With the price of crude seemingly in a bubble, are airlines a good buy and hold?

Educate me.

-Joo

Airlines are highly contrarian right now. Everyone seems to think air travel is going to cease to exist or something. I wouldn't go piling in randomly, and most of them have crappy fundamentals, but I think you could do a lot worse. I also think they are likely to receive a lot of help from the gov't if things become dire.

Besides obviously PNCL, an airline stock I am a fan of is Air France (AFLYY) - they actually have decent fundamentals.

Good article on the topic:

http://seekingalpha.com/article/8024...no-matter-what

If you want to make money in the stock market, stick with rule one: don't every buy an airline and rule two: don't forget rule one.

why this claim?

i think that goes along the lines of airlines (in the US) haven't been profitable (w/out a helping hand) in a long time (if ever). this is a guess.

I had some AMR the day before yesteday when oil took the hit, gained about 9% i got off it. I probably wont be picking it back up for a month.

Basically Airlines don't make money and never have and probably never will. Very strong unions with very skilled labor make it tough to negoitate down a salary expense where they can keep people flying and keep the skilled labor from going on strike.

If you want to us a airline as a way to short oil without the margin requirment i understand it. If you are trying to invest in them its a very poor play IMO

I am using it as a way to short oil, but i have the margin requirement. Should I just short oil instead? If so, what stocks do you recommend I short? Sorry, I'm a newb.

uhmmm just short oil futures and hope you get lucky

What the . happened today?

The Short Answer: Oil fell and they talked about Job cuts/getting more available unrestricted cash.

The Shorter answer: nothing

This. Fine for a trade but not for an investment. Basically no company has ever crafted a competitive advantage in the airline industry and there's no reason to believe that will change anytime soon.

I can see very good reasons to swing trade airlines.
1. People seem to flock together about the future of airlines (leads to my next point)
2. They are very volatile considering the market cap of the industry
3. Airline stocks are very correlated to oil and macro discretionary spending and other catalysts

Knowing these things and the fact that long term investing is a bad idea there are plays to be made.

Sidenote: My father is a senior pilot at AA and just finished a weekend together. While his airline struggles with uncertain future, its very interesting whats happening at United. (UAUA) All of his pilot friends (at United) are using all of their reserved sick time because they believe that this is the last chance . Flight attendants are starting to look for new jobs, just in case. Their cash reserves are being burned at an ever faster rate with no sign of stopping (I am not a financial analyst so maybe someone can step in with specifics of their cashflow/debt situation compared to the industry as a whole)

My point is that the very people who have the most on the line and will do anything to turn the company around have basically given up. There is talk of Chapter 7 liquidation. The key event yet to happen is when they start selling their most profitable routes off to pay off debt. This is the point of no return. Most likely wont happen until late this year or maybe even january.

Just something for you folks to put on your radar and to research on your own.

Jim Rodgers said he likes the airlines FWIW>

He did? Have a link?


Also, paging John Kane: go buy some airlines now, because Rodgers says so. lol

As bad as things look for airlines look right now, it's probably as good as it's gonna get. You're better off buying them when they crash and burn in the near future (dagger catching is my plan, counting on gov't rescue) or shorting it on a surprising uptick in tourism... either way, they really are in very bad shape, and will only get worse as their fuel supply contracts must be renewed at higher prices in the coming months.

Foreign airlines like Air France and EVA are heavily government subsidized and that's why their fundamentals look strong but their upside is still limited.

LoL.

John Did you unload any of your SKF at 200 area? I think you bought at appx 150 and its at 121 now.

Tough to buy airlines anytime in my opinion.

What a tough business.