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Discussion in 'General Discussion | Travel' started by uggboy, May 7, 2014.
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Airline profits soar to $12.7 billion
I wonder what they plan to do with all that money?
Not go broke, share it with employees (profitsharing) and customers (dividends), buy planes, invest in new products, pay down debts, fund pensions.
Well, except for UA.
Hard to call it a profit when you have debt.
Funny book keeping, you can make them say anything...
Till it is paid for you are just working for the man...
1. Run their businesses
2. Give some of it to their shareholders
Wrong. If I've financed an expansion in my business by getting a loan for equipment that's secured by the equipment, I have debt that has to be paid back, but I also have the equipment. If necessary it gets sold to pay back the debt if my business is liquidated.
This is how business has worked since forever. Airlines do own things like airplanes, you know. But would you have them sell the planes and no longer operate the airline just to be debt-free? Or never expand unless they provide the capital out of their business, with no banker involvement?
Actually the value of the business declines as debt increases.
In the stock market the company being acquired increases in price, while the acquiring company declines in price,
If the airplanes need to be sold to pay off the debt the price is discounted to motivate the buyer.
This is how business works, and why most investors fail.ndebt is a heavy load on your back.
A debt free business is much more profitable and secure, yet no one has a guaranteed customer, nor a guaranteed wage,
Welcome to the real world, where there are no free lunches.
No-one is saying debt is a "free lunch". But "hard to call it a profit if you have debt" is silly. Go look at a balance sheet for an airline. Here's one, Alaska Air Group:
http://finance.yahoo.com/q/bs?s=ALK Balance Sheet&annual
Plenty of debt, but plenty of assets (and plenty of stockholder equity). It would be foolish of them to sell assets which produce income and profitable operations (and a dividend to shareholders) merely to have no debt, so long as they generate more than enough income to pay the debt; less airplanes would mean less income (very possibly less income than simply enough to balance out reduced debt load). And ALK has a lot of it.
http://finance.yahoo.com/q/is?s=ALK Income Statement&annual
Agreed, Luv use to have a decent stock price, AA spent many years in the tank. I also seen it double in price.
I can think of many other places I'd rather have my money.
Airlines have never cut it for me, and I started investing in the 60s, when the DOW was at 500,, I was on the phone selling when Kennedy got killed, seen the birth control go from 1.50 to almost 200 in a few months, and Chrysler drop like a rock, only to come back without a G bailout. Workers took a cut and put some skin in the game.
I have investments in a few companies, and been very lucky over the 50 plus years.
"The profits come on $199.7 billion in operating revenues for the nation's top 26 airlines, compared with $156 billion for 2012, according to the federal Bureau of Transportation Statistics."
For an Apple to Airlines comparison:
In the FY ending Sept 30, 2013 AAPL reported $170 billion in revenue and $37 billion in net income.