American Airlines is in Deep Financial Stress

Mish

American Airlines does not have the financing for Boeing 737 Max aircraft it ordered. Repercussions are many.

In addition to not having financing, The company does not have sufficient passengers. So AA Threatens to Cancel Some Orders.

American executives told their Boeing counterparts in recent weeks they didn’t have sufficient financing for some of their MAX orders and would have to cancel them unless Boeing helped secure funding for the jets, the people familiar with the matter said.

Airlines and plane makers often posture during such negotiations, but the American-Boeing friction marks a twist in the 737 MAX saga. It was American whose push for a new fuel-efficient jet in 2011 helped spur Boeing to develop the MAX, an updated version of its decades-old 737 workhorse, rather than a new single-aisle aircraft.

For Boeing, losing American Airlines ’ 737 MAX orders would add to the Chicago aerospace giant’s worsening financial woes. After a loss of $636 million last year, it has announced plans to sharply reduce production and shed 10% of its 160,000-employee workforce.

In June, Norwegian Air Shuttle AS A became the latest airline to walk away from the 737 MAX, saying it was canceling its orders for 92 of the jets. That followed 313 earlier cancellations by other customers this year.

United Warns It May Cut 36,000 Employees

On July 8, I noted United Warns It May Cut 36,000 Employees

On June 30, the New York Times reported Airbus, Expecting Long Slump in Air Travel, Will Slash 15,000 Jobs.

Airbus CEO, Guillaume Faury, said he didn’t expect air travel to return to pre-virus levels before 2023 and potentially not until 2025.

Cascading Stress

Layoffs in the airlines leads to layoffs at the plane makers. Airlines in stress puts further stress on Boeing and Airbus. 

A Surge in Small Business Bankruptcies is Underway

Nearly everywhere you look there is cascading stress. A Surge in Small Business Bankruptcies is Underway

We can debate what the Next Stimulus Will Look Like, but many of these jobs are not  coming back, ever.

Mish

Comments (40)
No. 1-17
Stuki
Stuki

Looks like your answering the question in the "What Will the Next Covid Stimulus Bill Look Like?" post:

It will include debasing and taxing the productive, in order to ensure idle "bondholders", "pensioners", "investors", stockholders", "banks", "funds" and other waste, won't have to take a market loss on their "investment" in AA and Boeing. Nor any other useless zombie.

After all, it's America. Land of Useless Leeches feeding off competent productives...

tokidoki
tokidoki

No problem. Dave Portnoy and his army of monkeys will trade AA to the very end. If they could do it with Hertz, they sure could do the same s*** here.

RonJ
RonJ

"Nearly everywhere you look there is cascading stress."

Governments shutting down economies, will cause that.

ToInfinityandBeyond
ToInfinityandBeyond

Economy would have crashed even if the government did not shut down non essential business. The increased number of fatalities that would have resulted combined with the fact that this Covid virus is highly contagious would have been enough to convince consumers not to fly, cruise, vacation, dine out, attend concerts and sporting events etc.

TimeToTest
TimeToTest

I wish someone would stop and ask why airlines are so important? The planes will still exist and the skilled personal can be rehired by the next company.

We really are at the end of this credit cycle. When the most unproductive and mismanaged companies can’t be allowed to fail it’s just and endless loop of money creation.

Anna 7
Anna 7

Boeing is part of the MIC. Bailing out AA and getting them to buy those planes helps Boeing. Ergo...

awc13
awc13

Obiden will bring those jobs back

Bam_Man
Bam_Man

How many times has American already filed for bankruptcy?
All these airlines are serial bankruptcy filers.
The entire industry has never made a dime since its inception.
But this is how they "fly".

ToInfinityandBeyond
ToInfinityandBeyond

This is why we have bankruptcy laws. Let American file for bankruptcy and let the shareholders / bond holders feel some pain. We don’t need another taxpayer bailout. Airline industry is cooked for the foreseeable future.

Solon
Solon

I personally am looking forward to the days of more leg room and wider seats, less people on planes...

Just hide my VISA bill from me after I book.

Mish
Mish

Editor

In Utah safely - Last leg took way longer than expected.
Got here at 10:00 PM Sunday evening but just now able to comment.

Will not have movers until tomorrow to unload the Uhaul so in a hotel for at least Sunday night and perhaps Monday too.

Have a post scheduled for early Monday.

MiTurn
MiTurn

Asking out of ignorance, but can't any and every airline with Boeing or Airbus jets on order simply declare 'force majeure' and legally bail out on any future commitments to purchase? Considering the circumstances, this sounds legit.

Can someone help with this idea?

ReadyKilowatt
ReadyKilowatt

Sardy field (KASE) is back in business, as is Eagle County (KEGE). I imagine Centennial is seeing more flights/day than Denver International. Meanwhile, there are still only three scheduled commercial flights per day into Aspen.

Montana33
Montana33

This is sad but what’s amazing is the number of people who are getting on planes. I know someone who had a moderate case of the virus and did not get another test showing a negative result and then got on two planes within days. There are no controls. Sick people are not quarantined. United and American are selling middle seats. It’s no wonder the virus is raging. I do support bailouts for airlines. We should save key transportation industries from ruin.

Six000mileyear
Six000mileyear

Maybe the FED can buy Boeing's airplanes, but that would bring instant howls that the FED should buy cars, dinners, and maybe hotel rooms. A form of sanctioned corruption. Unfortunately the howls should be the FED has broken its charter and needs to be disbanded.


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