Moody's is the reason for the tumble + another analcyst's downgrade. Cash projected around $300M by year-end, but I think the 4Q and all of 2009 will produce lower oil ($100 bbl) if no CAT problems with Hurricanes or attack on Iran. My guess is cash will be closer to $350M by year end.
Since it wasn't any leaks that caused the selling, it's possible Fornaro may wait awhile....although, I wouldn't recommend it. He needs to park some planes and cut another 20-30% from capacity asap. If he can do this without 11, god bless him.
imp:
NEW YORK (Associated Press) - Two downgrades and a negative outlook given for the airline industry sent shares of AirTran Airways' parent company tumbling Monday nearly 19 percent to a new 52-week low.
There's no near-term threat of a bankruptcy filing by the Orlando, Fla.-based discount carrier. But analysts and ratings agencies are concerned about AirTran's deteriorating cash position in light of record high fuel prices.
"AirTran is expected to continue to generate negative cash flow from operations and in the face of scheduled debt maturities and capital spending obligations, the company's modest cash balance could erode over the coming year," Moody's Investors Service said Monday as it downgraded AirTran's debt rating to a lower degree of junk status.
Moody's noted that AirTran is a low-cost carrier and is cutting capacity and taking other measures to try to conserve and generate cash in the face of oil prices that have soared to $145 a barrel, but the ratings agency said that won't be enough to turn the tide.
It said that while AirTran is currently in compliance with the covenants contained in its credit card processing agreements, the company's credit card processing banks have the right to increase the credit card holdback under certain circumstances, which would increase AirTran's cash requirements.
"AirTran has no unused lines of credit available and substantially all of its assets are encumbered," Moody's said.
Also Monday, Credit Suisse analyst Daniel McKenzie downgraded four airlines, including AirTran, and Fitch Ratings issued a negative outlook for the airline industry as a whole. Calyon Securities airline analyst Ray Neidl projects that at current fuel prices AirTran's unrestricted cash will fall to $294 million by the end of this year and $102 million by the end of next year.
Kevin Healy, senior vice president of marketing and planning for AirTran Airways, said he doesn't believe Neidl's projections take into account some of the cash raising and capacity cutting initiatives the airline has and is taking.
"When you look at the industry, oil is the issue," Healy said. "We are taking steps to deal with oil."
He declined to say whether AirTran has thought about filing for bankruptcy protection.
Neidl wrote in a client note that he believes the 10 biggest airlines can withstand current oil prices for the remainder of the year, but suggested "some bankruptcies are a real possibility" if crude remains at that level or keeps rising.
"The industry is moving into 'survival mode' and has entered uncharted territory," he wrote.
AirTran shares fell 32 cents, or 18.8 percent, to close at $1.38 in trading Monday. The stock had previously traded in a 52-week range of $1.40 to $11.17.
