Author: Mark Holder, Stone Fox Capital
Covestor model: Opportunistic Arbitrage
Disclosures: Long AER
Below is great picture from a TulsaWorld article of the continual losses by American Airlines parent AMR Corp (NYSE: AMR). In good years, AMR makes a decent profit. In bad years, AMR has crushing losses. Even worse is the fact the losing years outweighed the good years 8 to 3 accumulating in a net loss of roughly $10.5B. How has this company even survived?
“American can’t really afford to do this, but they cannot afford not to do it,” said Robert Herbst, industry analyst and founder of AirlineFinancials.com. “American’s in serious financial trouble. They had to order these aircraft because without more fuel-efficient aircraft requiring less maintenance, American can’t compete. In the end, it could break American, but they really can’t afford not to order new aircraft,” Herbst said.
- Boyd and Herbst, both former American employees, said resolving the breach between management and labor is critical for American’s survival.
- Management/labor relations are at a low point as unionized mechanics, pilots and flight attendants have been unable to reach agreement with the company on new contracts after more than four years of negotiations.
“American Airlines faces bumpy road getting back in the black” Tulsa World, http://www.tulsaworld.com/business/article.aspx?subjectid=45&articleid=20110731_45_E1_ULNSnA54227