Three successive rounds of taxpayer bailouts and the recovery of the airline industry should be good news for American Airlines, as it is for other U.S. carriers. However American remains in a more precarious financial position than its competitors and has less maneuvering room than other airlines do facing the headwinds that are on the horizon for the industry.
American’s financial statements show liabilities that are greater than their assets. Liabilities on their second quarter balance sheet total $76.4 billion and assets of $68 billion. No other major airline is underwater in this way, and they face four major challenges that could make things worse:
- Interest rates are rising. American has the most debt of any airline. As the debt matures and they need to roll it over, interest expense will rise. They’re already making $2 billion per year in interest payments, and outstanding debt will be getting more expensive. They’re in a race against time to make money now in order to pay off debt before it becomes unsustainable. Whether they can keep making money depends on factors largely outside of their immediate control.
- Labor costs are rising. They’re in contract negotiations with their pilots and already publicly offered a 17% raise, and the union was unimpressed (though United’s pilot union pulled its endorsement of a recently-negotiated contract on the news).
- Fuel is an open question. Does we stay at $100 oil? Historically $100 oil has been challenging for airlines. The recent fare environment has supported it. Will it continue to?
- Recession is looming. That could hit demand hard. And demand will already fall in the fall – it always does, though usually the end of summer travel gets replaced by an upswing in business travel. That’s unlikely to happen in full force in 2022, with not everyone (especially in big cities) back in office and many companies not having fully restored their travel budgets this year. During the second quarter earnings call Vasu Raja reported corporate managed travel recovered to 70% – 75% of pre-pandemic levels.
Even after about $10 billion in direct taxpayer cash, and $5 billion in subsidized loans, American Airlines could wind up in chapter 11 reorganization. It remains the most vulnerable major airline. A recession combined with higher interest rates could both drive costs and sap revenue that the carrier needs to service its debt.
Regardless, American’s prospects for improving its balance sheet are limited, which suggests that it will continue to financially underperform the industry, since it will have higher debt servicing costs than competitors.
They are a high cost airline. They’re moving the needle on revenue generation with the loyalty program, selling status-qualifying miles to partners at a premium compared to how they’ve priced redeemable miles. To further generate revenue they can’t operate as an ultra low cost carrier with low fares. They need to offer a product that customers are willing to pay a premium for – generating higher margins. Even now, with the airline profitable, their margins haven’t recovered. That has to change. The question is how much time they have to make that happen.
@Tim Dunn – short interest isn’t what you want to look to for bankruptcy it’s credit default swaps
@AC – “hy post an article that acts like they will go out of business instead of, worst case, reorganizing yet again under a Chapter 11 filing?” who on earth said American would go out of business, the entire piece is about chapter 11 reorganization
I saw the headline and figured I better see what Tim Dunn is up to.
Tim Dunn: “Having negative (shareholders equity) (means) that it is essentially worthless to the stockholders.”
WRONG!!! So very wrong. Shareholder equity is the difference between book value of assets and book value of liabilities. Generally speaking, GAAP does not allow for mark-to-market value of assets (there are exceptions), so book value of assets can be dramatically different from real world value of assets. An asset that was bought 30 years ago and has appreciated since then would still be reported at book value. Any company could have plenty of valuable assets that are not reflected in book value. Deficit equity is not a great way to predict whether American will file bankruptcy. Taken to an extreme, a company could have spent $1 100 years ago on something that is now worth $1 billion dollars. If they had paid $2 in dividends, they would have deficit equity of ($1) even though they have a $1bn asset.
If deficit equity means AA is worthless to shareholders, per Tim, why does AA have a $9bn market cap?
Tim, take your own advice and “Leave financial analysis to people who know what they are talking about.” If you can’t properly interpret what deficit equity may or may not mean, you shouldn’t be analyzing a balance sheet. If we want amateur analysis, we know where to find you on Seeking Alpha.
Over the last 5 years the AAL stock price was dropping near linearly (with a dip and a recovery during the pandemic) from the high of ca. $58 in Jan 2018 to about $14 today. With high inflation and the interest rate the prospects of AA are not looking good at all Today WSJ acknowledged that “American Airlines Group Inc., AAL -7.43%▼ United Airlines Holdings Inc. UAL -10.17%▼ and Alaska Air Group Inc. ALK -0.48%▼ said this week that their revenue during the second quarter was the highest ever for this time of year, as resurgent demand allowed them to charge high enough fares to cover higher costs..” but the AA shares still dropped (together with UA). Also, I do not see ANY evidence whether the new Loyalty Points scheme makes any dent in the long-term AA financial performance except discouraging the loyal customer from flying AA.
Jesus , gloom doom , gloom doom . AA will turn around survive and thrive . Wall Street has been wrong before . I take tte opinions of these individuals with a grain of salt.
Rereading what Jim wrote I’m having even more trouble understanding what he’s asserting.
“AAL has negative stockholder equity but that has been the case for years even before covid.”
Which only means that AAL has been in poor financial shape for years.
“Having negative SE doesn’t mean a company has a higher risk of bankruptcy but that it is essentially worthless to the stockholders.”
Yes it does. A company with low capitalization doesn’t have the financial resources to call upon that a well capitalized one does.
“AAL is paying salaries, providing transportation, and paying its debt. It has value to a whole lot of other entitites – just not its stockholders.”
That a company is paying salaries and paying its debt says nothing about it’s ability to do so going forward.
“And, btw, AAL’s net income margin was the same as UAL’s for the 2nd quarter. Unlike UAL, AAL is cutting its spending.”
But if AAL’s margins are the same and their debt is higher they have less margin of safety. Even if they can cut spending (which assumes they are either less efficient now, will somehow become more efficient going forward than competitors or will be able to charge the same as them while offering less) that doesn’t necessarily mean it will offset their lack of capitalization. You’d need to show numbers demonstrating this, not just say it’s going to keep them out of trouble.
“according to the investors, Frontier Airlines stock is much more likely to collapse based on its high level of short interest than American. ULCC’s short interest rate is over 37% compared to AAL at 12%. LUV has the lowest short interest at 2% followed by DAL and then ALK.”
That doesn’t speaks to whether AAL will or won’t have to enter into receivership. Besides Gary didn’t make any assertion regarding how much other airlines were at risk. He only stated that based on their numbers AAL looked like they had a potential of needing to declare.
“You’ve tried to be the expert about everything under the sun, Gary, but please leave financial analysis to people who know what they are talking about.”
Leaving aside whether Gary did or did not assert he was an expert he provided information of the kind that someone would use to make an assessment as to the probability that AAL would likely have to declare Chapter 11 and said that it was a distinct possibility. I have no skin in this game but my read is that a highly leveraged company is always at risk coming into an economic slowdown. When the enterprise is in a capital intensive, highly competitive business with margins substantially similar to its peers I don’t see anything that Tim has said that proves otherwise.
If you think that AAL is unlikely to enter into receivership make your case.
The butthead comment was for this replying who are saying.. they deserve it. It wasn’t referring to you being a butthead!
I think this is an exaggeration. First off, there is no going concern risk factor. In general, if the auditor was concerned that AA couldn’t continue as a going concern for one year, there would be a risk factor. In fact, it says that AA expects to meet its cash obligations for the next year.
Second, there are some liabilities that can be “ignored”. Loyalty program liabilities are what our collective miles are worth. Air traffic liabilities are liabilities for future air travel that is purchased, but not flown. AA can’t recognize that as revenue until it provides the service.
Airline balance sheets shouldn’t be interpreted by non-experts as the business model (airplane leases, loyalty programs, unique assets like gate rights) are pretty complex to analyze.
Everything I read here is always so negative towards AAL. Are you guys paid by DAL? I wonder sometimes.
Jim,
“Shareholder equity is the difference between book value of assets and book value of liabilities.”
which means that AAL’s stockholders would get absolutely nothing if AAL were liquidated today – which it will not.
Stockholder Equity IS representative of the value of a company.
And, Gary, you were wrong from the beginning. you don’t dig yourself out of the hole by trying to use terms that you couldn’t use right the first time.
Why does ANY American employee that has a clue who you are provide any service to you?
and the most important distinction, Jim, is that Stockholder Equity is a BOOK value and has nothing to do with the likelihood or not of American declaring bankruptcy.
Profitability is the single biggest factor in determining the likelihood of future bankruptcy. AAL has been profitable – even at very low margins before covid.
As others noted, AAL IS paying its bills as is EVERY OTHER US airline.
I am sure we won’t see Gary touting how much JetBlue and Spirit loses when they finally get around to reporting their 2nd quarter earnings, I mean losses.
The biggest issue that is setting up in the US airline industry is that the big 4 are profitable while it is the deepest discounting airlines that are losing money.
Add in that JBLU is trying to go after SAVE to solve JBLU’s problems and the chances are VERY HIGH that JBLU will self implode under the debt IT will take on to try to secure a future for itself – which it hasn’t managed to do in 22 years.
AAL will be fine. Jim can put his textbook down because he still doesn’t get the point that Gary was wrong and had no business writing something that resulted in dozens of responses that were completely inappropriate – until an adult stepped into the room.
@Tim Dunn – negative equity is not why AAL could reorganize. I never ever said that. The point is they don’t have a ton of margin here, they financially underperform under a mountain of debt and could face rising interest expense (Fed tightening), rising labor expense (new contracts), and declining revenue (recession) all at the same time. They have less of a window than competitors, which isn’t to say that United is in great shape.
@Matt – I genuinely don’t think I’m more positive about Delta than I am about American, certainly AAdvantage > SkyMiles
“Profitability is the single biggest factor in determining the likelihood of future bankruptcy. AAL has been profitable – even at very low margins before covid.”
The airline is highly cyclical. Fixed costs, particularly if the organization is carrying significant debt, are enormous. So when demand falls, there is very little room to cut costs and losses skyrocket. Therefore regardless of what the companies profits are now a without substantial cash, or the ability to raise it on the basis of their assets, there is a much higher chance the company won’t be able to meet their financial obligations.
Lot’s of “good” businesses fail because they loaded up on debt and when demand softened couldn’t generate the free cash flow to service it.
Gary’s point and I think it’s a valid one, is that AAL at risk because the various risk factors are stacked against them. Debt laden companies are inherently more risky that those that are well capitalized. Manager don’t dispute that, some just choose to accept the risk (often because they don’t bear the consequence when things go south but reap the benefits if demand is strong).
If you want to make your case that AAL is in a good position to weather a downturn explain how they are going to service their debt in a downturn? Not flying plans to keep load factors up only works if you own the planes so leaving them on the ground is effective at reducing costs. But it doesn’t eliminate your debt costs so if you have borrowed heavily costs don’t decrease.
I’m not trying to down on you but I really can’t understand how a highly indebted company is well positioned for if there is a slowdown, let alone a recession as opposed to being at risk
AAL has been a high risk company for YEARS. The basic gist of this article that American is at any more risk because of its negative stockholder equity is false.
And I will also tell you and everyone else that Gary didn’t come up with the ideas expressed in this article. There is, practically verbatim, an article on Seeking Alpha that was published yesterday saying essentially the same points that Gary makes here.
Not only does Gary have no more idea of how companies operate than the author that wrote that article but Gary essentially plagiarized someone else’s work and didn’t give credit. Gary’s bullet points line up quite nicely with what the Seeking Alpha article said.
And, Gary, since you seem to be an expert on credit default swaps, please share with us the current price for them on AAL and how that relates to historic levels.
Every single US airline is a candidate for bankruptcy and each can or will therefore avail themselves to the loopholes that US bankruptcy laws affords them to screw their employees, customers, and themselves and “reorganize”. The industry’s Q2 profit streak is thanks to pent up leisure demand, which will fade fast in the Fall and not be replaced by strong and stable business demand, which is mostly gone and likely gone for good.
The US government, staring down further bailouts, will simply apply what it did in 2008 to Wall Street and force mergers and those will be AA/B6, UA/WN, DL/AS, with divestitures applied.
Tim, I prefer to get my balance sheet analysis from someone who knows GAAP. You said “Stockholder Equity IS representative of the value of a company.” That may be the case. It usually is not. If the book value of assets does not represent current market value — which is usually the case — stockholder equity is not representative of the value of a company. If a company buys something for $500mn and it appreciates to $1bn, generally speaking, it is still reported on the balance sheet at a value of $500mn (or less if it is a depreciable asset). Again — the point you ignore — shareholders currently value AA at $9bn. So how does that gibe with your statement that “Stockholder Equity IS representative of the value of a company”? Literally billions of dollars in investor capital begs to differ.
Tim — to your comment suggesting that I put my textbook down — can you let us know what qualifications you have to analyze a balance sheet? You are making some strong statements about AA’s valuation; I think it’s fair for us to ask what basis you have to make them. Have you ever taken an accounting class? Do you know GAAP (obviously not)? Are you an MBA? Do you have a finance degree? Are you a CFA charterholder? Are you a paid analyst? Or are you a dude with a keyboard who blogs for free at Seeking Alpha?
Jim,
this is an a general information aviation chat forum and not an accounting class.
You and I both know what financial statements really mean.
but, once again, you miss the entire point of the discussion.
NOBODY CARES what Gary thinks about American’s financial condition esp. since it is apparent that he plagiarized an article from an author on Seeking Alpha who wrote BEFORE American released its earnings about AAL’s financial condition.
American ACTUALLY met the guidance it provided to Wall Street, something that Delta and United did not do.
American WAS profitable and MORE SO than United and that is what has kept American out of the ditch for the past 8 years (along with the same federal aid that everyone else got). Because Gary read an article of doom and gloom about American and learned the term “credit default swaps” doesn’t mean jack regarding the future of American Airlines.
Given the number of American employees that read this forum and given how much Gary touts how great American’s AUS club employees take care of him, he owes them an apology for stepping into a subject that he clearly doesn’t understand.
Practically ANY company can face chapter 11. There is nothing that shows that American is at any more risk now than they were during the heart of the pandemic – in fact the opposite is true.
Tim, I’m not missing the point of the discussion. Gary is suggesting that AA faces some significant financial headwinds. I agree. American has a lot of debt and not a lot of financial flexibility. Nothing he’s saying is outside of the conventional wisdom and a bankruptcy filing in the coming years is not out of the question. Easy enough. I’m correcting horrendously inaccurate statements that you have made. Book value IS NOT the value of a company. It’s that simple. Literally $9bn in investment capital is contradicting your posts. You and I have gone back and forth multiple times and you keep ignoring the point. You get on these blogs and type opus-length comments and it’s just as clear as can be that you don’t know what you’re talking about. If you don’t understand accounting, don’t comment on a balance sheet. The idea that market value is not the same as book value is so elementary that I’m stunned that I have to explain it to you.
If you really believe what you’re saying, go out and raise funds for a hedge fund and say that your investment thesis is going to be to invest based on book value. See how that goes.
You’re arguing semantics when the real issue is that Gary should have never used the word “bankrupt” in an article about any US airline and esp. since it is abundantly clear that he copied the entire essence of someone else’s article which was published yesterday.
Gary does virtually nothing ORIGINAL on this site. To somehow thing that he would come up with an article about AAL’s finances when all he can manage to do is post bizarre anecdotes is itself beyond the believable.
You – at Gary’s direction, of course, can get back to us about the finer points of accounting when American files its next chapter 11 case.
You and Gary and a whole lot of other people might be surprised when it is not a legacy that files the next C11 case but a low cost carrier that was once considered the darling of Wall Street.
The employees and customers of American Airlines deserve to know the truth and not some convoluted textbook diatribe you copied.
That sounds like legacy America west and usair not legacy AA
@Steve
FWIW
You surmised:
“Besides Gary didn’t make any assertion regarding how much other airlines were at risk. He only stated that based on their numbers AAL looked like they had a potential of needing to declare.”
And yet, @ Gary wrote:
“However American remains in a more precarious financial position than its competitors…American Airlines…could wind up in chapter 11 reorganization. It remains the most vulnerable major airline…it will continue to financially underperform the industry”
@ Gary is clearly comparing AAL to other airlines and making relative statements of risk (by claiming AAL is the most vulnerable airline).
You would been more correct to observe that @ Gary failed to justify his comparison with any actual comparative data (if that’s what you meant).
Moving on – to note that some commentators herein are confusing two different core arguments (especially in responses to @ Tim Dunn):
1) Whether AAL is intrinsically at risk of Chapter 11 Bankruptcy
2) Comparison of AAL’s risk of such relative to other airlines
On the former issue, @ Gary apparently ignores the issue of cash flow (as @ Tim Dunn points out in one of his responses).
On the latter issue @ Gary has provided no actual data (just the blanket statement “liabilities that are greater than their assets … no other major airline is underwater in this way).
But @ Gary makes the curious statement “…American has large maneuvering room than other airlines do”, which is meaningless given the sloppy use of language (one or more words missing from the statement!).
One point of interest (if you go and look at the actual original financial statements) is the substantial income from the loyalty program, which far exceeds that of ticket revenues (as @ Gary has rightly and astutely observed in previous articles).
Much of the attendant commentary might consider these revenues (and attendant liabilities) and scope to address improved performance – @ Gary could have expanded on this topic, rather than simply providing a superficial and obvious comment (“They’re moving the needle on revenue generation with the loyalty program, selling status-qualifying miles to partners at a premium compared to how they’ve priced redeemable miles”).
What issues could put those loyalty revenues at risk? Can these be managed? Can performance be improved? Can the loyalty program be expanded in scope to generate more revenue? Etc….
Taste the boomerang sanctions on oil, Shitlib Fortune 500s! Enjoy screwing America over for Ukraine’s war in the Donbass.
@platy
You’re right. I stand corrected regarding that remark. Good catch.
You also bring up some other good points. There is a lot to consider when trying to gauge the risk a company will find itself out of cash and unable to meet its obligation. However what I took strong issue with was the statement that “having negative SE doesn’t mean a company has a higher risk of bankruptcy…”
If that is true I’d like to understand how. Leverage is wonderful when things are going well because owners don’t have to share the bounty with their lenders. But the flip side is that unlike owners, lenders have the right to be paid even when there are losses.
So, to where we started. Is AAL at risk of needing to seek protection from creditors? It comes down to whether they can generate sufficient cash to meet all their obligation, including debt service. If debt service is substantially larger than their peers and they don’t have assets they can use to raise cash, then they don’t as many options if business falls off, load factors decrease compared to better capitalized competitors similarly situated.
Perhaps those other revenue streams are so much greater than other airlines that AALs lack of capitalization won’t cause them to be unable to service their debt. But the poster hasn’t indicated that this is the case, nor is there any evidence that it is.
There is no free lunch. Highly leveraged companies are riskier than those with less leverage, other things being substantial the same (and often even when they are not). Gary may have been less than thorough, he may have copied what he wrote from somewhere else, but that’s beside the point The poster made the assertion that having a negative SE doesn’t mean a company has a higher risk of bankruptcy.
Hard to imagine other than in some very unusual situations, none of which appear to be the case with AAL that this is true. Would you agree with that?
I wonder if Doug Parker got to retire with a golden parachute
@ Steve
Many thanks for the thoughtful commentary.
“ I took strong issue with was the statement that “having negative SE doesn’t mean a company has a higher risk of bankruptcy…if that is true I’d like to understand how.”
Of course, negative stockholder equity can be perceived as problematic (including for the reasons you cite) and a red flag for impending bankruptcy according to basic business economics. However, it isn’t necessarily so. The devil is in the detail (and clearly @ Tim Dunn is a detail person!).
Some thoughts:
(1) Depreciation / amortization: large loses may impact the balance sheet on an atypical basis – you may recall the Qantas CEO / Board “jiggled” its accounts for 2013-2014 by deciding to include a USD2.6 billion one-off write-down of the value for the international fleet (plus some other line items) as part of its then record loss – the intention appeared to be to combine all the bad stuff into one financial year (underlying loss of (“just”) AUD646 million out of a total loss of AUD2.84 billion). The share price crashed. That snapshot of the financial heath of the company looked chronic at the time. It recovered in time. Folk may or may not want to debate whether such is relevant or a telling factor in the case of AAL.
(2) Future liabilities: a company may need to include provisions for future liabilities. This is true (amongst other reasons) for those airlines with successful loyalty programs (like AAL) – note that in such a case, the liability is not necessarily reflecting a “debt” to repay (debt is just one type of liability). The highest revenue generator and most profitable part of the business (loyalty program) incurs a liability (provision for cost of supply of reward for unredeemed miles under operant accounting rules). Note that some airlines have been very actively encouraging loyalty members to redeem to address the burgeoning liability from unredeemed miles as an output of the COVID years (miles earned and not spent). To note that such liabilities for AAL (declared at USD9 billion) just exceed the differential between the cited asset value and SE value. Again, folk may or may not want to debate whether such is relevant or a telling factor in the case of AAL.
(3) Assets: valuation of assets may affect the math – by way of example, the calculation of the value of the loyalty program itself can be problematic (if included) – quoted estimates for the value of AAdvantage itself vary hugely and in the USD10s billions. In the case of AAL, I cannot see at a cursory glance where the value of loyalty program has been factored into the accounts (perhaps somebody can pinpoint it and let us know) and whether that is therefore included in the comparative data being used to calculate “negative SE” or not.
“Leverage is wonderful when things are going well because owners don’t have to share the bounty with their lenders. But the flip side is that unlike owners, lenders have the right to be paid even when there are losses.”
Yes. The AAL balance sheet shows about 50% of liabilities come under line items for maturing long term debt (and financial leases)…
“ It comes down to whether they can generate sufficient cash to meet all their obligation, including debt service.”
Yes…then, surely, we would need to identify whether such debt is at a fixed or variable interest rate (scope for increased risk during inflationary times) and temper our assessment according to cash flow (projected ability to service debt) etc, etc. Maybe we don’t have enough data from the balance sheet alone to make definitive statements about risk of bankruptcy. Yes, or no?
“If debt service is substantially larger than their peers and they don’t have assets they can use to raise cash, then they don’t as many options if business falls off, load factors decrease compared to better capitalized competitors similarly situated.”
Maybe so, although @ Gary has provided no relevant data in the article on such matters. And @ Tim Dunn has cited some data to suggest we proceed with caution in making our comparisons between the various airlines in these regards – at least that is how I viewed his posts – a challenge to presumptive thinking pending comparative data with some examples to support why we should read lightly into the debate.
Remember revenues from the loyalty program exceed those from the main airline operation and are largely generated from sale of miles to third parties.
“Perhaps those other revenue streams are so much greater than other airlines that AALs lack of capitalization won’t cause them to be unable to service their debt. But the poster hasn’t indicated that this is the case, nor is there any evidence that it is.”
Maybe so. But please can we be careful not to conflate liability due to debt with other liability items (the other 50%). That debt may be sustainable, we just don’t know the exposure to future interest rate hikes.
“ The poster made the assertion that having a negative SE doesn’t mean a company has a higher risk of bankruptcy.”
Yes – but I take his meaning that it is not necessarily so in this case.
“Hard to imagine other than in some very unusual situations, none of which appear to be the case with AAL that this is true. Would you agree with that?”
See my (theoretical) reasons above – folk may wish to debate their relevance in the particular case of AAL – they are certainly of ball park significance to apply to an airline business (whether or not to AAL in this moment).
They may also consider a financial sensitive analysis of those external factors (some of which @ Gary rightly identifies) – I’m sure that CFOs and accounting wizards (of which I am not one) are gainfully employed doing just that over at AAL!
These are just my idle thoughts as a small business CEO (in a different jurisdiction) rather than a CFO or whatever.
Incredibly poor management as well as no integrity
First off, Mr. Matt gave about the most poignant response in the entire thread.
Secondly, and a little more importante:
AA’s negative debt:asset ratio has existed for a bit. Largely because Daddy Parker invested in a rather large fleet renewal program,
which resulted in the youngest average fleet of the Big 4 (I’m including g our friends at WN). I’ll be the first to admit that strategy didn’t always serve us well…but carrying that kind nd of debt isn’t a strict liability, and it certainly isn’t going to single-handedly drive the carrier into Ch 11. Plus, we’re filling planes and turning profit again, soooo…
Maybe wait and see before we announce the coming apocalypse, is all I’m really saying. Then again, I didn’t graduate bid’niss school, so what do I know??
The author is intending to short AAL by his negative comments. His opinions are worthless, and will not succeed.
@Jason – to be clear I am not “intending to short AAL” in fact I am not making any trading decisions with respect to AAL. Full disclosure: the only publicly traded individual stocks I own at the moment [as opposed to index funds, ETFs] are in a managed account intended to mirror the S&P 500 while harvesting tax losses. I do not at present hold any short positions nor do I intend to enter into any.
I’m mostly a ‘give all your money to Jack Bogle’ kind of guy.
Delete this article lol
Gary Dunn once again shows his full ass in his continued hatred of American. Go touch grass and take your garbage “journalism” with you.
Thank you USAirway! Should have let the airline fold. Then could have swooped in and acquired what AA needed. Instead we saddled with exorbitant debt w/ no real way out.
Irma get your head out of the sand…
American was in much worse shape than Usairways was just before the merge.