Displaying items by tag: delta airlines

(Atlanta)

The market is making a very strong bet that American Airlines—one of the largest carriers in the US—is going to fail. Bloomberg data shows that based on credit default swap pricing, investors think there is nearly a 100% chance of the Texas-based carrier defaulting in the next five years. There is nothing particularly unique about American Airlines’ exposure to the COVID crisis, except that it has a great deal more debt than other carriers, making it much more vulnerable. For its part, American is trying to “right size” its budget and is planning to downsize its operating expenditures by about $12 bn this year.

FINSUM: Cost cuts are great, but if your revenue has fallen 90%+ plus, all the costs cuts in the world aren’t likely to keep up.

(Seattle)

The biggest aircraft maker in the country just put out a dire prediction (although not a surprising one)—that there will be a major airline bankruptcy this year. The airline industry has been wounded as never before, with demand falling more than 90% since this time last year. Most analysts think it will take until the end of year for demand to even rise to 50% of the year prior. Credit default swaps—a proxy for the odds a company will default—are very high right now. For instance, markets are putting a 54% chance that American Airlines defaults.

FINSUM: This is an odd comment from a company that is talking about its biggest clients. It speaks volumes.