Investors jump into airlines
September 23, 2011, 1:51 PM
Investors jumped into airlines on Friday after J.P. Morgan made a bullish case for the sector.

In the past week the NYSE Arca Airline Index XAL has declined about 8%, and carrier stocks are down nearly 40% from their November peak. Enthusiasm for the economically-sensitive sector has been hard to come by in the face of global economic slowdowns and the credit turmoil in Europe.

“The market ‘appears’ to be discounting a 2009 redux,” said J.P. Morgan, referring to the 2008-2009 equity slump that occurred following the collapse of Lehman Brothers and the freezing up of credit markets.

In that year airlines had been posting huge losses as fuel prices climbed and demand dried up. Capital markets were shut and liquidity was running thin, the investment firm said.

Today the carriers are flush with cash, the industry is making money and consolidation has allowed for tighter capacity control to keep ticket prices high.

“Airline stocks have behaved the way they have in the past upon entering a typical recession,” J.P. Morgan said. “Turns out, most look cheap to us, meaning cheaper still should the economic outcome ultimately be less severe.”

J.P. Morgan has overweight ratings on Delta Air Lines DAL, United Continental UAL, US Airways LCC, and JetBlue JBLU.

Analysts say to steer clear of AMR AMR, which has a high cost structure and looks poised to see wider losses next year.

-Christopher Hinton

 

Elvis,

What you see is mostly a reaction to oil prices and the fact that manipulative traders like Goldman Sachs (who use our tax money to bet against us) are getting their butts handed to them.

Airlines are not a counter trend trade for the overall economy. Just oil.

The market is foolish. Republic's stock is up today while insiders are dumping like an ER FO on his first day home from a 9 day after a breakfast of raisin bran. That even with the fact that most of RJET's fuel is a pass through cost.

 

Buzz;

Do you wear eurotrash glasses? You know like ted danson.

 

The DPA is being silly. First of all, a large percentage (majority?) of Delta's outsourced small jet flying is not performed by ALPA members. Secondly, in addition to the cost of recovering flying (if there is any) there is a very real cost in breaking a long term contract. Third, we don't desire a reduction in the number of jets flying, we desire an increase in the flying performed by Delta pilots. Parking three RJ's which results in the parking of a 767 does not do anyone good. What we need is to get away from this "CRJ bad" "717 good" thinking when in reality they are both airplanes designed for the same market and should be flown by pilots on one mainline list.

The DPA is building on their false platform with a meaningless demand.

Jabberwock stated it perfectly.

 

Keep 'em coming boys!!! I heart this.

 

Jabber, I'm not considering it as an investment, I was simply highlighting the analyst's comment about airlines being "flush with cash" and on the rebound financially due to consolidation and capacity restraint. That tells me that the company complaining about financial woes during contract negotiations is simply a ploy to keep labor costs down.

 

You have (not you Elvis, but in general) to know that the DAL oil folks are putting in some hedges right now at these levels.

 

You lie.

You liar.

I'll see you on the Maury Povich Show.

What? Y'all don't know me, y'all don't know me!

 

Is it important to try to get extra insurance for retiring pilots prior to Medicare age? I think so. A lot of the geezers still flying don't want to pay cobra prices for them and their spouse. I say help them out until Medicare age, and then no more. It hopefully would increase geezers going out the door where they should be already, golfing in Flar-i-dah.

 

Absolutely -- it's a smart business plan.