Industrials

Report by Asterisk Advisors

Reno Bianchi provides his take on reports that United Airlines' CEO Scott Kirby has floated a potential merger with American Airlines, though any transaction remains highly speculative. The logic is clear given American’s very precarious financial situation, but regulatory hurdles appear prohibitive, with the combined entity controlling ~40% of domestic capacity and likely requiring extensive asset divestitures. The more relevant takeaway is strategic: such signalling may reflect the DOT's recent openness to further airline consolidation, or serve as a tactic to frame smaller, more achievable transactions as less contentious by comparison.

Industrials

Report by Asterisk Advisors

Reno Bianchi offers incisive commentary on key developments across the aviation sector. Highlights from his report this week include Delta’s strategic push towards AI-driven pricing, persistent capacity constraints from Pratt & Whitney engine issues and the latest fallout from the EU-US aerospace tariff standoff. In credit, short-dated EETCs like UAL B 4.6% due 2026 imply spreads near 1,000bps and offer compelling value if sourced at quoted levels. For AA tranches, Reno recommends 5yr paper with spreads ≥130bps; for A tranches, selected issues offering +200bps or more. He continues to favour Spirit’s 2015-1 B tranche. Term loans and senior secureds remain expensive, with Spirit and JetBlue as notable but risky exceptions. Domestic unsecureds are best avoided on tight spreads. LATAM remains his his preferred international credit, citing low leverage and relative upside.

Industrials

Report by Asterisk Advisors

AAL reported a disappointing Q1, with modest improvements in unit revenue and load factor offset by poor cost control (especially relative to Delta and United). Despite benefitting from lower fuel prices, AAL failed to retain related savings. Cash conversion deteriorated and over the last 12 months, adjusted OCF is ~33% below 2019 levels (the weakest among the Big Three). Leverage also remains substantially higher than peers. Reno Bianchi forecasts Q2 EBITDA of ~$1.6bn, below consensus estimates. Given increasing macro risk, he believes AAL's credit profile is looking increasingly fragile. Reno continues to recommend avoiding the group's equity and unsecured debt, while the current spread premium among AAL’s long-dated secured obligations is too tight. Investors should focus exclusively among some of the airline’s short-dated, well secured structures.

Industrials

Report by Cmind

Cmind expects LUV is very likely to miss its Q2 earnings, scheduled for release on 27th July - their latest prediction shows that the probability of beating the consensus is 0.25. Comparing LUV against its peers (Delta Air lines, United Airlines and American Airlines) they find that the ratio Cash/Operating Profit of LUV exceeds 75 percentile and Receivables - Estimated Doubtful is below 25 percentile of the same metrics of its peers. In addition, linguistic signals indicate excessive CEO evasiveness, and CFO and analysts bullishness from earnings transcripts. Finally, LUV has missed its targets in the past two quarters.

Industrials

Report by Smart Insider

Brett Hart (President) sells $3.4m of stock at $45.14 reducing his holding by a massive 69% - this is clearly a concerning trade from an executive that was only promoted to President in 2020. Not only has he materially reduced his stake in the company, but it comes after long-term under-performance. It is his first non-option related sale since 2014. He currently only has 7,000 exercisable options. Stock Rank -1 (lowest rating).