I’ve been travelling for the past few weeks and I’ve come to the conclusion that these are all f*cked. Flights that usually sell out are empty. Either myself or my close colleagues have personally seen the following flights with ~50% capacity in the past week:
- NYC to LHR
- NYC to MSP
- NYC to DTW
- NYC to DFW
- NYC to LAX
- NYC to SFO
These flights are never empty. What’s more, some of these flights have $4k+ first class tickets where the airlines make all their money. Hotels, theme parks, casinos, live entertainment, these are all to follow. A bit of research on debt loading, fixed service charges, exposure to business vs. leisure travel, etc. has led me to believe that the following companies are absolutely f*cked:
- $UAL, $EXPE, $SIX, $AMC, $SEAS, $CZR, $LYV, $SAVE.
Now I hear you, thank you captain obvious. Yeah yeah, but these are actually f*cked. They all need debt refis in the next 8-12 months to survive a 20% reduction in revenue. The leavers they can pull to fix this are all longer term than that are unlikely to be effective in the short term. Let’s put it like this – they effectively have to get started with layoffs in the next month to survive, and some are beyond that already.
The following companies are going to survive, but have pretty large hits to market cap, primarily due to debt loading / business travel:
- $AAL – High debt, fixed charges, etc., but lower exposure to Asia travel, tech sector full price business class tix, etc. and likely going to benefit from a global oil price decrease over the coming months which should save them;
- $MAR / $HIL – High debt, but have good portion of real estate holdings, high concentration in vendors that they can likely squeeze to get temporary relief on rents, lots of hotels owned by 3rd party LP groups, etc. Debt holders will likely want to work with them.
- $MGM / $LVS – Better balance sheets, ability to survive, better management teams and more diversified holdings vs. CZR who basically only has Vegas strip.
List is obviously not exhaustive. A few ones that are likely to do relatively OK are:
- $LUV, $DAL, $JBLU (likely the best)
Now I haven’t looked at everything, only the ones I had a hunch about really bad exposure to the markets. Broadly speaking, these businesses also tend to employ working class people who will be f*cked by this. I was crazy sick on Feb 1-2 and spent that weekend researching the beer virus, bought May / June SPY 305p and have printed on them. I’m going to spend $30k on puts on some variation of the above (based on put prices) this Monday / Tuesday. Horizon is 8-12 months out, willing to pay large premiums for those that I think are going down 75%+ from 52wk max this year.
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.