At this price, I care primarily whether the new planes can be expected to generate an ROIC that's greater than the cost of capital. If so, then they increase the value and the stock is more attractive.
Also, of note, it's net capex that matters. If they swap aircraft 1:1 then the capex is reduced by the sale of older aircraft. In that case, the real question is what's the net cost of adding ~30 seats (Boeing has 190ish and the neos have 220ish) and what's the net yield on that? Is it greater or less than the cost of capital?
Hi, how should we think about their future capex commitments in the form of airplane orders?
At this price, I care primarily whether the new planes can be expected to generate an ROIC that's greater than the cost of capital. If so, then they increase the value and the stock is more attractive.
Also, of note, it's net capex that matters. If they swap aircraft 1:1 then the capex is reduced by the sale of older aircraft. In that case, the real question is what's the net cost of adding ~30 seats (Boeing has 190ish and the neos have 220ish) and what's the net yield on that? Is it greater or less than the cost of capital?
[EDIT: fixed typos]