American Airlines: Treasury Throws Curve Ball
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April 14, 2020 - by Stone Fox Capital for seekingalpha.com
- American Airlines is trading down as the U.S. Treasury appears to alter the expected terms of payroll grants.
- The airline unions appear the most impacted with the Treasury Secretary demanding 30% of grant aid via loans that need to be repaid.
- American Airlines will need to slash employee costs without a grant from the government.
- The stock remains a buy as the outcome is not as dire as the market fears as slashed employee costs will stem cash flow losses.
The airlines appeared cleared for takeoff, but the U.S. Treasury threw a last-minute curveball to the industry, causing the stocks fall in early trading on Monday. The employee-payroll protection grants are suddenly up in the air, and airlines like American Airlines Group (NASDAQ:AAL) could be forced to dump thousands of employees.
The market appears to misconstrue the industry implications of the government aid making any dip a buying opportunity here as the market continues to see a dire situation that doesn't exist....
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