Update: On August 27, 2019, American’s stock hit a new five year low.
American’s management team sure is putting their money where their mouth is. No, not when it comes to actually making positive changes at the airline, but rather when it comes to investing in the airline’s stock.
American management buys more American stock
Yesterday American CEO Doug Parker purchased a further 50,000 shares of American Airlines stock, at a cost of $28.09 per share, or just over $1.4 million total.
He wasn’t the only one to invest in American yesterday, as six other top executives at American bought a combined 35,000 shares yesterday.
Historically Doug Parker’s compensation has largely been paid in stock rather than cash. At this point he owns a total of just over 2.2 million shares of American stock, currently valued at just over $60 million.
What should we make of this?
It seems like American’s top management thinks that the stock has more or less hit rock bottom, and things are going to get better from here. As I wrote about last week, American’s stock has just hit a three year low. Or maybe they’re just trying to get us to believe that’s the case.
On one hand I respect management that believes in their company. At the same time, in spite of Doug Parker having lost tens of millions of dollars as American’s stock price has plummeted over the past year, he can’t actually seem to bother to make changes at the airline that could have a positive impact.
So this makes me wonder why American’s management team thinks things are going to get better. American is going to have huge labor issues in the coming months, so to me it sure seems like things will get worse before they get better.
My guess is that this is just Parker being optimistic.After all, he’s not a great predictor of American’s stock price. In late 2017 when American’s stock was in the high $40s, Parker said the “stock is so undervalued it defies logic.”
Bottom line
It’s interesting to see seven of American’s top executives buying more stock. It makes me wonder if management is finally reaching a point where they’re coming to their senses, or what they know that we don’t.
While American’s stock may basically be at a three year low, it sure seems like it has the potential to get even lower if they can’t figure out the situation with their mechanics.
What do you make of Parker & Co. picking up more stock this week?
This token display of confidence in AA either only goes to prove their complete lack of business acumen, or they need a few tax losses in the coming financial year.
Either way, don't see it as an hint of improvement in the in air/on ground experience unless you believe in fairies at the bottom of the garden.
@Steve_C
Well it should in theory if the demand for their shares doesn't decrease, many companies in the past have bought back their shares with the aim to increase the prices of them. But yeah 0.004 is not a lot.
The stock price has surged 12%, so...good for him?
His stock purchase could be a negative indicator. Just because it looks like a bottom - there are much better undervalued equity plays now. For example, the oil sector
Amazing that American hasnt asked you to join the Board huh?
Dude ... do your research
He sold 11.7 Million $$$ in January 2018 at $52
Look at what the Institutions are doing ... selling this dog.
When institutions get in ... then I am getting in.
Sincerely,
-Mark
If DUI Doug really believed in his company, he'd actually put his money where his mouth is and fly in Oasis-format coach. Let him wedge himself into those glorified lawn chairs and that thimble-sized fart locker of a lavatory, and then we'll see just how much he loves his job.
Talk is cheap, Mr. Parker, and so is buying a pittance of stock in your own company. If you really want to impress us, put...
If DUI Doug really believed in his company, he'd actually put his money where his mouth is and fly in Oasis-format coach. Let him wedge himself into those glorified lawn chairs and that thimble-sized fart locker of a lavatory, and then we'll see just how much he loves his job.
Talk is cheap, Mr. Parker, and so is buying a pittance of stock in your own company. If you really want to impress us, put yourself through the same hell you submit the rest of us to every day!
As mentioned. These executives have limited trading windows a few times a year, usually after quarterly reporting and disclosed within filings shortly after. Consistent with his prior comments and stance (pay based on stock awards). Symbolic show of confidence.
C-level of other large companies have personally bought company stock in the market multiple times all while the stock continued to slide and slide.
I guess he figured that under his leadership things couldn't get much worse. When someone capable replaces him, the value will increase.
He is a very smart guy. Buying the stock at a 4-5 year low. Watch in a few years when the price goes up he will sell and made a nice profit.
Buy low sell high
DAL is trading at a lower P/E than AAL right now with none of the headwinds. Perhaps Doug should be investing in Delta. That really would not go over well.
Lucky gets to eat crow. AAL up 11% ish in two days. Maybe stick to travel. The stockmarket is unpredictable and highly irrational
Why don't AAL do a stock buy back if it was undervalue? Win for everyone.
Why only Doug Parker buying it?
Finnair's new Platinum Wing with a la carte dining is now open, I suggest you check it out. First photo on Finnair twitter account...
@DLPTATL @sean
Ah yes, that famous C-Level executive tradition of scrupulously following the nation's weakly enforced insider trading laws
Doug Parker's base pay from AA is $0. His compensation comes from AA stock so it benefits him if the AA stock price increases.
Wall Street Journal wrote an article about this a few weeks ago and if you go to any of the salary websites you'll see Parker's base pay is $0 (whereas Ed Bastian and Oscar Munoz all have base pay over $800k/year)
I'm not really an AA flyer but it does say something if the CEO of an airline is being paid mostly from its stock price.
I think AA stock is undervalued. The current 737 MAX grounding and labor issues will resolve at some point. They’re still filling planes and I still fly them and I can go with just about any carrier. In the long term, I have confidence the stock will recover with or without Doug Parker. If I had extra cash hanging around I’d buy AA now.
Total marketing. $1.4MM in stocks is nothing compared to how much money he is paid.
put another way, if any of the speculation in this blog post were true, it would be securities fraud.
The stock purchases remind me a lot of Smisek’s final months at United
management are allowed to buy and sell stock during specified windows pursuant to 10b5-1 plans, and it could be for any variety of reasons, so its generally not productive to speculate. And as @DLPTATL pointed out on your "what they know that we don’t" point, they would be required to abstain from trading if in possession of material nonpublic information.
I agree with @DCAFrank. Keep it up Lucky! I’m based in PHL so unfortunately have little choice outside of AA. Things are getting worse!
@Sir Lancelott
Haha thats not how it works. His buy represented .004 of all AA shares traded yesterday.
I don't think Lucky is constantly bashing AA, @hotinTx. He's in Miami and I'm in D.C., so the AA presence looms over us both.
I've been on this AA hamster since the merger. I do about 75-90,000 miles butt-in-seat every year and this "New American" just gets worse. Last year once I hit PLT, I went over to Delta and finished the year as a sliver. As a silver on Delta, I feel as good as a PLT on American. That shouldn't be the case.
A) He makes no changes to improve the airline, the stock keeps going down, the board fires him.
B) He has decided to make changes, the airline improves, the stock goes up, he gets nailed for insider trading, and his last act as CEO is to open a nonstop from DFW to Danbury, CT, white collar minimum security federal facility "Club Fed" so that his family can easily visit him.
In either case, his replacement...
A) He makes no changes to improve the airline, the stock keeps going down, the board fires him.
B) He has decided to make changes, the airline improves, the stock goes up, he gets nailed for insider trading, and his last act as CEO is to open a nonstop from DFW to Danbury, CT, white collar minimum security federal facility "Club Fed" so that his family can easily visit him.
In either case, his replacement at the helm performs better or at least not worse than he has (that's a sure bet). Looks like a "win-win" situation.
This may be the kind of move executives make to try to push off a BOD or investor-led major change in management, with the execs claiming that they have their own money where their mouth is and thus should be given more time to right the ship.
Or it may be the kind of move executives make when expecting to see a share price increase.
Or both.
Personally, I think AA needs a break from Parker and his favorites in senior management.
Decreasing supply to push up price
Lucky, I really enjoy reading your blog daily, however, your constant AA bashing is slowly turning your site into VFTW. I think everyone gets it, you are over AA, but still insist on flying them for the OW status. Not to say you haven't given some credit when it was due, but every little thing is nitpicked now. Just my $.02
I think that Doug & Co are doing this purely as a public show of confidence in the stock in the hopes of pushing up the share price. It's unlikely that they have significant knowledge that could impact the stock materially as they'd be precluded from trading on this information. There are also limited "windows" in which execs can buy/sell to discourage insider trading.
Maybe this is Doug Parker's hedge against unemployment. If Doug is successful in reversing the disastrous decisions he has made and thus turning around AA, the stock will rise and he wins. But if Doug is unsuccessful, or just does not embark on a path of improving the product and improving the service (this seems more likely), then the stock will continue to wallow and he will be canned. Since whoever takes over will be...
Maybe this is Doug Parker's hedge against unemployment. If Doug is successful in reversing the disastrous decisions he has made and thus turning around AA, the stock will rise and he wins. But if Doug is unsuccessful, or just does not embark on a path of improving the product and improving the service (this seems more likely), then the stock will continue to wallow and he will be canned. Since whoever takes over will be better than Doug, the stock will rise, and all of this stock Doug bought will increase in value.
Come to think of it, maybe Doug is playing a very long con. Become head of AA, tank the stock through terrible terrible decision making, buy said stock at a deep discount, wait to be fired (he's probably surprised he is still around at this point), and then sell when the stock rises on news of your demise and being replaced by someone with a passing level of competence for the job.