Passengers board DFW’s American Airlines B737 MAX for reintroduction aircraft on December 2, … [+]
AFP through Getty Images
If the first week of stock trading in 2021 is any indication, investors are still keeping an eye on American Airlines and regretting their competitors.
For the week ending Friday, when the S&P 500 index rose 2%, American shares were down 4.5% while shares in the other five major airlines traded flat up 1%.
On Thursday, Delta will begin the industry’s fourth-quarter earnings reports.
Key issues for all carriers are expected to be money burning and profiteering rates about when business travel returns.
Delta established status on January 1, when CEO Ed Bastian said in a note to staff, “We continue to expect to achieve a positive cash flow by spring. ”
But on Friday, Cowen & Co. analyst Helane Becker says expectations are “aggressive, given the current state of recordings and the negative effects of Covid’s travel.
“Delta is the most open airline to corporate travel,” Becker wrote in a note. “Physical travel is still down 85% and SMEs appear to be the only physical travelers flying.
“Delta had hoped to recover in business travel in 2H21, but it is becoming increasingly clear that business travel will not significantly increase revenue in 2021 as timelines will. vaccine moves, ”she wrote.
A Bank of America report released Friday also predicts a 15% decline in global business travel after Covid.
“By permission, these are the expectations of business travelers compared to corporate orders, but this 15% decline is largely in line with much of what we have heard from investors,” the report said. analysts led by Andrew Didora.
United plan to report on Jan. 21, with America likely to report after United, who are set to set a job release for Jan. 21.
American Sport has the highest debt in the industry and has headed toward a fourth-quarter daily cash burn of $ 30 million. It also projects to have more than $ 14 billion in liquidity by the end of the year.
Didora estimates that the carrier performs lower “with its balanced balance. ”JP Morgan analyst Jamie Baker posted a similar rating in a Dec. 16 report, when he wrote in a report that America, which closed the day before at $ 17.01, was trading too high.
“America is the name we get the most research on, often coming in the form of ‘How can you explain this (high) evaluation?” Baker wrote.
“We cannot identify any fundamental argument for the recent strength in AAL equality,” he said. “Better balance is upside down elsewhere.”
It may be a good idea to stay on Baker ‘s good side.
America has not seen $ 17 since its report. Instead, it fell for five straight days, finally dipping to $ 14.87 on Jan. 5, before closing Friday at $ 15.13.
Not to mention that America has no defenders, who argue that when the airline’s business revenues come back, inevitably, the rising tide will raise its -all boats, especially the one with powerful hubs in Charlotte, Dallas, Miami and Washington as well as the strong New York-London franchise.
Strong hubs need the now questionable strategy of running up debt to get a fleet with an average age of just 10 years, the youngest of peers, but reduced with excessive global consumption of planes as a result of coronavirus crisis.
The last time a lot of worthless planes were sitting around, someone started a ValuJet.
As was the case for United, on Friday Didora cut his rating to perform better from neutral, noting the “high corporate / international exposure and stretched appraisal (already above the middle of the net). historical evaluation area of 2019 EDITDAR). “
He followed Baker, who cut United to being obese from being obese on Dec. 16.
Airline shares did not perform well in 2020, when the S&P 500 ended the year up 16% while the South West – the best-played airline – fell 14%. In addition, Delta was down 31%, American Airlines was down 45% and United – the worst player – was down 51%.