On July 14, American Airlines stock was at a good point: $21.45. Nevertheless, as the market has opened, the stock is sinking: it is currently at $18.45, resulting in a 14% loss. That’s not the worst part. American Airlines finished the first quarter with a tremendous $48 billion of debt and lease liabilities, along with a $6.8 billion pension deficit, compared to just $14 billion of unrestricted cash and investments. This represents by far the biggest debt in the industry.
While American’s net debt became less last quarter, including $2.6 billion in cash payroll support grants. Also, the second quarter tends to be seasonally strong for airlines’ cash flow. Without those tailwinds, net debt could skyrocket again in the second part of 2021.
Despite small cash flow, not qualitative earnings prospects, and massive debt load, American Airlines’ market cap is higher than it was at the start of 2020 (before the pandemic). To be straightforward, that doesn’t make sense. This airline stock is the one that long-term investors should avoid.
Finance and Entertainment Reporter
Richard is a bottle of wine – the older the sweeter. He has already found the sweetest hobby in writing entertainment and finance news for Own Snap. Readers get the updated posts regularly from him searching for real-time news.