The airline industry gains altitude
Today's Financial News - Posted June 25, 2009
The airline industry is under a lot of pressure. Thanks to some encouraging news this morning and word that fliers are willing to pay a bit more, airlines have managed to pull out of the recent nosedive.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): Even as fuel prices continue to rise, the airline industry is managing to gain some altitude this week. The action is putting some money in the pockets of savvy investors.
Thanks to word that traveler demand appears to be leveling off and a couple of price hikes have actually managed to stick, the airline industry, from Alaska Air Group (NYSE:ALK) to UAL Corp. (NYSE:UAUA), is up big today.
The good news started with the International Air Transportation Association’s (IATA) announcement this morning. While the group says passenger traffic dropped 9.3% in May (thanks to swine flu fears), it is better than the 11.1% drop back in March.
IATA officials say it just may market the bottom the industry so desperately needs.
While this is the worst crisis the industry has ever seen, according to the association’s CEO, Giovanni Bisignani, he believes it may have finally reached a bottom. He warns, however, airlines are a long way from a recovery.
The way I see it, that just gives investors more time to make money off the situation.
Now boarding at gate…
If recent pricing trends find momentum, the upcoming quarterly earnings reports could be filled with surprises.
Several airlines have gradually increased fares over the past two weeks. So far, it seems as though prices remain fairly inelastic. Consumers have not minded the extra $10 or $20 added to their seats.
The news makes the airline industry quite attractive.
But TFN Strategic Trader investors have known of my bullish sentiment for quite a while.
Back on March 24, I told subscribers to take an options position in Alaska Air. Thanks to today’s good news, the options are up by over 55% on the day. It won’t take long until we are looking at serious sums of money.
As for the rest of the industry, United Airline’s parent, UAL, is leading the charge, with gains of well over 10%. American Airlines, owned by AMR Corp. (NYSE:AMR) is up by about 7%. And US Airways (NYSE:LCC) is up by 9%.
With gains like those, it may feel like it is too late to enter a position and make big bucks. But today’s action has not yet covered the fall we saw late last week and earlier this week. Rest assured, there is plenty of room to go.
Few investors have the guts to look into the airline industry’s books, but as you know, one of the best times to invest is when nobody else will.
Wall Street is starting to pick up on the industry’s potential, so don’t wait too long. You may miss your flight.
Next Article: TFN eNews 06/24/2009: “Did you miss me?”
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