So American Airlines gets beat down as havoc spreads across the world and the airline industry looks like it's shot for quite some time. Going from $30 in mid February to 885 in two months is enough to make your head spin fall off and then have it take a flight to Hawaii. Oh, but wait, you won't be flying to Hawaii anytime soon, will you folks? But the question is, now that a Al has been beaten down is now the opportunity to buy in. And how can we use a Al to make money? Because literally, just six months ago, airlines were recording record profits and American Airlines themselves were reporting record revenue from baggage fees.

Who doesn't love paying eighty dollars to drag their trash clothes and tiny toothpaste on an airplane with them? But things are different now and in this current crisis, airlines have been one of the worst, the worst hit sectors. Also, I should add that this is a very opportune time to be talking. Treasury Department Just reached an agreement with the airlines to provide billions of dollars in aid and this news was factored in as I Edited this video and it ran up about eight point six, six percent to twelve dot ninety-six And in the case of American Airlines even though we have had some slight attempts at recovery, we are still trading near all-time lows. But having said just that, we know that eventually tourism and the airline travel industry will come back.

and if it does eventually return to the level we were at just two months ago, that would be a 300% return. So is now the time to buy. American Airlines and hop on the plane to that beautiful, beautiful recovery. Well in this video you're going to be learning just that.

But before you hop on any plane to recovery, you first need to hop over to that ravishing like button. And of course, let me know what you think about AAL in the comment section below. Is it a buy? Is it a sell? Am I Completely wrong, Let me know. I read all of the comments and I respond to most of them.

Okay, so let me start by exposing all of the BS that I've seen from the analyst monkeys all over the Internet In the last couple of months, literally all of the financial media from a few weeks ago, especially mid-march were cheering and talking about how American Airlines this darling company that was just doing fabulous, Just fabulous before the evil beer bug came and destroyed their business. Yeah sure. I guess it looks quite stable if you cherry picked the data and show just the last six months, but let's stop kidding ourselves and open up the long-term trend. This is not a company that was exactly thriving pre-beard Bunk Funks fact it's been flailing out for years.

It started burying itself after hitting highs in 2017 and was running down during what was then the longest economic boom in US history. In fact, Barron's reported as recent as September 2019 that it was quote finally ready to take off. You see the final quarter of 2019 and going into 2020. That was when American Airlines was supposed to redeem itself.

ha ha ha ha. And it's not like the airline sector as a whole was doing bad during these last three years that a Al suffered. In fact, United Airlines hit new highs just in 2019 and was very strong on a consistent uptrend through this very same period. Delta Same thing.

new highs in 2019 in strong overall uptrend despite fluctuations. So this theory that American Airlines was some sprawling company pre beer bug is nothing short of a child's fantasy. But it is also true that A Al s demise was rapidly sped up by the beer bug. So the question of whether or not a Al will be a huge winner when this beer bug fades away is legitimate.

And much like I said last week with Carnival Cruise, the question isn't will demand comeback, but rather will these airlines survive To meet that demand and with government intervention, it seems that the government will do whatever it takes to keep them in business. But what I'm saying survive and we're talking about survived For the purposes of this video, I Mean for them to keep the structure they have in order to return back to their former selves after this is all over, What position will these companies be in in order to go back to making that level of profit at some point in how fast will we get there? So how can we the trader determine whether or not American Airlines is going to survive? Well, of course, by looking at their survival toolkit, What tools do they have to survive? Putting aside government intervention for a second, first tool that companies have is debt. Now investor place reports that at the end of 2019, American Airlines already had more debt than any other air carrier. It also goes on to talk about how even with the stimulus bill and other cost-cutting measures, this kind of debt gives the company a lot less flexibility.

If one of your biggest tools in your war chest is debt and you've already tapped a lot out of it, you are in a worse position in a crisis. But American Airlines is taking concrete steps that can serve their cash, such as cutting down on future flights, cutting down on marketing budgets and administrative costs, and so forth. And this is perhaps the only area where I would say that airlines as a whole have a huge advantage. That's because much of the cost of actually doing business is associated with the service itself.

So if you don't provide the service a lot of the cost of a per eighths, but you still have massive amounts of jobs and payrolls to cover. And this is where the government comes in because airlines including American are being offered direct payroll assistance funding in the form of grants which is helping prevent furloughs and promises a faster recovery. Think about it, if they have to go and cut all of their workers, then it's going to take time to rehire, retrain, and rebuilt the company. But the next factor and building off the last point, is the government's role in this and how much government intervention is going to be needed to save aaand.

Unlike the cruise sector, the airlines are part of a stimulus package with the goal of keeping these companies afloat as long as necessary. However, because of American Airlines financial standing, the terms of the stimulus still aren't going to be as favorable to them as compared to save the other airlines because remember, Al is the ugly duckling amongst the airlines. Now, since the government is often to issue loans to the airlines instead of flat-out bailouts like what happened in 2008, these terms mean that Airlines will have to repay them and give up some equity in the form of actual Sherriff's So once we return to normal demand and the economy goes back to normal and flight demand is back to where it was. American Airlines will not only be saddled with their debt from prior to this crisis, but also will be saddled with government debt and will have less equity.

The current plan means that American Airlines would have to give the government a three percent stake whereas United Airlines is only giving 2.3 percent. Delta only one percent JetBlue only 1.3 percent In Southwest only six. Zero Point Six percent. This is because American Airlines need some of the most help, but also has some of the least valuable equity because of the way that their company was managed prior.

But if airlines take this deal, they can't conduct layoffs until late September and the loans that they will get if they take this deal will allow them to stay solvent enough to survive. Until then, this government intervention will keep American Airlines afloat or should I say in the skies until this crisis ends. But is it really that easy to make the same argument for long-term profitability? By the way, Quick tangent: I Usually have a glass of water, but everybody's always like hey, that's a fake sip that you're taking No folks, it's not fake. Why would I take a fake sip of water? Ah, why didn't you is getting back into it.

Is it really that easy to make the argument for long-term profitability of American Airlines Well, what the man comes back American Airlines will be saddled with more debt than ever, and it will still likely be one of the least efficient Airlines in terms of capital expenditure and at best. if it's able to weather this crisis, it will probably return to this long-term downtrend. anyhow. Ok Charlie, but who cares, who cares about what you think? How do I use this knowledge, this knowledge to make money? Well, one of the things that we talked about in terms of swing trading or taking a slightly longer term position is that you need to be playing stocks that were doing well and then had an overreaction to some sort of catalyst.

Now the catalyst in the situation is obviously the Beer Bug. It's not an overreaction in the short term, but every reaction is an overreaction when considering the long term. But see, the key here is that they were doing well beforehand, right? They have very steady, or it's very steadily growing and then an overreaction and that turns into like a long term dip. But when it comes to American Airlines it was already going down.

and then the bad catalyst of the Beer Bug just crashed it further. So when it returns, it's returning back to a downtrend. For example, once the beer bug fades, Delta and United will have that solvent uptrend to return back to. But American Airlines on the other hand, has a solvent downtrend to return back to.

So in order for American Airlines to be a great trade long-term it'll not only need to overcome the hurdle of the Beer Bug, but also overcome the hurdle of making itself an actually good business. It needs to come up from being an Ugly Duckling. And while there's no doubt in my mind that American Airlines will return some of its share, there are also just much better opportunities out there. One of the things that we always talk about is always trading like a spoiled brat, only taking the best setups.

and with American Airlines this is just not one of the best setups. Why do you need to settle for something that is subpar? It's funny, a lot of traders have like all these huge houses and cars and like fancy gold watches that they show off in their videos. But me I have artisan water haha I wish they would sponsor me, but this isn't sponsored. If you work hard kids, you can get expensive bottled water.

This is at least twice the price of Dasani Never drink tap folks. But anyways, my point is, if you're looking to long-term invest, if you're looking to long-term Holthus there's better opportunities out there. But Charlie This is a trading channel I thought your name was Dip traitor. What? What about the day trading? Potential Day trading potential? Ha ha.

Now we're speaking my language. So when it comes to day trading, we are trading off quick fluctuations and a L's mini recoveries have been quite correlated with the overall market. When the market goes up, a Al tends to go up two or three times as much. For example, as the market recovered 15% during the specific time, a Al went up 60% So 15% in the market 60% in a Al.

And understanding this correlation means that you can trade the upper direction on a Al on days when the market has a hole of ticks. Also, since a Al has been beaten down so much, literally any positive news can make a Al extremely susceptible to run ups. That means more opportunities for us as day traders. And yes, at the end of the day, a Al is in a long-term downtrend regardless of how you spin this.

But being that we are so substantially below the price a Al would be at if we were post beer bug, there will continue to be insane price fluctuations to trade off of for the months and perhaps years to come. Anyways, folks, I do hope that this video was valuable to you. What do you think? Am I completely wrong As my analysis completely goofed up, why don't you let me know In the comment section below, Is Al going to be a good buy at $12 Or is it a good buy? Never. And as a quick reminder for folks who are looking to use this time to develop their skillset and forge growth in their as a trader, We do offer Zip Trader.

You and Zip Trader. you will be $50 off if you put in coupon code Easter 50 at checkout and you can go to Zip Trader. you calm or click the link below to see whether or not it is a good fit for you and your goals. And of course if you are having a hard time keeping up to date with all of the pics that we talked about on this channel you can join us for free ads if trader circle.

We post lightly watch lists which are of course every night by the nature of then be nightly and I'll put the link to that in the description below as well. Anyways folks have a great day and I'll see you in the next video.