Morning Note: Market news and an update from American Airlines.
Market News
US 10-year Treasuries pushed above 4.5% following hawkish remarks from a Federal Reserve speaker Neel Kashkari who said rates can stay on hold for an “indefinite” period. JGB yields rose to 1-year highs of 1.08% as a Bank of Japan policymaker hinted of a rate hike if the yen’s fall has a big impact on inflation. Gold held steady at $2,350 an ounce.
US equity markets moved higher last night – S&P 500 (+0.02%), Nasdaq (+0.6%, and above the 17,000 mark) – boosted by gains in Nvidia. This morning in Asia, markets were mainly lower: Nikkei 225 (-0.8%); Hang Seng (-1.8%); Shanghai Composite (flat). The IMF has upgraded China’s 2024 and 2025 GDP growth forecasts after a strong first quarter.
The FTSE 100 is currently trading 0.2% lower at 8,235. BHP wants another Anglo American bid deadline extension to allow for talks. Sterling currently buys $1.2762 and €1.1760.
The oil price moved up to $84.25 a barrel. According to the Wall Street Journal, Saudi Arabia is to announce an Aramco stock sale plan as soon as this week. The FT reported ConocoPhillips is in advanced talks to buy Marathon Oil in a potential all-stock deal.
A majority of European business leaders said the continent’s relationship with China will probably deteriorate over the next few years, according to a survey of ERT members.
Source: Bloomberg
Company News
Yesterday evening, American Airlines released an unscheduled statement highlighting a change in senior management and a downgrade to guidance for the current quarter. In response, the shares were marked down by 5% in after-hours trade.
American Airlines is one of the world’s largest global carriers with a fleet of around 1,500 aircraft, offering flights to nearly 350 destinations in more than 50 countries. The renewal of the fleet with hundreds of new planes has resulted in American operating the youngest fleet among US network carriers. In 2023, the company led the US network carriers in completion factor (98.9%) and on-time departures (69.5%)
In 2023, the group generated revenue of around $53bn and has set several financial targets to be achieved by 2026: adjusted EBITDAR margin (15%-18%), Free Cash Flow (>$3bn vs. $1.8bn in 2023), and total debt (<$35bn vs. $43bn at the end of 2023).
Last night, the company provided an update regarding its financial and operational guidance for Q2.
· adjusted operating margin was lowered by one percentage point, to between 8.5% to 10.5%.
· adjusted EPS of $1.00-$1.15, versus $1.15-$1.45 previously and a market forecast of around $1.30.
· total revenue per available seat mile to be down by 5% to 6% versus down by 1%-3% previously.
· cost per available seat mile (CASM) excluding fuel to be flat to up 1% (vs. +1% to +3% previously), with average fuel price slightly lower at $2.70-$2.80 per gallon of jet fuel.
The company also announced that Vasu Raja, the Chief Commercial Officer, will leave in June. Effective immediately, Stephen Johnson, Vice Chair and Chief Strategy Officer, will assume leadership of the commercial organisation and help lead the search for a new Chief Commercial Officer.
Source: Bloomberg