A filing has revealed that beleaguered airline American Airlines (AAL) has now accessed a total of $2.73 billion from three revolving credit facilities in order to cope with the coronavirus fallout.
The company has now borrowed the full $450 million from an April 2016 facility, plus $750 million from a 2013 revolver and ~$1.53B from a 2014 revolving facility.
At the same time, Stifel Nicolaus analyst Joseph DeNardi downgraded his rating on AAL stock from Hold to Sell. He has a $13 price target on the stock (22% upside potential). Shares have plunged 63% year-to-date, with a 31% drop in just the last five days, and DeNardi believes the outlook for AAL is particularly worrying.
“The bearish scenario is playing out,” the analyst told investors, with air travel potentially suspended this summer due to the coronavirus pandemic. He believes that AAL could emerge from the crisis a much smaller player, with reduced capacity and routes.
For AAL one potential source of further revenue is monetizing airline mileage programs. According to DeNardi this could raise about $4 billion for American Airlines, however the analyst cautioned that “If airlines start seriously talking about mileage presales, we’ll know things are particularly dire.”
Taking a step back, we can see that the stock shows a Hold consensus rating on TipRanks- with six analysts advising investors to sell AAL in the last three months. That’s versus 5 hold ratings and only 3 buy ratings published in the same period. Meanwhile the average analyst price target stands at $19. (See AAL’s stock analysis on TipRanks)
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