Ray Neidl raises his rating on AirTran

[Andy]

PCL, using ARSs as a short term cash equivalent isn't that uncommon. The failure rate on these auctions have gone from near zero over the last decade to greater than 50% in 2008. They first caught my eye last year when I read about a Canadian company who put their short term money in an ARS which failed. It almost resulted in them being unable to supply their workers in the north with food for the winter.
The problems in the credit market problems are no longer extremely unusual.

I haven't pulled apart GE's earnings yet, but there are a number of problems, including their 2 cent miss on the non-financial side. Their forecast for the financial side for the second quarter is also bad. What, specifically, was blamed on Bear Stearns?

 

[PCL_128]

They blamed the Bear Stearns fiasco for basically locking up the credit markets and destroying their credit business completely for the last few weeks of the quarter. Apparently everything was looking on-track until the week that Bear Stearns practically collapsed. After that, they found it incredibly difficult to get any business done.

As for AAI and ARSs, the question isn't really whether they are common, the question is the likelihood of AAI's $30 million cash growth being invested in these types of securities. In the past, AAI has specifically listed ARSs in their 10-K filings, but I don't think there have been any listed in several years. None were listed in 2007. That would tend to indicate that those investments were shifted to other investment vehicles and haven't been revisited in some time.

 

[Andy]

They blamed Bear for locking up the credit markets? That's BS. No wonder their stock was down so much.
if anything, the borderline illegal actions taken by the Fed have significantly eased the credit markets.
It sounds like they had to go mark to market on some of their paper. There's been way too much mark to fantasy going on.

PCL, I don't know how much of AAI's cash/equivalents are in ARSs. If not there, where has AAI been putting their equivalents over the last several years?

 

[PCL_128]

Here you go, Andy. I finally found the relevant information in the Annual Report:

In January 2008, we converted all of our investments in auction rate securities to investments in U.S. Treasury securities.

 

[Andy]

Here you go, Andy. I finally found the relevant information in the Annual Report:

In January 2008, we converted all of our investments in auction rate securities to investments in U.S. Treasury securities.

In one word: BRILLIANT!!!

No sarcasm intended. They dodged a HUGEASS bullet. The credit markets are cratering; the average american has no idea how bad it is.
The only place where I'd feel safe today is in treasuries. The timing on shifting to treasuries was damned near perfect.

 

[PCL_128]

Yeah, I was pretty impressed with that one too. Probably just dumb luck, but maybe they really are smarter than they look.

It probably wouldn't have been an enormous bullet for us, anyway. According to the filing, only $37 million was in ARSs in the first place. It would have been a significant hit, but not crippling.

 

[Jonny Sacko]

So should that "expert" get ripped, or was he stating fact? I will always think he's a common crook, talking out his azz. To reverse his course a day later could literally KILL a company these days! It doesn't matter which company (airline), imagine the storm if he opened that crack mouth and came after AMR while the FAA was WRONGLY accusing them also. It's criminal. And to top it all off, I heard he's GAY too! Well maybe not, but he probably wishes he was! HOMO! No smiley on that one.

 

[FlyFastLiveSlow]

So should that "expert" get ripped, or was he stating fact? I will always think he's a common crook, talking out his azz. To reverse his course a day later could literally KILL a company these days! It doesn't matter which company (airline), imagine the storm if he opened that crack mouth and came after AMR while the FAA was WRONGLY accusing them also. It's criminal.

Good rant and quote until this point. Then you lost all of your credibility with the sentences below.

And to top it all off, I heard he's GAY too! Well maybe not, but he probably wishes he was! HOMO! No smiley on that one.

 

[Jonny Sacko]

Not so, what if he is? It's the same as that guy saying Airtran's going out of service soon. But in all seriousness, these guy's shouldn't be free to harm others period. Facts are fine, but a reversal the next day should require/trigger criminal investigations or something, all airline's are on rocky ground right now.

 

[Andy]

Jonny, I generally ignore upgrades and downgrades. This is Neidl/Calyon's first change in rating on AAI since June 07, when he downgraded it to Neutral with a $12 price target. I don't know why he opted to upgrade the stock, but I've seen a lot of reindeer games on upgrades/downgrades. I shorted Northwest stock all the way into bankruptcy; I can't tell you how many upgrades happened along the way. Upgrades and downgrades are for the 'dumb' money. Do your own due diligence and ignore analyst ratings.
I'm not short Airtran, but there was a LOT of action on this stock in the last hour; someone with a lot of money either dumped a ton of AAI stock or shorted a ton of stock. Volume on Friday was 6 times normal.
You don't see that kind of movement and volume unless someone knows something. This was by no means dumb money, nor is it related to Neidl's comments or Frontier's chap 11 filing. If it was related, you would have seen heavy volume at the open. There wasn't.
Look at the chart. Pretty steady all day until 306PM; then BAM! Dropping on heavy volume.

The dumb money bought AAI stock after hours; I also don't put it past the smart money to walk the stock back up on light after hours volume. Never catch a falling knife; it'll slice and dice your investment portfolio.

AAI's cash position is roughly the same as F9's prior to bankruptcy relative to size. It's going to be critical for them to increase their liquidity because if their credit card processor opts to require a holdback, they'll end up just like Frontier.
Should Airtran end up filing bankruptcy, they'll survive. They'll make a lot of cutbacks and shrink, but they'll come out the other side.

Again, I've got no position in Airtran either short or long; all of my current positions are short financials and short term treasuries (straight treasuries; no GNMAs, MBSs, etc).

 

[Jonny Sacko]

I've got no position either, I'm just suspicious of his motivations. Who's next? I personally would like to die in peace, not be announced by the town idiot. That's all I'm saying, and in no way do I think that's where Airtran's headed, it could be any one of the remaining guests in the library with the candle stick!

 

[PCL_128]

Andy's alarmism is unwarranted. Our cash position is at 15%+ our annual revenue and continuing to grow throughout the first half of the year. We are a long way from any triggers for hold-backs from the credit card companies. The stock will rebound tomorrow.

 

[RIDETHELIGHTING]

hey Andy if you don't have a dog in the fight why do you care and spend your time analyzing us?

 

[Secret Squirrel]

I would think that someone from United would be a little more worried about his own stability than others. UAUA is looking at almost 400 million loss this quarter and almost 900 million loss for the year. AAI is lookin at about 25 million loss for the quarter and about the same for the year. That kind of loss could put UAUA into a pretty poor cash position. Maybe you should short your own stock.

 

[Andy]

hey Andy if you don't have a dog in the fight why do you care and spend your time analyzing us?

I analyze a lot of stocks. I don't track AAI; no money to be made there. I was merely giving an opinion. Got a problem with me giving an unbiased opinion?