Also in this playlist...
This transcript is automatically generated
-- -- -- actually downgraded AMR's stock just two weeks ago.
Citing American -- labor progress with its pilots Jeffrey -- as managing director for equity research -- -- a and he joins us right now by the way congratulations on the timing.
Thank you very much or is this mostly about labor I mean the headlines state fuel cost and there's an -- isn't this really -- mostly about the fact that.
Big they have to bring down their obligations to these unions.
-- that this is no that's not really so much about labor I think labor's a piece of the problem maybe 3040% of it but the bigger issue is.
The rest of the industry went through Chapter Eleven they -- pension obligations that they lowered -- infrastructure cost.
And their labor costs and they got labor productivity American.
Behind the ball they don't get the productivity everyone else does they have more debt they've been impaired in terms of their ability to compete and what this Chapter Eleven really doing is leveling the playing field.
You heard Dennis they'll talk about how many bankruptcies have been I think since 2000 I think if you go back to be regulations is like 189 the view that all of them it's just it's just ridiculous right it can you make money -- this industry make money.
Especially without that calling dining assigning the airline fees I mean the baggage fees -- change your ticket fees it's ridiculous and it seems like that's the only -- -- making money.
You know fifteen years ago I couldn't give away a railroad stock and a lot of people at the same arguments -- -- -- capital to be cutting prices keep getting service at.
Today one would argue rails -- the blue chips of the industrial space because this industry consolidated.
The management's Begin to focus on returns on capital and pricing they raise prices to customers.
And this became an investor -- industry.
You'd be surprised but about five years from now that's what we say about the airline industry we've consolidated not just the big.
A lot of consolidates and already I mean realistically how many airlines are other big airlines -- -- consolidations part of the story I think the other part is a disciplined by management and capacity addition I think the third part is changing the revenue model.
I'm not arguing eighty dollar fuel may be the best thing happen in this industry -- -- force these companies to put all the excess capacity out in the desert.
And actually start charging us for baggage and charging us for services we were using.
In the long run it's the right model the question is how to we get away from -- and I -- people and just kind of charge of for the service of mobile.
Because this has been my thought I think they've had so many mindless -- wars over the years and over the decades that we become we the customer.
Have become so accustomed to a price level that really a relatively.
It's cheaper we take into -- for -- account inflation for the last decade or so.
The airline ticket -- are probably.
As cheap as if anything is spending no I mean everything has gone up more than an airline -- and yet how did they get these prices on us how can he raise prices without -- On -- but I think what you're seeing is the same thing we -- on -- same thing we -- on trucking these industries -- -- regulated 78 to eighty.
We had a lot of new entrance for twenty years finally the industry's consolidated nearly two thousands.
Begin to -- rational about capacity rational about pricing I think the same things happening with the airline industry.
Look at who's gone AirTran.
All the low cost carriers have been swallowed up ATA even southwest doesn't have the energy use to current on the network -- I think higher airfares is -- gonna have to used to.
I'm -- let's go Jaffray is this an area people should be thinking about investing in right now obviously -- rival stocks are hot would have -- higher today.
Well I think so I mean it might surprise you both united and delta -- throwing off two billion a free cash flow this year.
They could have investment grade balance sheets within two years because they have right size -- cost structure this is what American needs to do.
But we actually think people would find the airline industry surprisingly invest -- bull.
Americans kind of the last company with -- impaired structure to try to go -- -- Chapter Eleven effects and that's really what you're seeing.
This and I was rooting for sir Freddie -- so you -- that it could happen that's a lot of things are different coffin concerning do you.
Filter by section