew on those routes last year.
10 stocks we like better than American Airlines Group
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and American Airlines Group wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of December 1, 2019
Lou Whiteman owns shares of Spirit Airlines. The Motley Fool owns shares of and recommends Spirit Airlines. The Motley Fool recommends Hawaiian Holdings. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Shares of U.S. carriers have all fallen dramatically in recent weeks, with shares of American Airlines Group (NASDAQ: AAL), United Airlines Holdings (NASDAQ: UAL), Hawaiian Holdings (NASDAQ: HA), and Spirit Airlines (NYSE: SAVE) all down more than 50% year to date. On Wednesday night, U.S. President Donald Trump announced plans to halt passenger traffic from Europe for 30 days beginning March 13. In a statement, IATA head Alexandre de Juniac called on governments to limit restrictions to what has been recommended by the World Health Organization, and to weigh the risk of permanent damage to the industry when considering bans.
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Shares of U.S. carriers have all fallen dramatically in recent weeks, with shares of American Airlines Group (NASDAQ: AAL), United Airlines Holdings (NASDAQ: UAL), Hawaiian Holdings (NASDAQ: HA), and Spirit Airlines (NYSE: SAVE) all down more than 50% year to date. The Motley Fool owns shares of and recommends Spirit Airlines. The Motley Fool recommends Hawaiian Holdings.
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Shares of U.S. carriers have all fallen dramatically in recent weeks, with shares of American Airlines Group (NASDAQ: AAL), United Airlines Holdings (NASDAQ: UAL), Hawaiian Holdings (NASDAQ: HA), and Spirit Airlines (NYSE: SAVE) all down more than 50% year to date. An international travel group has warned that the latest round of travel restrictions put in place by the United States to counter the spread of the COVID-19 coronavirus could push some airlines to the brink, calling on governments to weigh the financial implications of new restrictions. The International Air Transport Association (IATA), which last week estimated the novel coronavirus outbreak would cost global airlines more than $100 billion in lost revenue, said that these new, more severe restrictions were not included in that estimate.
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Shares of U.S. carriers have all fallen dramatically in recent weeks, with shares of American Airlines Group (NASDAQ: AAL), United Airlines Holdings (NASDAQ: UAL), Hawaiian Holdings (NASDAQ: HA), and Spirit Airlines (NYSE: SAVE) all down more than 50% year to date. An international travel group has warned that the latest round of travel restrictions put in place by the United States to counter the spread of the COVID-19 coronavirus could push some airlines to the brink, calling on governments to weigh the financial implications of new restrictions. In 2019 there were about 200,000 scheduled flights between the U.S. and countries included in the latest travel plan, equivalent to about 550 flights per day.
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6188.0
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2020-03-12 00:00:00 UTC
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Grounded by Coronavirus, American Airlines Stock Is Now Too Cheap
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AAL
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https://www.nasdaq.com/articles/grounded-by-coronavirus-american-airlines-stock-is-now-too-cheap-2020-03-12
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Airline stocks have been killed as the outbreak of the coronavirus from China has gone global over the past few weeks, with most airline stocks dropping more than 25% from their mid-February highs. Among the biggest losers in the group has been American Airlines (NYSE:), largely because of the companyâs huge debt burden and its sizable international flight exposure. From its mid-February highs, AAL stock has shed a whopping 50%.
You read that right. American Airlines stock has been cut in half in a matter of weeks on coronavirus concerns.
Thatâs overdone.
Buying airline stocks may seem like an extremely risky, maybe even bone-headed move, in the current environment. After all, who is flying these days? But you have to understand that these stocks are priced for the apocalypse. Before the outbreak, the earnings per share of American Airlines was supposed to be about $5 in 2020. Even if the coronavirus knocks its earnings down by 20%, its EPS this year will still be about $4.
AAL stock is changing hands for $15 per share. That means the stock is trading at less than four times analystsâ average 2020 earnings estimate. Thatâs an apocalypse-type multiple.
But the apocalypse isnât going to happen. Instead, coronavirus hysteria will fade in the next few weeks as the virusâ spread slows. In April or May, the coronavirus outbreak in the U.S. â and across the globe â will largely be in the rear-view mirror. Demand for airplane tickets will come surging back because most consumers wonât give up flying because of an outbreak that only lasts for two months.
As demand for airplane tickets rebound, American Airlines stock will mount a huge comeback.
Coronavirus Fears Will Pass
I want to make two things abundantly clear.
First, the coronavirus crisis is a big, scary, and volatile thing. It should not be taken lightly. Second, nothing in the data tells me that itâs time to panic or even worry. In fact, the data tells me that the outbreak will pass soon and wonât inflict much damage along the way.
The virus hit China and South Korea first. A few weeks ago, each country was reporting thousands of new cases each day. Then, each country implemented strict quarantining, and the virus stopped spreading. Now the outbreak in each country is largely over, with China reporting just 26 new cases on Mar. 10 and South Korea reporting just 35 new cases on the same day.
Assuming the U.S. and other countries follow similar patterns, the base-case scenario is that the virus will largely be in the rearview mirror by April or May.
Meanwhile, only one in 10,000 people got the virus in South Korea. Only one in 20,000 people got it in China. The reported mortality rate is above 3%, but the actual mortality rate is considered to be less than 1%, given unreported case, and well below 0.5% for anyone not over the age of 50 and/or with a preexisting medical condition.
Even further, in about three months, the virus has killed about 4,000 people globally. Cancer kills that many people every four hours.
All in all, then, the hysteria over coronavirus is a temporary thing. In April or May, it will fade. By June or July, consumers will be back to normal, virus-free and with lots of pent up demand.
American Airlines Will Bounce
There is no denying the fact that airline travel will be negatively impacted as long as consumers suffer from coronavirus hysteria and as long as governments and institutions restrict travel.
American Airlines is not immune to this slowdown. About 73% of the companyâs flights are domestic. Those flights will be hurt by U.S. business travel restrictions and consumers second guessing their spring vacation plans. Meanwhile, demand for American Airlinesâ international flights will get hurt even more, thanks to travel restrictions.
But this slowdown will not be permanent.
By April, the hysteria over coronavirus will cool down. Some businesses will lift travel restrictions and some consumers will start to fly again. By May or June, the coronavirus outbreak will be in the rear-view mirror. Some businesses will resume traveling at full capacity, and some consumers will go on their big summer vacations.
By 2021, no one will talking about coronavirus. All consumers and businesses will get back to their regular globe-trotting routines.
AAL stock is down 50% on challenges that will last a few months and then disappear. In 2021, I fully expect this company to earn at least $4.50 per share.
Historically, the normal forward price-earnings multiple for this stock is seven. A P/E multiple of seven and a projected 2021 EPS of $4.50 implies a 2020 price target for the stock of over $30.
The Bottom Line on AAL Stock
American Airlines stock has been beaten up on coronavirus concerns, and rightfully so. Nobody is traveling these days.
But this selloff has gone too far. At its current levels, AAL stock is too cheap, considering the problems caused by coronavirus are fleeting and that air travel demand will pick back up in a few quarters.
I think the shares can stage a huge rally into the end of 2020 on easing coronavirus hysteria and improving air travel demand.
Luke Lango is a Markets Analyst for InvestorPlace. He has been professionally analyzing stocks for several years, previously working at various hedge funds and currently running his own investment fund in San Diego. A Caltech graduate, Luke has consistently been recognized as one of the worldâs top stock pickers by various other analysts and platforms, and has developed a reputation for leveraging his technology background to identify growth stocks that deliver outstanding returns. Luke is also the founder of Fantastic, a social discovery company backed by an LA-based internet venture firm. As of this writing, Luke Lango did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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At its current levels, AAL stock is too cheap, considering the problems caused by coronavirus are fleeting and that air travel demand will pick back up in a few quarters. From its mid-February highs, AAL stock has shed a whopping 50%. AAL stock is changing hands for $15 per share.
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From its mid-February highs, AAL stock has shed a whopping 50%. The Bottom Line on AAL Stock American Airlines stock has been beaten up on coronavirus concerns, and rightfully so. AAL stock is changing hands for $15 per share.
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The Bottom Line on AAL Stock American Airlines stock has been beaten up on coronavirus concerns, and rightfully so. From its mid-February highs, AAL stock has shed a whopping 50%. AAL stock is changing hands for $15 per share.
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From its mid-February highs, AAL stock has shed a whopping 50%. AAL stock is changing hands for $15 per share. AAL stock is down 50% on challenges that will last a few months and then disappear.
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6189.0
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2020-03-12 00:00:00 UTC
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Skip Southwest Airlines Stock and Buy the JETS ETF Instead
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AAL
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https://www.nasdaq.com/articles/skip-southwest-airlines-stock-and-buy-the-jets-etf-instead-2020-03-12
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Southwest Airlines (NYSE:) CEO Gary Kelly is taking a 10% pay cut as a sign of solidarity with rank-and-file employees who are coping with lower revenues due to the coronavirus from China. While itâÂÂs a noble gesture, IâÂÂm not sure itâÂÂs going to help lift LUV stock out of its tailspin.
Source: Jeramey Lende / Shutterstock.com
Down 18.9% year to date (including dividends), long-time shareholders of Southwest are looking at a 5-year annualized total return of 1.2%, which is 620 basis points less than the U.S. markets as a whole, but 490 basis points higher than its airline peers.ÃÂ
Airline stocks of all stripes are getting hammered.ÃÂ
What Airline Stock to Buy?
I recently suggested that investors consider American Airlines (NASDAQ:) along with six other services stocks that were faltering due to the coronavirus. I picked American because its stock has suffered far more in 2020 â AAL is down 48.2% YTD (including dividends), 2.6 times worse than LUV stock â making it a risky, but potentially more lucrative contrarian value play than Southwest in the weeks and months ahead.ÃÂ
However, for those who donâÂÂt mind a little risk, but donâÂÂt want to expose yourself to the kind of risk that American Airlines represents, Southwest is an intriguing possibility.
IâÂÂve always liked Southwest. The last time I wrote about it in April 2018, I suggested LUV stock was Trading around $55 at the time, it went sideways for the next 24 months before the coronavirus sent it reeling in mid-February; itâÂÂs down almost 25% over the past month.ÃÂ
MarketWatch published an article on March 7, two days before the 2,100-point correction by the Dow Jones, suggesting that investorsâ reaction to the coronavirus and airline stocks was , referencing comments from Michael Matousek, the head trader for U.S. Global Investors.ÃÂ
Matousek argued that the U.S. carriers have strong balance sheets. Also, no matter the extent of the outbreak, summer is around the corner. Americans are going to take vacations.ÃÂ
âÂÂAre people going to stop going on vacation? No. Will businesses stop travel in perpetuity? No,â Matousek said. âÂÂItâÂÂs oversold based on peopleâÂÂs fears.âÂÂ
The International Air Transport Association (IATA) estimates that the coronavirus could cost the global airline industry more than $113 billion from canceled or postponed air travel.
Buy JETS Over LUV StockÃÂ
While thatâÂÂs a huge number, I think a smart play over the next year would be to buy the U.S. Global Jets ETF (NYSEARCA:) â as I write this, it crossed hands at $20.45 â and save some dry powder to buy every week it drops more than 2% over the next 6-12 months.
The biggest reason IâÂÂd bet on JETS over LUV or even AAL is that it provides you with diversification through its 33 holdings. The holdings include airline stocks, airport owners and even Boeing (NYSE:), which is bound to make a comeback once the 737 MAX is back flying and the coronavirus has been eradicated.ÃÂ
And, for those who really like Southwest, itâÂÂs currently the exchange-traded fundâÂÂs largest holding with a weighting of 14.42%, 41 basis points higher than Delta (NYSE:), the second-largest holding.ÃÂ
JETS charges 0.60%, which compared to an S&P 500 Index ETF, it isnâÂÂt cheap. However, if you want to make a bet on the airline industry recovering from the latest hiccup to its profitable growth, JETS is the best way to go about it.ÃÂ
I like LUV. I even like AAL for speculative bets. But you canâÂÂt beat JETS if you want to cover your bases while reducing company-specific risk.
As Warren Buffett says, âÂÂBe greedy when others are fearful.âÂÂÃÂ
Will Ashworth has written about investments full-time since 2008. Publications where heâÂÂs appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. As of this writing, he did not hold a position in any of the aforementioned securities.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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I picked American because its stock has suffered far more in 2020 â AAL is down 48.2% YTD (including dividends), 2.6 times worse than LUV stock â making it a risky, but potentially more lucrative contrarian value play than Southwest in the weeks and months ahead.àHowever, for those who donâÂÂt mind a little risk, but donâÂÂt want to expose yourself to the kind of risk that American Airlines represents, Southwest is an intriguing possibility. The biggest reason IâÂÂd bet on JETS over LUV or even AAL is that it provides you with diversification through its 33 holdings. I even like AAL for speculative bets.
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I picked American because its stock has suffered far more in 2020 â AAL is down 48.2% YTD (including dividends), 2.6 times worse than LUV stock â making it a risky, but potentially more lucrative contrarian value play than Southwest in the weeks and months ahead.àHowever, for those who donâÂÂt mind a little risk, but donâÂÂt want to expose yourself to the kind of risk that American Airlines represents, Southwest is an intriguing possibility. The biggest reason IâÂÂd bet on JETS over LUV or even AAL is that it provides you with diversification through its 33 holdings. I even like AAL for speculative bets.
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I picked American because its stock has suffered far more in 2020 â AAL is down 48.2% YTD (including dividends), 2.6 times worse than LUV stock â making it a risky, but potentially more lucrative contrarian value play than Southwest in the weeks and months ahead.àHowever, for those who donâÂÂt mind a little risk, but donâÂÂt want to expose yourself to the kind of risk that American Airlines represents, Southwest is an intriguing possibility. The biggest reason IâÂÂd bet on JETS over LUV or even AAL is that it provides you with diversification through its 33 holdings. I even like AAL for speculative bets.
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I picked American because its stock has suffered far more in 2020 â AAL is down 48.2% YTD (including dividends), 2.6 times worse than LUV stock â making it a risky, but potentially more lucrative contrarian value play than Southwest in the weeks and months ahead.àHowever, for those who donâÂÂt mind a little risk, but donâÂÂt want to expose yourself to the kind of risk that American Airlines represents, Southwest is an intriguing possibility. The biggest reason IâÂÂd bet on JETS over LUV or even AAL is that it provides you with diversification through its 33 holdings. I even like AAL for speculative bets.
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6190.0
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2020-03-12 00:00:00 UTC
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With Stocks Plunging, Is Now When Warren Buffett Buys an Airline?
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AAL
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https://www.nasdaq.com/articles/with-stocks-plunging-is-now-when-warren-buffett-buys-an-airline-2020-03-12
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Warren Buffett famously said when others are fearful it's time to get greedy. The COVID-19 coronavirus has sparked a wave of selling through the airline industry, with investors terrified today's industry leaders will soon go the way of Pan Am, Braniff, or TWA.
Buffett's Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) reacted in the early days of the sell-off, buying up 976,000 shares of Delta Air Lines (NYSE: DAL) in late February. But the airline stocks have fallen significantly further in the weeks since.
Could the Oracle of Omaha soon aim his legendary "elephant gun" at the airline industry and buy an airline outright? And if so, what company is the most likely to be acquired?
Image Source: The Motley Fool
One last big deal?
Berkshire Hathaway has more than $128 billion in cash on hand, and Buffett appears to be looking for one more big deal before he retires. He's shown an interest in transports and aerospace in the past, adding Burlington Northern Santa Fe railroad in 2010 for $26 billion and Precision Castparts in 2016 for $37 billion.
Buffett downplayed the talk of buying an airline outright during a Feb. 26 interview on CNBC, noting the high level of regulation in the industry and saying that creates "complications" in transactions. But that's not a firm denial. Buffett is a value investor at heart, and shares of the four airlines currently in his portfolio have fallen an additional 12% to 26% since he gave that interview.
Buffett has been known to change his mind about airlines in the past. In his 2007 letter to investors he called the airline sector un-investible, famously saying "if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down."
Thirteen years later, the four largest U.S. airlines make up a sizable part of the Berkshire portfolio.
Which airline would Berkshire buy?
Most of the parlor talk about Buffett and the airline business in years past has focused around Southwest Airlines (NYSE: LUV), a longtime industry maverick that has matured into one of the "big four" dominating the U.S. domestic industry. Berkshire is the second largest holder of Southwest shares.
Southwest offers simplicity, flying only one type of aircraft to mostly domestic and Caribbean destinations. It eschews the complexity of international alliances, has a reputation for not nickel and diming customers, and is the closest thing in the airline industry to the folksy-feel that Buffett tries to cultivate.
But Southwest is also expensive relative to its peers, trading at 10 times trailing earnings when Delta, American Airlines Group (NASDAQ: AAL), and United Airlines Holdings (NASDAQ: UAL) are all trading closer to five times earnings.
Southwest also has potential headwinds on the horizon, as its future growth is tied to Boeing's troubled 737 MAX. Furthermore, Southwest is showing signs of maxing out the growth potential of its simplified route structure, meaning it might be forced to adopt some of the more complex operating procedures of its rivals in the years to come.
Delta, meanwhile, is the only airline position we know Berkshire has been adding to, and Buffett has professed his admiration for the company in the past.
Buffett typically keeps Berkshire's holdings to below 10% of shares outstanding to avoid more onerous disclosures and regulations. Berkshire's stake in Delta crossed the 10% threshold last year due to the airline's stock buyback program, and Buffett told CNBC not long after that he'd decided not to sell the stake down because of the quality of the company.
In Delta, Berkshire would get a company that has led an industrywide transformation that has positioned the airlines to survive this downturn and has given Berkshire the confidence to buy into the sector. It is a best-of-class business trading at just over five times earnings and 0.5 times sales.
American and United are also possibilities. However, American has an industry-high debt load that would need to be addressed, and United has been a chronic underperformer until recently, though it has made great strides under its current management. Although United has a less-than-stellar reputation due to some high-profile customer service snafus, it does have close ties to the energy sector Buffett knows well thanks to its Houston hub.
Will Warren pull the trigger?
I think Berkshire Hathaway will announce a major acquisition sometime during the first half of 2020. Buffett has cash to deploy and has shown an eagerness to do one last deal but has complained about valuations in recent years. With every passing day, valuations are beginning to look more reasonable.
Two weeks ago, I would have discounted the chance that deal is for an airline. Buffett is correct in flagging the potential regulatory headaches, including the potential conflicts that would arise from Berkshire owning or investing in both an airline and its credit card partner a la Delta and American Express, for example. And buying one airline would force Berkshire to sell down its stake in the other three it currently holds, potentially at a loss in some cases.
If forced to predict, I'd still bet against it simply because it seems likely there are a lot of other, less complicated options.
But the airlines, despite the negative momentum, are much healthier than markets are making them out to be. And until the coronavirus is contained it is going to be hard for these stocks to find a bottom. If they do keep falling, at some point the opportunity to buy one of these airlines on the cheap might be too good of a deal for Buffett to pass up.
10 stocks we like better than Berkshire Hathaway (A shares)
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Berkshire Hathaway (A shares) wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of December 1, 2019
Lou Whiteman owns shares of Berkshire Hathaway (B shares) and Delta Air Lines. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares), Delta Air Lines, and Southwest Airlines and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short March 2020 $225 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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But Southwest is also expensive relative to its peers, trading at 10 times trailing earnings when Delta, American Airlines Group (NASDAQ: AAL), and United Airlines Holdings (NASDAQ: UAL) are all trading closer to five times earnings. Buffett downplayed the talk of buying an airline outright during a Feb. 26 interview on CNBC, noting the high level of regulation in the industry and saying that creates "complications" in transactions. In his 2007 letter to investors he called the airline sector un-investible, famously saying "if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down."
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But Southwest is also expensive relative to its peers, trading at 10 times trailing earnings when Delta, American Airlines Group (NASDAQ: AAL), and United Airlines Holdings (NASDAQ: UAL) are all trading closer to five times earnings. See the 10 stocks *Stock Advisor returns as of December 1, 2019 Lou Whiteman owns shares of Berkshire Hathaway (B shares) and Delta Air Lines. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares), Delta Air Lines, and Southwest Airlines and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short March 2020 $225 calls on Berkshire Hathaway (B shares).
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But Southwest is also expensive relative to its peers, trading at 10 times trailing earnings when Delta, American Airlines Group (NASDAQ: AAL), and United Airlines Holdings (NASDAQ: UAL) are all trading closer to five times earnings. Most of the parlor talk about Buffett and the airline business in years past has focused around Southwest Airlines (NYSE: LUV), a longtime industry maverick that has matured into one of the "big four" dominating the U.S. domestic industry. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares), Delta Air Lines, and Southwest Airlines and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short March 2020 $225 calls on Berkshire Hathaway (B shares).
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But Southwest is also expensive relative to its peers, trading at 10 times trailing earnings when Delta, American Airlines Group (NASDAQ: AAL), and United Airlines Holdings (NASDAQ: UAL) are all trading closer to five times earnings. And buying one airline would force Berkshire to sell down its stake in the other three it currently holds, potentially at a loss in some cases. That's right -- they think these 10 stocks are even better buys.
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6191.0
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2020-03-11 00:00:00 UTC
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AAL Stock Ready for Take Off After Crash Landing
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AAL
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https://www.nasdaq.com/articles/aal-stock-ready-for-take-off-after-crash-landing-2020-03-11
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nan
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nan
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Shares of American Airlines (NYSE:) are finally finding some footing after a brutal sell off. AAL stock had plunged to the lowest levels ever as coronavirus fears rocked the airline industry. While travel has been undoubtedly affected in the short term, the longer term outlook is certainly not as dire. Volatility and crisis beget opportunity in investing. Longer term investors should look to add a hedged position in AAL stock to their portfolio at current levels.
Source: GagliardiPhotography / Shutterstock.com
The coronavirusâ effect on airlines has taken a serious toll. Travel restrictions combined with dramatically lower demand from both business and holiday travelers alike has brought demand down to levels rarely seen.
In response, to help the airlines in any way possible through this rough patch. It will undoubtedly take some time for travelers to feel comfortable flying again. Once they do, however, the pick up in flight booking should return near normal levels. One only needs to look at 9/11 to see a similar scenario.
The short-term outlook is clouded at best. Longer term investors, however, can look at historically cheap valuations and oversold technicals to take advantage of the fear. As Warren Buffett famously said, âÂÂBe greedy when others are fearful.âÂÂ
Valuation View
AAL stock is now trading at a P/E ratio of 4.2, by far the lowest multiple in the past five years. Other metrics, such as a P/S ratio which is under one, are at similar trough valuations. The last time American Airlines was even close to this cheap was June 2016, which marked a major bottom in AAL stock.
Fuel costs account for roughly one third of the overall cost structure for airlines. Oil prices saw their biggest drop since 1991 on Monday as OPEC fell apart. fell over 35% since the beginning of the year. This massive cost saving should help American Airlines as it navigates thru the coronavirus downturn. The combination of historically low valuations and historically low fuel costs will definitely temper the effects of historically low seat bookings.
Technical Take
Source: Source: The thinkorswimî platform from TD Ameritrade
American Airlines stock is looking decidedly better from a technical perspective. 9-day RSI breached the 20 level before turning higher. Bollinger Percent B went negative but is now back in positive territory.ÃÂ MACD was at by far the most oversold readings of the past year before strengthening.
AAL stock is trading at a massive discount to the 50-day moving average of $25.94. Previous times when American Airlines approached these oversold levels marked a significant low in AAL stock.
Current implied volatility (IV) for AAL options is at 100%. This means option prices are at the highest levels in the past year. The combination of cheap stock and expensive options sets up ideally for a covered call trade, buying AAL stock and selling AAL call options to hedge.
AAL Stock Trade Idea
Buy AAL stock and sell January 2021 $18 call for a $12 net debit
Selling the call option reduces the net cost of buying AAL stock by the premium received of $5. This equates to a nearly 30% downside hedge for the stock. Ideally AAL stock closes above $18 at Jan. 15, 2021 expiration. The shares would then be called away at $18 for a 50% return.
If American Airlines is under $18 at expiration then investors can look to re-hedge by selling additional call options to further lower the cost basis.
As of this writing, Tim Biggam did not hold a position in any of the aforementioned securities. Anyone interested in finding out more about option-based strategies or for a free trial of theÃÂ ÃÂ can email Tim at timbiggam@gmail.com.ÃÂ
More From InvestorPlace
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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As Warren Buffett famously said, âÂÂBe greedy when others are fearful.â Valuation View AAL stock is now trading at a P/E ratio of 4.2, by far the lowest multiple in the past five years. Previous times when American Airlines approached these oversold levels marked a significant low in AAL stock. AAL stock had plunged to the lowest levels ever as coronavirus fears rocked the airline industry.
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The combination of cheap stock and expensive options sets up ideally for a covered call trade, buying AAL stock and selling AAL call options to hedge. AAL Stock Trade Idea Buy AAL stock and sell January 2021 $18 call for a $12 net debit Selling the call option reduces the net cost of buying AAL stock by the premium received of $5. AAL stock had plunged to the lowest levels ever as coronavirus fears rocked the airline industry.
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Previous times when American Airlines approached these oversold levels marked a significant low in AAL stock. The combination of cheap stock and expensive options sets up ideally for a covered call trade, buying AAL stock and selling AAL call options to hedge. AAL Stock Trade Idea Buy AAL stock and sell January 2021 $18 call for a $12 net debit Selling the call option reduces the net cost of buying AAL stock by the premium received of $5.
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As Warren Buffett famously said, âÂÂBe greedy when others are fearful.â Valuation View AAL stock is now trading at a P/E ratio of 4.2, by far the lowest multiple in the past five years. The combination of cheap stock and expensive options sets up ideally for a covered call trade, buying AAL stock and selling AAL call options to hedge. AAL stock had plunged to the lowest levels ever as coronavirus fears rocked the airline industry.
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6192.0
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2020-03-11 00:00:00 UTC
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Why Airline Shares Are Falling Today
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AAL
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https://www.nasdaq.com/articles/why-airline-shares-are-falling-today-2020-03-11
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nan
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nan
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What happened
Airline stocks were under pressure again on Wednesday following a series of Wall Street downgrades and fears that government assistance could be less certain than some have hoped.
Shares of JetBlue Airways (NASDAQ: JBLU) were down more than 8%, and a number of other companies including Delta Air Lines (NYSE: DAL), United Airlines Holdings (NASDAQ: UAL), American Airlines Group (NASDAQ: AAL), Southwest Airlines (NYSE: LUV), and Hawaiian Holdings (NASDAQ: HA) were all down more than 6%.
Image source: Getty Images.
So what
The airline stocks have been among the hardest hit by the COVID-19 coronavirus scare, with some companies down more than 40% year to date. The industry has reported a collapse in travel demand to areas most affected by the outbreak and falling demand for domestic and international flights.
Most of the major airlines have cut capacity in recent days, indicating they expect a sustained slump that will likely eat into demand during the peak spring break, Easter, and summer vacation seasons. Should the outbreak cause the U.S. economy to spiral into a recession, it would likely impact business travel for most of 2020 if not beyond.
Airline data by YCharts
Airline stocks had a rare up day on Tuesday, buoyed by their cost-cutting announcements and the broader market's anticipation of action from Washington to try to mitigate the outbreak damage. The companies also should be able to offset at least some of the outbreak-related losses thanks to a plunge in crude oil prices, which annualized represents a $2 billion tailwind for the larger airlines.
But downgrades by Wall Street analysts at Evercore ISI and Argus, coupled with a round of news stories about how difficult it will be to quickly pass legislation in an election year, took the wind out of the sails on Wednesday.
Now what
Airlines are sure to be significantly impacted by the travel slowdown, and investors mindful of the numerous airline bankruptcies and failures that have accompanied past downturns appear to be saying "better safe than sorry" and fleeing the sector in case history repeats itself this time around.
Fortunately, the airlines are going into this crisis much healthier than they have been in years past, and I believe they all can weather the storm. But it is really hard to find a bottom during a developing situation, and the coronavirus outbreak appears far from contained.
Until it is, and airlines can offer more concrete estimates on the total impact of their businesses, it is going to be difficult for these airline stocks to gain altitude.
10 stocks we like better than Delta Air Lines
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Delta Air Lines wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of December 1, 2019
Lou Whiteman owns shares of Delta Air Lines. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines. The Motley Fool recommends Hawaiian Holdings and JetBlue Airways. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Shares of JetBlue Airways (NASDAQ: JBLU) were down more than 8%, and a number of other companies including Delta Air Lines (NYSE: DAL), United Airlines Holdings (NASDAQ: UAL), American Airlines Group (NASDAQ: AAL), Southwest Airlines (NYSE: LUV), and Hawaiian Holdings (NASDAQ: HA) were all down more than 6%. Most of the major airlines have cut capacity in recent days, indicating they expect a sustained slump that will likely eat into demand during the peak spring break, Easter, and summer vacation seasons. The companies also should be able to offset at least some of the outbreak-related losses thanks to a plunge in crude oil prices, which annualized represents a $2 billion tailwind for the larger airlines.
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Shares of JetBlue Airways (NASDAQ: JBLU) were down more than 8%, and a number of other companies including Delta Air Lines (NYSE: DAL), United Airlines Holdings (NASDAQ: UAL), American Airlines Group (NASDAQ: AAL), Southwest Airlines (NYSE: LUV), and Hawaiian Holdings (NASDAQ: HA) were all down more than 6%. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines. The Motley Fool recommends Hawaiian Holdings and JetBlue Airways.
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Shares of JetBlue Airways (NASDAQ: JBLU) were down more than 8%, and a number of other companies including Delta Air Lines (NYSE: DAL), United Airlines Holdings (NASDAQ: UAL), American Airlines Group (NASDAQ: AAL), Southwest Airlines (NYSE: LUV), and Hawaiian Holdings (NASDAQ: HA) were all down more than 6%. Airline data by YCharts Airline stocks had a rare up day on Tuesday, buoyed by their cost-cutting announcements and the broader market's anticipation of action from Washington to try to mitigate the outbreak damage. Until it is, and airlines can offer more concrete estimates on the total impact of their businesses, it is going to be difficult for these airline stocks to gain altitude.
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Shares of JetBlue Airways (NASDAQ: JBLU) were down more than 8%, and a number of other companies including Delta Air Lines (NYSE: DAL), United Airlines Holdings (NASDAQ: UAL), American Airlines Group (NASDAQ: AAL), Southwest Airlines (NYSE: LUV), and Hawaiian Holdings (NASDAQ: HA) were all down more than 6%. Should the outbreak cause the U.S. economy to spiral into a recession, it would likely impact business travel for most of 2020 if not beyond. * David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Delta Air Lines wasn't one of them!
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6193.0
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2020-03-10 00:00:00 UTC
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Why Airline Shares Are Climbing Today
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AAL
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https://www.nasdaq.com/articles/why-airline-shares-are-climbing-today-2020-03-10
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nan
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nan
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What happened
Shares of major airlines all climbed more than 5% on Tuesday morning after the companies announced sweeping moves designed to cushion the blow of a COVID-19 coronavirus-related travel slump. American Airlines Group (NASDAQ: AAL) and United Airlines Holdings (NASDAQ: UAL) led the sector higher, with Delta Air Lines (NYSE: DAL) and Southwest Airlines (NYSE: LUV) also climbing.
So what
Airline stocks have been among the hardest hit during the coronavirus sell-off, with shares of American losing nearly half of their value at their lows. The industry has reported that demand for travel into areas most affected by the outbreak has evaporated, and overall demand is falling rapidly.
United announced plans to cut capacity last week, and Delta and American followed on Tuesday morning by announcing their own cuts to international and domestic flights. The cuts are centered on trans-Pacific routes, but domestic flights will be reduced by 10% or more.
Image source: Getty Images.
Delta, American, United, and Southwest combine to account for about 80% of the domestic market, so the impact on U.S. air travel will be significant. But the cuts should help prevent fare wars as airlines scramble to fill empty seats at any price.
Delta is also instituting a companywide hiring freeze and will park some aircraft, as well as defer about $500 million in planned capital expenditures and delay a $500 million planned voluntary pension funding. American is accelerating cost-cutting.
On Tuesday, United followed up last week's cuts by suspending its share-buyback program, and its CEO and president will both forgo their base salaries during the crisis. All of the major airlines have suspended their first-quarter guidance due to the outbreak, though United admitted on Tuesday it expects to incur a loss in the current quarter. United also successfully raised $2 billion in added liquidity on Monday.
Southwest CEO Gary Kelly is also taking a pay cut during the crisis.
Now what
The market, mindful that past downturns have led to companies including Eastern Airlines, TWA, and Pan Am to disappear from the skies, has been worried about potential bankruptcies due to a prolonged travel slump. The industry has changed, and there was reason to believe all major airlines can weather this storm even before these latest moves, but seeing industry participants take bold actions seems to have reassured investors.
One morning with higher share prices is no reason to take a victory lap. The extent of the impact of the coronavirus on travel and the broader economy is still unknown but is likely to be substantial. While shares are up today, there is real risk that a bad headline in the hours or days to come will send stocks falling further.
For those able to handle the volatility, there is still an opportunity to selectively buy airline stocks at attractive valuations.
10 stocks we like better than United Airlines Holdings
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and United Airlines Holdings wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of December 1, 2019
Lou Whiteman owns shares of Delta Air Lines. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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American Airlines Group (NASDAQ: AAL) and United Airlines Holdings (NASDAQ: UAL) led the sector higher, with Delta Air Lines (NYSE: DAL) and Southwest Airlines (NYSE: LUV) also climbing. What happened Shares of major airlines all climbed more than 5% on Tuesday morning after the companies announced sweeping moves designed to cushion the blow of a COVID-19 coronavirus-related travel slump. All of the major airlines have suspended their first-quarter guidance due to the outbreak, though United admitted on Tuesday it expects to incur a loss in the current quarter.
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American Airlines Group (NASDAQ: AAL) and United Airlines Holdings (NASDAQ: UAL) led the sector higher, with Delta Air Lines (NYSE: DAL) and Southwest Airlines (NYSE: LUV) also climbing. United announced plans to cut capacity last week, and Delta and American followed on Tuesday morning by announcing their own cuts to international and domestic flights. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines.
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American Airlines Group (NASDAQ: AAL) and United Airlines Holdings (NASDAQ: UAL) led the sector higher, with Delta Air Lines (NYSE: DAL) and Southwest Airlines (NYSE: LUV) also climbing. United announced plans to cut capacity last week, and Delta and American followed on Tuesday morning by announcing their own cuts to international and domestic flights. 10 stocks we like better than United Airlines Holdings When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen.
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American Airlines Group (NASDAQ: AAL) and United Airlines Holdings (NASDAQ: UAL) led the sector higher, with Delta Air Lines (NYSE: DAL) and Southwest Airlines (NYSE: LUV) also climbing. What happened Shares of major airlines all climbed more than 5% on Tuesday morning after the companies announced sweeping moves designed to cushion the blow of a COVID-19 coronavirus-related travel slump. United announced plans to cut capacity last week, and Delta and American followed on Tuesday morning by announcing their own cuts to international and domestic flights.
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6194.0
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2020-03-10 00:00:00 UTC
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Airlines Announce Sweeping Cuts to Combat Coronavirus Travel Slump
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AAL
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https://www.nasdaq.com/articles/airlines-announce-sweeping-cuts-to-combat-coronavirus-travel-slump-2020-03-10
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nan
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nan
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Delta Air Lines (NYSE: DAL) and American Airlines Group (NASDAQ: AAL) on Tuesday became the latest U.S. airlines to announce broad domestic and international capacity cuts as the industry attempts to grapple with collapsing demand due to the COVID-19 coronavirus outbreak.
Delta in a statement said it would reduce international capacity by 20% to 25% and domestic by 10% to 15%, with transpacific capacity to be reduced by about 65%. The airline is also instituting a companywide hiring freeze and will park some aircraft, as well as defer about $500 million in capital expenditures and delay a $500 million planned voluntary pension funding.
Image source: Getty Images.
"Over the last 10 years, we've transformed Delta by strengthening the balance sheet, diversifying our revenue streams and enhancing operational and financial flexibility," CEO Ed Bastian said in a statement. "The environment is fluid and trends are changing quickly, but we are well positioned to manage this challenge and are taking actions to ensure that Delta maintains its leadership position and strong financial foundation."
American, meanwhile, said it would reduce summer peak international capacity by 10% and April domestic capacity by 7.5% compared to the current schedule. As with Delta transpacific flying will account for the bulk of the cuts, with capacity to drop by 55%.
Both airlines also suspended their first quarter guidance.
The airline sector has been hard hit by coronavirus concerns, which has caused corporate and leisure travel demand to evaporate. Though it is too soon to say when demand will return, airlines are assuming the outbreak will affect the key summer travel season. United Airlines Holdings (NASDAQ: UAL) and JetBlue Airways already announced capacity cuts, while Southwest Airlines (NYSE: LUV) CEO Gary Kelly said he would take a 10% pay cut during the crisis.
United on Tuesday it expects to incur a loss in the first quarter. The airline suspended its share buybacks and said it raised $2 billion in new liquidity on Monday to provide more of a cushion through the downturn. The airline's CEO and president are also forgoing their base salaries during the crisis.
The airlines should at least benefit from a drop in oil prices, as fuel represents upwards of one-quarter of their total operational expenses. Delta said the recent drop in crude prices amounts to an annualized $2 billion cost benefit for the company.
10 stocks we like better than Delta Air Lines
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Delta Air Lines wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of December 1, 2019
Lou Whiteman owns shares of Delta Air Lines. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines. The Motley Fool recommends JetBlue Airways. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Delta Air Lines (NYSE: DAL) and American Airlines Group (NASDAQ: AAL) on Tuesday became the latest U.S. airlines to announce broad domestic and international capacity cuts as the industry attempts to grapple with collapsing demand due to the COVID-19 coronavirus outbreak. "Over the last 10 years, we've transformed Delta by strengthening the balance sheet, diversifying our revenue streams and enhancing operational and financial flexibility," CEO Ed Bastian said in a statement. The airline sector has been hard hit by coronavirus concerns, which has caused corporate and leisure travel demand to evaporate.
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Delta Air Lines (NYSE: DAL) and American Airlines Group (NASDAQ: AAL) on Tuesday became the latest U.S. airlines to announce broad domestic and international capacity cuts as the industry attempts to grapple with collapsing demand due to the COVID-19 coronavirus outbreak. United Airlines Holdings (NASDAQ: UAL) and JetBlue Airways already announced capacity cuts, while Southwest Airlines (NYSE: LUV) CEO Gary Kelly said he would take a 10% pay cut during the crisis. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines.
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Delta Air Lines (NYSE: DAL) and American Airlines Group (NASDAQ: AAL) on Tuesday became the latest U.S. airlines to announce broad domestic and international capacity cuts as the industry attempts to grapple with collapsing demand due to the COVID-19 coronavirus outbreak. United Airlines Holdings (NASDAQ: UAL) and JetBlue Airways already announced capacity cuts, while Southwest Airlines (NYSE: LUV) CEO Gary Kelly said he would take a 10% pay cut during the crisis. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines.
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Delta Air Lines (NYSE: DAL) and American Airlines Group (NASDAQ: AAL) on Tuesday became the latest U.S. airlines to announce broad domestic and international capacity cuts as the industry attempts to grapple with collapsing demand due to the COVID-19 coronavirus outbreak. United Airlines Holdings (NASDAQ: UAL) and JetBlue Airways already announced capacity cuts, while Southwest Airlines (NYSE: LUV) CEO Gary Kelly said he would take a 10% pay cut during the crisis. The Motley Fool owns shares of and recommends Delta Air Lines and Southwest Airlines.
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6195.0
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2020-03-10 00:00:00 UTC
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American Airlines To Cut Domestic, International Capacity Due To Coronavirus
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AAL
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https://www.nasdaq.com/articles/american-airlines-to-cut-domestic-international-capacity-due-to-coronavirus-2020-03-10
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nan
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nan
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(RTTNews) - American Airlines Group Inc. (AAL) said Tuesday it has made additional adjustments to its schedule and will reduce international as well as domestic capacity in response to lower travel demand due to coronavirus or COVID-19.
The airline plans to reduce international capacity for the summer peak by 10 percent compared to the previous selling schedule. This includes a 55 percent reduction in trans-Pacific capacity.
American Airlines will also reduce its domestic capacity in April by 7.5 percent compared to the current schedule. The airline will decrease frequencies on markets with robust schedule patterns and cancel routes where customers can be easily re-accommodated.
American Airline said it is suspending service to mainland China and Hong Kong from Los Angeles through the summer, suspending service to mainland China from Dallas-Fort Worth through the summer, and also suspending service to Hong Kong or HKG from Dallas-Fort Worth or DFW through June. DFW-HKG will resume with a reduced schedule in July.
Further, the airline is extending the suspension of service to Seoul, South Korea from DFW into early May. Flights to Tokyo's Narita International Airport and Haneda International Airport from Los Angeles and Dallas-Fort Worth will be operated with smaller wide-body aircraft beginning in May.
Regarding the airline's operations to Europe, American said it is suspending service to Rome from Philadelphia effective immediately through the end of April, extending the suspension of service to Milan, and also suspending flights to Rome from Chicago and Charlotte through early summer.
The company is also delaying the seasonal resumption of flights to Barcelona from Charlotte and to Venice from Chicago to early June.
Further, the airline is delaying the seasonal resumption of flights to Rome from New York and DFW through the end of April, and suspending operation of its second daily flight from DFW to Rome for the summer.
American is reducing service to Paris and Madrid for parts of May and June.
Moving on to South America, American Airlines said that flights to Montevideo, Uruguay from Miami will become seasonal, with service ending in May and resuming in December. Flights to Santiago, Chile from DFW will be suspended through April.
The company said it will redeploy wide-body aircraft on key domestic routes in its network and introduce new seasonal service between Chicago and Honolulu this summer on a Boeing 787-9.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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(RTTNews) - American Airlines Group Inc. (AAL) said Tuesday it has made additional adjustments to its schedule and will reduce international as well as domestic capacity in response to lower travel demand due to coronavirus or COVID-19. Moving on to South America, American Airlines said that flights to Montevideo, Uruguay from Miami will become seasonal, with service ending in May and resuming in December. The company said it will redeploy wide-body aircraft on key domestic routes in its network and introduce new seasonal service between Chicago and Honolulu this summer on a Boeing 787-9.
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(RTTNews) - American Airlines Group Inc. (AAL) said Tuesday it has made additional adjustments to its schedule and will reduce international as well as domestic capacity in response to lower travel demand due to coronavirus or COVID-19. American Airlines will also reduce its domestic capacity in April by 7.5 percent compared to the current schedule. American Airline said it is suspending service to mainland China and Hong Kong from Los Angeles through the summer, suspending service to mainland China from Dallas-Fort Worth through the summer, and also suspending service to Hong Kong or HKG from Dallas-Fort Worth or DFW through June.
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(RTTNews) - American Airlines Group Inc. (AAL) said Tuesday it has made additional adjustments to its schedule and will reduce international as well as domestic capacity in response to lower travel demand due to coronavirus or COVID-19. American Airline said it is suspending service to mainland China and Hong Kong from Los Angeles through the summer, suspending service to mainland China from Dallas-Fort Worth through the summer, and also suspending service to Hong Kong or HKG from Dallas-Fort Worth or DFW through June. Regarding the airline's operations to Europe, American said it is suspending service to Rome from Philadelphia effective immediately through the end of April, extending the suspension of service to Milan, and also suspending flights to Rome from Chicago and Charlotte through early summer.
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(RTTNews) - American Airlines Group Inc. (AAL) said Tuesday it has made additional adjustments to its schedule and will reduce international as well as domestic capacity in response to lower travel demand due to coronavirus or COVID-19. American Airlines will also reduce its domestic capacity in April by 7.5 percent compared to the current schedule. Regarding the airline's operations to Europe, American said it is suspending service to Rome from Philadelphia effective immediately through the end of April, extending the suspension of service to Milan, and also suspending flights to Rome from Chicago and Charlotte through early summer.
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6196.0
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2020-03-10 00:00:00 UTC
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Monday May Have Been Warren Buffett's Worst Day Ever
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AAL
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https://www.nasdaq.com/articles/monday-may-have-been-warren-buffetts-worst-day-ever-2020-03-10
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nan
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nan
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No doubt, Warren Buffett is one of the greatest investors of all time. However, that doesn't mean he doesn't make mistakes. Specifically, some have been critical of Buffett's lack of aggression during the past 11-year bull market, piling up $125 billion in cash on the Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) balance sheet as stocks have soared. However, the recent market plunge is making Buffett's conservatism look very wise indeed.
On the other hand, when you look at what Buffett already owns, unfortunately for Berkshire shareholders, Buffett is concentrated in some of the hardest-hit sectors of the entire market, not only on Monday, but over the past two weeks.
Image source: The Motley Fool.
An ugly tape for Berkshire
Buffett is famous for concentrating bets in areas in which he has a circle of competence. Unfortunately, outside of Apple (NASDAQ: AAPL), which remains Berkshire's largest stock holding, that means big bets in large U.S. banks, all the major U.S. airlines, and even some energy exposure to boot. Here are some of Buffett's largest holdings, and how they fared on Monday, March 9.
HOLDING
RANKING IN BERKSHIRE PORTFOLIO, BY SIZE
PERCENTAGE LOSS ON MONDAY, MARCH 9
Apple (NASDAQ: AAPL)
1
7.9%
Bank of America (NYSE: BAC)
3
14.7%
American Express (NYSE: AXP)
4
9.2%
Wells Fargo (NYSE: WFC)
5
12.4%
Kraft Heinz (NASDAQ: KHC)
6
7.95%
JPMorgan Chase (NYSE: JPM)
7
13.6%
US Bancorp (NYSE: USB)
9
14.4%
Delta Airlines (NYSE: DAL)
10
5.2%
Bank of New York Mellon (NYSE: BK)
11
8.2%
Southwest Airlines (NYSE: LUV)
13
4.6%
Goldman Sachs (NYSE: GS)
15
10.4%
General Motors (NYSE: GM)
16
13.9%
United Airlines (NASDAQ: UAL)
21
10.2%
PNC Financial Services (NYSE: PNC)
23
13.6%
American Airlines (NASDAQ: AAL)
25
7.6%
Suncor Energy (NYSE: SU)
37
19.3%
Occidental Petroleum (NYSE: OXY)
39
52%
Data source: CNBC.
Not only were most of these numbers extremely ugly, and off by even more than the S&P 500's 7.6% Monday decline, but even the airline stocks, which outperformed on a relative basis on Monday, only did so because they were already down so much over the past two weeks.
Especially brutal were Berkshire's energy positions in Suncor and Occidental, which were down by 19.3% and a stunning 52% on Monday. Berkshire has long had a stake in Suncor but recently invested in Occidental, first through preferred shares in April 2019, and then taking a position in the Occidental equity in the third quarter of 2019. Not only that, but Berkshire added to both positions in the fourth quarter.
Oops.
Occidental was so brutally hit because it had taken on lots of debt to acquire Anadarko Petroleum, a deal that closed last August and that activist investor Carl Icahn criticized. Now, the potential for a prolonged price war between Russia, Saudi Arabia, and U.S. shale is decimating energy stocks -- especially leveraged ones such as Occidental.
Then in a ripple effect, the banks fell precipitously, not only because they have some exposure to energy loans, but also because of tumbling long-term Treasury rates, which means lower interest income for banks in the near term.
10 Year Treasury Rate data by YCharts
It's just one day
Some may take recent results as evidence of a flaw in Buffett's investment process. However, that's not entirely fair. For one, Buffett is famous for buying stocks and holding them for the long term through ups and downs. While we are definitely in a "down" moment right now, it's especially important in times like these to remember these are just one day's results. And one day doesn't mean much when looking out over the long-term returns of the U.S. stock market.
SPY data by YCharts
Momma said there'd be days like this
Buffett's record is historic in its long-term success. But as yesterday's results show, even the most heralded investor in the world can have terrible days.
In fact, Buffett addressed the market sell-off a couple of weeks ago, when it was in its early stages. Unsurprisingly, he didn't mind the losses he was experiencing at all, proclaiming: "That's good for us actually -- we're a net buyer of stocks over time. ... Just like being a net buyer of food -- I expect to buy food the rest of my life, and I hope that food goes down in price tomorrow."
Meanwhile, investors should take solace that even you probably did better than Buffett did on Monday. But investing isn't about daily paper losses. If you believe in the long-term prospects of your stocks, having big losses over any one day, week, month, or even year doesn't mean you're wrong, it's not a reason to beat yourself up, and it's certainly not a reason to quit investing. Though days like Monday aren't fun, over the long term, stocks on the whole will certainly yield much more than low-yielding Treasuries, provided you pick high-quality stocks at reasonable prices, and hold on for the long-term.
And stock prices got much more reasonable yesterday.
10 stocks we like better than Berkshire Hathaway
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Berkshire Hathaway (A shares) wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of December 1, 2019
Billy Duberstein owns shares of Apple, Bank of America, Berkshire Hathaway (B shares), and JPMorgan Chase and has the following options: short June 2020 $400 calls on Apple. His clients may own shares of the companies mentioned. The Motley Fool owns shares of and recommends Apple, Berkshire Hathaway (B shares), Delta Air Lines, and Southwest Airlines and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short March 2020 $225 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Apple (NASDAQ: AAPL) 1 7.9% Bank of America (NYSE: BAC) 3 14.7% American Express (NYSE: AXP) 4 9.2% Wells Fargo (NYSE: WFC) 5 12.4% Kraft Heinz (NASDAQ: KHC) 6 7.95% JPMorgan Chase (NYSE: JPM) 7 13.6% US Bancorp (NYSE: USB) 9 14.4% Delta Airlines (NYSE: DAL) 10 5.2% Bank of New York Mellon (NYSE: BK) 11 8.2% Southwest Airlines (NYSE: LUV) 13 4.6% Goldman Sachs (NYSE: GS) 15 10.4% General Motors (NYSE: GM) 16 13.9% United Airlines (NASDAQ: UAL) 21 10.2% PNC Financial Services (NYSE: PNC) 23 13.6% American Airlines (NASDAQ: AAL) 25 7.6% Suncor Energy (NYSE: SU) 37 19.3% Occidental Petroleum (NYSE: OXY) 39 52% Data source: CNBC. Unfortunately, outside of Apple (NASDAQ: AAPL), which remains Berkshire's largest stock holding, that means big bets in large U.S. banks, all the major U.S. airlines, and even some energy exposure to boot. Occidental was so brutally hit because it had taken on lots of debt to acquire Anadarko Petroleum, a deal that closed last August and that activist investor Carl Icahn criticized.
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Apple (NASDAQ: AAPL) 1 7.9% Bank of America (NYSE: BAC) 3 14.7% American Express (NYSE: AXP) 4 9.2% Wells Fargo (NYSE: WFC) 5 12.4% Kraft Heinz (NASDAQ: KHC) 6 7.95% JPMorgan Chase (NYSE: JPM) 7 13.6% US Bancorp (NYSE: USB) 9 14.4% Delta Airlines (NYSE: DAL) 10 5.2% Bank of New York Mellon (NYSE: BK) 11 8.2% Southwest Airlines (NYSE: LUV) 13 4.6% Goldman Sachs (NYSE: GS) 15 10.4% General Motors (NYSE: GM) 16 13.9% United Airlines (NASDAQ: UAL) 21 10.2% PNC Financial Services (NYSE: PNC) 23 13.6% American Airlines (NASDAQ: AAL) 25 7.6% Suncor Energy (NYSE: SU) 37 19.3% Occidental Petroleum (NYSE: OXY) 39 52% Data source: CNBC. Unfortunately, outside of Apple (NASDAQ: AAPL), which remains Berkshire's largest stock holding, that means big bets in large U.S. banks, all the major U.S. airlines, and even some energy exposure to boot. The Motley Fool owns shares of and recommends Apple, Berkshire Hathaway (B shares), Delta Air Lines, and Southwest Airlines and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short March 2020 $225 calls on Berkshire Hathaway (B shares).
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Apple (NASDAQ: AAPL) 1 7.9% Bank of America (NYSE: BAC) 3 14.7% American Express (NYSE: AXP) 4 9.2% Wells Fargo (NYSE: WFC) 5 12.4% Kraft Heinz (NASDAQ: KHC) 6 7.95% JPMorgan Chase (NYSE: JPM) 7 13.6% US Bancorp (NYSE: USB) 9 14.4% Delta Airlines (NYSE: DAL) 10 5.2% Bank of New York Mellon (NYSE: BK) 11 8.2% Southwest Airlines (NYSE: LUV) 13 4.6% Goldman Sachs (NYSE: GS) 15 10.4% General Motors (NYSE: GM) 16 13.9% United Airlines (NASDAQ: UAL) 21 10.2% PNC Financial Services (NYSE: PNC) 23 13.6% American Airlines (NASDAQ: AAL) 25 7.6% Suncor Energy (NYSE: SU) 37 19.3% Occidental Petroleum (NYSE: OXY) 39 52% Data source: CNBC. See the 10 stocks *Stock Advisor returns as of December 1, 2019 Billy Duberstein owns shares of Apple, Bank of America, Berkshire Hathaway (B shares), and JPMorgan Chase and has the following options: short June 2020 $400 calls on Apple. The Motley Fool owns shares of and recommends Apple, Berkshire Hathaway (B shares), Delta Air Lines, and Southwest Airlines and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short March 2020 $225 calls on Berkshire Hathaway (B shares).
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Apple (NASDAQ: AAPL) 1 7.9% Bank of America (NYSE: BAC) 3 14.7% American Express (NYSE: AXP) 4 9.2% Wells Fargo (NYSE: WFC) 5 12.4% Kraft Heinz (NASDAQ: KHC) 6 7.95% JPMorgan Chase (NYSE: JPM) 7 13.6% US Bancorp (NYSE: USB) 9 14.4% Delta Airlines (NYSE: DAL) 10 5.2% Bank of New York Mellon (NYSE: BK) 11 8.2% Southwest Airlines (NYSE: LUV) 13 4.6% Goldman Sachs (NYSE: GS) 15 10.4% General Motors (NYSE: GM) 16 13.9% United Airlines (NASDAQ: UAL) 21 10.2% PNC Financial Services (NYSE: PNC) 23 13.6% American Airlines (NASDAQ: AAL) 25 7.6% Suncor Energy (NYSE: SU) 37 19.3% Occidental Petroleum (NYSE: OXY) 39 52% Data source: CNBC. On the other hand, when you look at what Buffett already owns, unfortunately for Berkshire shareholders, Buffett is concentrated in some of the hardest-hit sectors of the entire market, not only on Monday, but over the past two weeks. Especially brutal were Berkshire's energy positions in Suncor and Occidental, which were down by 19.3% and a stunning 52% on Monday.
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6197.0
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2020-03-10 00:00:00 UTC
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4 Brand-Name Stocks That Haven't Been This Cheap in 10 Years (or Longer)
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AAL
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https://www.nasdaq.com/articles/4-brand-name-stocks-that-havent-been-this-cheap-in-10-years-or-longer-2020-03-10
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nan
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nan
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Investors have had a bit of a rude awakening over the past two-plus weeks. Amid the longest economic expansion in U.S. history and a more than decade-long bull market, they've been reminded that the stock market can, and will, swing in both directions.
Over a 10-session stretch, the 123-year-old Dow Jones Industrial Average logged its two largest single-day point gains in history, as well as five of its 10 biggest single-session point declines of all-time. This volatility is being caused by the global spread of coronavirus disease 2019 (COVID-2019) and the subsequent uncertainty that COVID-19 could have on global supply chains. The clear indication from the market over the past two-plus weeks is there's real concern about a global and/or U.S. recession.
But as the stock market has "plunged," so have the valuations of a number of brand-name companies. It didn't take me long at all to locate four well-known stocks that are currently cheaper than they've been at any point over the past 10 years. Keep in mind that "value" can be interpreted a lot of ways, with everything from book value and cash flow, to more traditional metrics like forward price-to-earnings ratio, taken into account.
Image source: Getty Images.
Wells Fargo
When it comes to cheap banking stocks, money-center giant Wells Fargo (NYSE: WFC) probably leads the list. As of this past weekend, Wells Fargo was valued at just 92% of its book value and a little more than 9 times its forward earnings per share estimate from Wall Street. The book value figure is at least a decade low, with the forward P/E figure an eight-year low.
Much of this underperformance in Wells Fargo is its own doing. For those who may not recall, Wells Fargo employees wound up opening 3.5 million fake accounts as part of an aggressive product cross-selling campaign at the branch level. When announced in 2016, it completely wrecked management's reputation, with Wells Fargo now on its third CEO since the scandal was made public.
However, the company agreed to pay $3 billion to settle criminal and civil litigation tied to these fake accounts last month. This isn't to say that Wells Fargo will immediately rebuild the trust it had with consumers, but it's feasible to assume that the negative overhang of this debacle will slowly but surely fade away. That makes Wells Fargo and its 5.2% dividend yield a potentially attractive stock to consider for investors with a long-term mindset.
Image source: American Airlines.
American Airlines Group
If there's one industry that's been absolutely clobbered by the spread of the COVID-19 illness, it's the airline industry. Airlines require a lot of capital to operate, and they historically perform very poorly when hit with recessions or exogenous shocks.
American Airlines Group (NASDAQ: AAL) is the perfect case in point. American Airlines has lost practically half its value over the past four weeks, with its stock now valued at just 1.9 times its cash flow and a little over 3 times next year's earnings per share (EPS). The forward EPS figure is at least a decade low, while the valuation to cash flow is the lowest it's been since American was working through bankruptcy proceedings in 2012.
However, a low share price doesn't always mean a well-known stock is a buy. While an argument can rightly be made that investors have overreacted to the COVID-19 scare, American Airlines is also the most indebted of all major airlines. The company's push to modernize its fleet has ballooned its debt beyond $33 billion, and pushed its net debt to nearly $30 billion. In short, American Airlines is ill-prepared if this drop-off in travel extends for months to come.
Image source: Getty Images.
Altria Group
Another industry that's fallen out of favor with most investors is tobacco. Altria Group (NYSE: MO) has lost in the neighborhood of 45% of its value in less than three years, primarily due to U.S. adult smoking rates pushing to an all-time low. As education surrounding the dangers of smoking tobacco has improved, Altria has seen its cigarette shipment volume tail off.
Following the last two weeks of heightened volatility in the stock market, Altria's forward P/E and price-to-cash-flow have declined to 9.6 and 10, respectively. Both are low-water marks dating back to at least 2010, if not well before. Not to mention, Altria's sought-after dividend is now up to a whopping 7.7%.
For those of you who avoid vice stocks, there's nothing to see here. But if vice stocks aren't a turnoff, Altria Group may be worth a closer look. It's had some miscues of late, with its investment in Juul being written down on two separate occasions, and its $1.8 billion equity stake in Canadian pot stock Cronos Group also underwater. However, Altria has incredible pricing power on its tobacco products, and the company has historically not been shy about repurchasing its own stock to create shareholder value.
Image source: Getty Images.
U.S. Bancorp
Circling back to the banking industry once more, U.S. Bancorp (NYSE: USB), the namesake behind U.S. Bank branches, is pushing into rarely chartered territory on the valuation front. Since mid-December, U.S. Bancorp has shed roughly 30% of its value, all while seeing its forward P/E and price-to-book value decline to 9.8 and 1.41, respectively. Both figures are the lowest they've been since at least 2010.
The big concern of late is that the Federal Reserve may have to get even more aggressive with its monetary playbook, including further easing of the federal funds rate, to keep the U.S. economy out of recession. As interest rates fall, banks will likely see their net interest margin shrink. Banks are a cyclical industry, meaning any hiccups in the U.S. economy would likely result in profits declining.
But even if such a scenario comes to fruition, U.S. Bancorp has proven itself to be a high-quality financial institution. Management avoided the risky derivatives that sank many of its peers during the financial crisis, with U.S. Bancorp predominantly focused on growing its deposits and loans, and shrinking noninterest expenses. Having consistently produced one of the highest return on assets in the banking industry, U.S. Bancorp may offer real value here.
10 stocks we like better than Wells Fargo
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Wells Fargo wasn't one of them! That's right -- they think these 10 stocks are even better buys.
See the 10 stocks
*Stock Advisor returns as of December 1, 2019
Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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American Airlines Group (NASDAQ: AAL) is the perfect case in point. For those who may not recall, Wells Fargo employees wound up opening 3.5 million fake accounts as part of an aggressive product cross-selling campaign at the branch level. Altria Group (NYSE: MO) has lost in the neighborhood of 45% of its value in less than three years, primarily due to U.S. adult smoking rates pushing to an all-time low.
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American Airlines Group (NASDAQ: AAL) is the perfect case in point. The clear indication from the market over the past two-plus weeks is there's real concern about a global and/or U.S. recession. Image source: Getty Images.
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American Airlines Group (NASDAQ: AAL) is the perfect case in point. Wells Fargo When it comes to cheap banking stocks, money-center giant Wells Fargo (NYSE: WFC) probably leads the list. 10 stocks we like better than Wells Fargo When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen.
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American Airlines Group (NASDAQ: AAL) is the perfect case in point. Much of this underperformance in Wells Fargo is its own doing. American Airlines has lost practically half its value over the past four weeks, with its stock now valued at just 1.9 times its cash flow and a little over 3 times next year's earnings per share (EPS).
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6198.0
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2020-03-10 00:00:00 UTC
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5 Top Stock Trades for Wednesday: AMZN, DKS, AAL, BMY, UAL
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AAL
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https://www.nasdaq.com/articles/5-top-stock-trades-for-wednesday%3A-amzn-dks-aal-bmy-ual-2020-03-10
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nan
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nan
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The market gapped up by 3.8%, gave up all of it gains and then ripped to new highs ahead of the close. That said, hereâÂÂs a few top stock trades for Wednesday.
Top Stock Trades for Tomorrow No. 1: Amazon (AMZN)
Source: Chart courtesy of StockCharts.com
Amazon (NASDAQ:) caught my eye on Monday, as the S&P 500 fell almost 8% for the day.
HereâÂÂs a stock with a near-$1 trillion market cap that had lagged its mega-cap peers for months.àIn January, we finally got a big-time breakout in the stock as Amazon approached $2,175. However, it could not surpass this level and had succumbed to the recent selling pressure.
The stock is still trying to hold up, though. It didnâÂÂt retest MondayâÂÂs low like the S&P 500 did in early Tuesday trading. In fact, itâÂÂs trying to build off those lows, as bulls circle the name looking for some value down more than 12% from the highs.
HereâÂÂs what I need to see now. Over the $1,863 mark puts AMZN above the 100-day and 200-day moving averages. It puts $1,900 in play, as well as the 50-day moving average. Above that, and $2,000 is possible.
Below $1,800 and uptrend support, however, and MondayâÂÂs low is in play. Below that, and technically speaking, $1,700 is possible.
Top Stock Trades for Tomorrow No. 2: DickâÂÂs Sporting Goods (DKS)
Source: Chart courtesy of StockCharts.com
A promising play turned ugly, as DickâÂÂs Sporting Goods (NYSE:) gave up most its post-earnings gains on Tuesday. Worse, the high came just below the 200-day moving average.
Now investors need to see the $33 mark hold as support. Should it fail, it puts the $31 low from August in play. If it does hold as support, look for a rebound back up to the mid-$30s, with $38 in focus should DKS gain momentum.
Overall, itâÂÂs never a good day to see this type of action â particularly when the S&P 500 is up notably on the day.
Top Stock Trades for Tomorrow No. 3: American Airlines (AAL)
Source: Chart courtesy of StockCharts.com
American Airlines (NASDAQ:) for a while, but I will not pretend that I expected a decline of this magnitude or predicted a coronavirus scare.
This stock had been trading in a declining channel for years, with the 50-week moving average weighing on the stock. Once the $25 mark gave way as support, a violent decline took place as American Airlines stock knifed right through channel support.
Now finding buyers near $15, the stock is working on a rebound after announcing a capacity cut. I want to see if AAL can get up to the $19 to $20 area. From there, letâÂÂs see if it can gravitate higher, or if prior channel support turns to resistance.
Top Stock Trades for Tomorrow No. 4: Bristol-Myers Squibb (BMY)
Source: Chart courtesy of StockCharts.com
After closing its acquisition of Celgene, Bristol-Myers Squibb (NYSE:) has been quite strong. However, the coronavirus-induced selling pressure caused uptrend support to fail (blue line). The 50-day moving average also gave way, as has the 100-day moving average.
Now, $56 is on the line. And if BMY loses this mark, it puts a decline down to $54 in the cards. Here the stock has the 200-day moving average and gap-up support from October. A move down to around $53 will fill the gap.
On the upside â whether BMY stock tests lower or not â look to see if shares can reclaim the 100-day moving average. If the stock can, $62.25 is on watch, followed by the 50-day moving average.
Top Stock Trades for Tomorrow No. 5: United Airlines (UAL)
Source: Chart courtesy of StockCharts.com
Like American Air, United Airlines (NASDAQ:) is ripping higher on Tuesday â and there is a great lesson in this chart.ÃÂ
When bad news is rampant for a certain company or industry, the stock can get hammered beyond most investorsâ assumptions. That makes buying on the way down a very difficult and dangerous thing to do, and is referred to as âÂÂcatching a falling knife.âÂÂ
With United Airlines, there was no telling if the low was at $65, $57.50 or $50.ÃÂ
After a precipitous decline, investors finally â finally â have a low in the stock. ThatâÂÂs around $46, as traders can now measure against this mark to size up their risk appropriately. A break of $46 thatâÂÂs not quickly reclaimed could lead to more selling. But at least for now, this is the short-term bottom. So letâÂÂs see if it turns into the long-term low.ÃÂ
Bret Kenwell is the manager and author of and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long BMY.
The post appeared first on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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3: American Airlines (AAL) Source: Chart courtesy of StockCharts.com American Airlines (NASDAQ:) for a while, but I will not pretend that I expected a decline of this magnitude or predicted a coronavirus scare. I want to see if AAL can get up to the $19 to $20 area. If it does hold as support, look for a rebound back up to the mid-$30s, with $38 in focus should DKS gain momentum.
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3: American Airlines (AAL) Source: Chart courtesy of StockCharts.com American Airlines (NASDAQ:) for a while, but I will not pretend that I expected a decline of this magnitude or predicted a coronavirus scare. I want to see if AAL can get up to the $19 to $20 area. 2: DickâÂÂs Sporting Goods (DKS) Source: Chart courtesy of StockCharts.com A promising play turned ugly, as DickâÂÂs Sporting Goods (NYSE:) gave up most its post-earnings gains on Tuesday.
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3: American Airlines (AAL) Source: Chart courtesy of StockCharts.com American Airlines (NASDAQ:) for a while, but I will not pretend that I expected a decline of this magnitude or predicted a coronavirus scare. I want to see if AAL can get up to the $19 to $20 area. This stock had been trading in a declining channel for years, with the 50-week moving average weighing on the stock.
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3: American Airlines (AAL) Source: Chart courtesy of StockCharts.com American Airlines (NASDAQ:) for a while, but I will not pretend that I expected a decline of this magnitude or predicted a coronavirus scare. I want to see if AAL can get up to the $19 to $20 area. 1: Amazon (AMZN) Source: Chart courtesy of StockCharts.com Amazon (NASDAQ:) caught my eye on Monday, as the S&P 500 fell almost 8% for the day.
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6199.0
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2020-03-10 00:00:00 UTC
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Tuesday Sector Leaders: Energy, Industrial
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AAL
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https://www.nasdaq.com/articles/tuesday-sector-leaders%3A-energy-industrial-2020-03-10
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nan
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nan
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The best performing sector as of midday Tuesday is the Energy sector, up 1.5%. Within that group, Cimarex Energy Co (Symbol: XEC) and Marathon Oil Corp. (Symbol: MRO) are two large stocks leading the way, showing a gain of 12.3% and 11.3%, respectively. Among energy ETFs, one ETF following the sector is the Energy Select Sector SPDR ETF (Symbol: XLE), which is up 0.6% on the day, and down 43.14% year-to-date. Cimarex Energy Co, meanwhile, is down 67.38% year-to-date, and Marathon Oil Corp., is down 69.88% year-to-date. Combined, XEC and MRO make up approximately 1.5% of the underlying holdings of XLE.
The next best performing sector is the Industrial sector, up 1.4%. Among large Industrial stocks, American Airlines Group Inc (Symbol: AAL) and United Airlines Holdings Inc (Symbol: UAL) are the most notable, showing a gain of 9.1% and 7.2%, respectively. One ETF closely tracking Industrial stocks is the Industrial Select Sector SPDR ETF (XLI), which is up 0.9% in midday trading, and down 18.53% on a year-to-date basis. American Airlines Group Inc, meanwhile, is down 43.54% year-to-date, and United Airlines Holdings Inc, is down 43.06% year-to-date. Combined, AAL and UAL make up approximately 1.2% of the underlying holdings of XLI.
Comparing these stocks and ETFs on a trailing twelve month basis, below is a relative stock price performance chart, with each of the symbols shown in a different color as labeled in the legend at the bottom:
Here's a snapshot of how the S&P 500 components within the various sectors are faring in afternoon trading on Tuesday. As you can see, six sectors are up on the day, while two sectors are down.
SECTOR % CHANGE
Energy +1.5%
Industrial +1.4%
Financial +0.9%
Technology & Communications +0.9%
Services +0.7%
Materials +0.2%
Healthcare -0.0%
Consumer Products -0.3%
Utilities -2.3%
25 Dividend Giants Widely Held By ETFs »
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Combined, AAL and UAL make up approximately 1.2% of the underlying holdings of XLI. Among large Industrial stocks, American Airlines Group Inc (Symbol: AAL) and United Airlines Holdings Inc (Symbol: UAL) are the most notable, showing a gain of 9.1% and 7.2%, respectively. Comparing these stocks and ETFs on a trailing twelve month basis, below is a relative stock price performance chart, with each of the symbols shown in a different color as labeled in the legend at the bottom: Here's a snapshot of how the S&P 500 components within the various sectors are faring in afternoon trading on Tuesday.
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Among large Industrial stocks, American Airlines Group Inc (Symbol: AAL) and United Airlines Holdings Inc (Symbol: UAL) are the most notable, showing a gain of 9.1% and 7.2%, respectively. Combined, AAL and UAL make up approximately 1.2% of the underlying holdings of XLI. Within that group, Cimarex Energy Co (Symbol: XEC) and Marathon Oil Corp. (Symbol: MRO) are two large stocks leading the way, showing a gain of 12.3% and 11.3%, respectively.
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Among large Industrial stocks, American Airlines Group Inc (Symbol: AAL) and United Airlines Holdings Inc (Symbol: UAL) are the most notable, showing a gain of 9.1% and 7.2%, respectively. Combined, AAL and UAL make up approximately 1.2% of the underlying holdings of XLI. Among energy ETFs, one ETF following the sector is the Energy Select Sector SPDR ETF (Symbol: XLE), which is up 0.6% on the day, and down 43.14% year-to-date.
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Among large Industrial stocks, American Airlines Group Inc (Symbol: AAL) and United Airlines Holdings Inc (Symbol: UAL) are the most notable, showing a gain of 9.1% and 7.2%, respectively. Combined, AAL and UAL make up approximately 1.2% of the underlying holdings of XLI. The best performing sector as of midday Tuesday is the Energy sector, up 1.5%.
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