AIRLINE stocks SOAR ^^

[Liquidity]

i have been posting about liking airline stocks but I thought i'd write this thread up to share my views on them.

their is a silver lining to this gloomy situation our economy is in.

Airlines will make a killing next year with oil this low and and will be lower. Even if this recession is in epic proportions. many of the airlines have already had capacity cuts already this year because of high oil prices. making them more efficient as a business. they also raised prices and have been charging extra for everything from drinks to bags.

Capacity cuts : they cut back even further when oil went to 147/ barrel.

Even before getting a break from falling oil prices, airlines were committed to big capacity cuts. Domestic capacity this fall will be down 10% to 12% vs. the fall of 2007, while 2009's overall capacity drop is expected to go even deeper into double digits.


US Airways President Scott Kirby said at a recent conference that investors don't appreciate the magnitude of the changes airlines made to cope with $147-a-barrel oil.

"The prior economic slowdown was not accompanied by capacity reductions of this magnitude, implemented in advance," Steenland said in Northwest's earnings conference call. "The airline industry in general and Northwest in particular are well positioned to prosper."

Oil prices : huge money for airlines. I remember hearing that every dollar that oil drops equals to 40 million for delta, i think it was 80 million after the merger. oil prices have fallen dramatically and will continue to fall. this means Big profits for airlines.

ill post an article about NWA northwestern below about their savings from oil next year.


The big bad recession----- bring it on
airline revenues dont get hit very hard from recessions. read below.

Even during the most severe historical economic downturns, industry revenue has declined by no more than 1.2% annually, Northwest said in a prepared statement. At that rate, the carrier would experience a $150 million revenue decline, which would be offset by a projected $1 billion decline in fuel costs if fuel averages $78 a barrel in 2009, compared with $104 a barrel in 2008. P/>Northwest also expects $2 billion in annual synergies resulting from its pending merger with Delta(DAL Quote - Cramer on DAL - Stock Picks). That deal is expected to gain regulatory approval shortly

•In 1991, recession caused only a 2% drop in airlines' annual revenues.

•In the 12 months before the 9/11 terrorist attacks — a period that included the bursting of the dot-com stock bubble and a mild recession — annual revenues dropped just 1%.

In 2003, fears about Severe Acute Respiratory Syndrome (SARS) caused a 40% drop in revenues on trans-Pacific routes, and worries ahead of the start of the Iraq war drove an 8% drop in domestic revenues. Yet, annual revenues for all of 2003 fell just 3%.


the only negatives is the credit crunch and staying liquid to get through, but oil prices have already dropped so the airlines should be making a lot more profit already. DAL/ NWA will merge soon they have 3-4 billion cushion. UAUA also has a cash reserve to draw from the number escapes me but i think its 2 or 3 billion.  CAL, AMR, LUV,LCC may also have cushions too but i know of the top of my head.

check which airlines have less hedged fuel for the remainder of 08 & 09 and will come out better than others also if you plan on going with airlines.


It's no coincidence airlines sector have gone up for i think the last 10 days straight.


I bought back DAL and UAUA wednesday.
 i plan on adding CAL, AMR , LUV and even LCC

the best thing is you can hold these through the up and down market knowing in time they will soar and i dont mean years. they will gain quickly.  i think the main reason people dont invest right now is the volatility in the market. Airlines are kicking the bears asses up and down wall street.

[Liquidity]

heres 2 articles i posted quotes from.

http://www.usatoday.com/travel/flights/2008-10-07-airline-outlook_N.htm

http://www.thestreet.com/_yahoo/newsanalysis/transportation/10443817.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

and an article on fuel hedging positions for the industry

http://www.reuters.com/article/marketsNews/idUKN1144640420080313?rpc=44

[propertymanager]

Ironically, I was thinking of shorting them in the near future.  Airlines have never been a lucrative business, even during the best of times.  We are now entering the worst period in decades and demand for airline seats (and especially business traveler seats) will plummet.  It's nice that oil prices have come back to the normal (but high) levels, but the airlines will still be a bad business.

Mike

[sunnyskyinvestor]

Liquidity, I think your optimism is great and surely hope you're right. Back in July I had that GUT feeling to buy CAL at around $6 when oil started to fall but my financial advisor said to avoid. Now it's trading over $18. So I missed out (Fdjake is right about those guys)! But now my instincts are that it's not going to go much higher in this environment and here's why...

I heard on the news recently that companies are cutting 3000 flights in the US due to fewer passengers
They employ (my husband is one actually) union workers and they are expensive
Oil prices are expected to increase -- OPEC will not let them go down much further
The Kiss of Death: when the mainstream media says it's a good time to get in -- remember the real estate excitement these papers generated?

These are just my opinions and I hope you make boatloads of cash...I'm truly an optimist here. These stocks do fluctuate. But if I'd consider buying CAL again it'll be when the market is showing signs of recovery when business and pleasure trips are more likely to be on Americans agendas.

[Liquidity]

Ironically, I was thinking of shorting them in the near future.  Airlines have never been a lucrative business, even during the best of times.  We are now entering the worst period in decades and demand for airline seats (and especially business traveler seats) will plummet.  It's nice that oil prices have come back to the normal (but high) levels, but the airlines will still be a bad business.

Mike

did you read what i wrote ?? even in a recession revenues have only fallen 2% even if this recession is bigger 5% the savings from oil will be huge.

[Liquidity]

I havent heard ANY media saying buy airlines right now.

[John_in_NC]

You guys are crazy to invest in airlines. I work for US Airways (pilot). This airline, like almost all others, is a mess. The employee groups are fed up, loads are down, and we have CEO's who rob everyone here. The only airline that has been consistently profitable has been SWA, and they just reported a loss for the first time in 17 years. I can't believe united is still in business!! They are worthless.

This industry is a mess, trust me! Like most employees here, I don't want anything more to do with it.

[Bluemoon06]

propertymanager is right.  Airlines have a bad business model.  In their business model even if they get paid what they ask, they still lose money.  What they do is operate using borrowed money until they can’t get financing anymore then file bankruptcy and start over again.  That is how they run.  It is idiotic and I have not seen a change in their model.

[Liquidity]

I have read about employees being un happy with them but i would be too when jobs are being cut.

john can you explain more why employees are not happy with us airways ??

[John_in_NC]

Want to buy some united? read this first

http://www.businessweek.com/magazine/content/08_34/b4096000437619.htm

[Liquidity]

propertymanager is right.  Airlines have a bad business model.  In their business model even if they get paid what they ask, they still lose money.  What they do is operate using borrowed money until they can’t get financing anymore then file bankruptcy and start over again.  That is how they run.  It is idiotic and I have not seen a change in their model.

these bad business's have their business in the best shape to handle this economy. uaua and dal both have a very good cash reserve to pull from.  the capacity cuts are the key here, they were forced to make the most out of every flyer. which now will have them already ready for a cut back in revenue's. OIL is more than $50 less than it was throughout this past year. its more than 1/2 of its high from 3 months ago.

[71tr]

The airline industry is a tough business model and historically been a place of dead money as an investment.  However, having been beaten down the group has popped in the last week.  There are about 15 stocks to choose from and as a group are up about 22% in the last 7 days with UAL and USair leading at 99% and 60%, respectively.  Perhaps you've already missed the bump?

Southwest runs a tight ship but has always been recognized as the industry leader.  Hawaiian Holdings and WestJet (CN) have earnings quality similar to Southwest but offer better value on a relative basis.  Each has only bumped in the single digits over the last week.  Virtually all of the legacy US airlines have very high analyst sentiment right now (for what its worth).

[Liquidity]

your right about their prices right now. they will pullback from these levels. i sold my dal and uaua today after about a 10% loss for the day on them. right now they're about -11% and -17%. this will continue for a few days as everyone panics. it only makes sense if your uneasy or losing money on your investments, you look at your airlines that have run up for a week straight to sell them too. i still think that dal and uaua's prices will be alot higher but right now timing and trading is a must.

Im thinking they get pushed down hard tomorrow also. next week their will be a buying oppurtunity in them.

UAUA didnt really double in price they were about $13 a few weeks ago. shorts killed the stock, then when expiration time came people poured money in and the stock came back to its normal level.

[Liquidity]

Want to buy some united? read this first

http://www.businessweek.com/magazine/content/08_34/b4096000437619.htm

john thats from august

[John_in_NC]

Want to buy some united? read this first

http://www.businessweek.com/magazine/content/08_34/b4096000437619.htm

john thats from august

Believe it or not, a few months hasn't changed them into a good airline or a good investment. I've been in the airline business for a long time, and there is no way I would put a dime into it.