Blog

Our Experts Comment the Times Series

See All the Comments
rss

Compression At Play: AAL Update

04 December 2020 by jbchevrel

American Airlines Group, Inc. (AAL) offers air transportation for passengers and cargo. AAL CDS is a constituent of CDX HY since series s28 (included) and took part in the broad compression which we have been witnessing recently. Although the last two months rally wasn’t a straight line, this name has come from 52% to 25%. The 5% 2022s rallied about 20 points over that period, and 55 points since the low (33%) reached in the middle of May. Today AAL said that it expects Q4 average daily Cash Burn to be at the high end of the previous guidance range of [$25M,$30M]. This is the consequence of the deceleration that AAL experienced in bookings, which started before Thanksgiving and has persisted into December. This $2.7B ish Q4 Cash Burn is the consequence of rising COVID stats across the US this autumn and, in some cases, travel restrictions or officials’ advices against travelling. As a result, AAL announced that they expect to end Q4 with $14B in total available liquidity. This was enough for the market to keep compressing today, by 3 additional points. In parallel, CDX HY rose by a quarter of a point today (€ time). At the end of Q3, AAL had lost -$5.2B year to date, and they reported $41B of Total Debt on balance sheet. The 2020 Net Loss is currently expected at -$9.4B, and 2021 is expected at -$2.8B, according to data compilated by Bloomberg. The vaccine-related news which we got in November have mostly impacted the 2021 figure, with which the market is comfortable enough to compress. In a similar development, Delta Air Lines (DAL 355 [-28]) warned that it would lose about $2M/day more than forecast in Q4. This was yesterday.