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American Airlines in 2Q15: Cash, Liquidity Positions Glide Along



Cash analysis

Over time, American Airlines (AAL) has successfully and consistently improved its cash flow, particularly since its merger in December 2013. At the end of the second quarter, American Airlines had about $9.7 billion in total cash and investments, of which $747 million is restricted and $629 million is held in Venezuela bolivars. The company also has an undrawn revolving credit facility of $1.8 billion, which brings its total unrestricted liquidity to $10.7 billion.

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Debt financing

During the second quarter of 2015, the company generated $2.3 billion in cash flow from operations and paid down $361 million in debt. The company has been focused on reducing its debt levels and takes every opportunity to repay its high-cost debt. AAL took advantage of lower interest rates due to its improved credit ratings to refinance each of its secured term-loan facilities at lower interest rates. It also extended the maturity of its $1.9 billion term loan facility by one year, to June 2020.

Liquidity position

As a result, AAL’s liquidity position has been improving for the last seven quarters. AAL’s current debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) ratio stands at 2.76. It was 9.56 in 4Q13.

Investors can get exposure to airlines by investing in ETFs. Airlines showing positive growth include Delta Air Lines (DAL), Southwest Airlines (LUV), and JetBlue Airways (JBLU). The iShares Transportation Average ETF (IYT) invests ~16.85% of its holdings in airline stock.


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