Industrials

Report by Asterisk Advisors

ALK reported operating results that might have been in line with the consensus forecast but they were nonetheless comparatively extremely poor. The 3.7% 2Q26 EBITDA margin was nowhere near the margin reported by Delta and United. The further deterioration in the cash operating margin indicates an inability to turn around Hawaiian’s operations. While not a complete surprise, the fact that a year and a half into the merger ALK has not achieved any operating progress whatsoever in this regard is worrisome. Reno Bianchi fears Hawaiian might drag ALK into financial despair. The airline has plenty of liquidity to confront the crisis but the harsh reality is that it is nowhere near as strong a credit as it used to be; it is now a very weak credit financially. Reno does not think its fixed income trading levels accurately reflect this reality.

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

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 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).