LCC

What Does $150 Oil Mean for Airline Stocks? New 52-week Lows.

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This article appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/277933-what-does-150-oil-mean-for-airline-stocks-and-the-airline-etf-expect-new-52-week-lows In “Get Ready for $150 Oil,” Barron’s predicts an oil shock will occur in spring 2012, with the black commodity reaching a record average monthly price of $150 per barrel, with spikes to $165 and $170 along the way. If this prognostication proves correct, airlines are in for a world of hurt. Before we get started on just how painful this shock could be, we invite airline stock speculators to take a read of our industry primer on the airline industry.  Jet fuel prices generally represent the largest component of an airline’s cost structure, and we estimate that for every $1 increase in the price of crude oil, it costs the global airline industry about $1.5 to $1.7 billion more. … Read more

Analyst Note: Hedge Positions of the Major Network Airlines

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We wanted to provide our subscribers with a brief snapshot of the 2012 hedge positions of the major airlines, should there be an oil price shock in spring 2012 along the lines of what Barron’s outlined in its cover story over the weekend.  United Continental (UAL) United Continental has only hedged 5% of its expected fuel needs for 2012 (Source: UAL’s 1Q 2011 10-Q). AMR Corp. (AMR) We don’t believe AMR has any material hedges for expected fuel consumption in 2012 (Source: AMR’s 1Q Earnings Release). US Airways (LCC) We believe US Airways to be completely unhedged for an oil price shock in 2012 (Source: LCC’s 1Q 10-Q). Delta (DAL) We do not believe Delta has a material hedge position in 2012 … Read more

Ageing Fleets: Which Airline Has the Highest Costs?

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This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/273990-aging-fleets-which-airline-has-the-highest-costs  With jet fuel once again on the rise and the economic environment becoming even more uncertain, it’s informative for airline stock speculators to know which carriers have the oldest fleets. The age (and model) of an aircraft could have large implications on fuel efficiency and ultimately the airline’s cost structure, which becomes absolutely paramount under poor economic conditions. Let’s evaluate the fleets of the Big Four legacy carriers in the U.S. US Airways (LCC) As of the end of last year, US Airways was flying nearly 60 Boeing 737 Classics and 10 legacy 767s that were on average about 21 years old. These Classics and legacy 767s are roughly 15%-20% … Read more

Troubles Loom for Aviation Stocks

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This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/273564-troubles-loom-for-aviation-stocks As many followers of airline equities know, rising jet fuel prices and concerns about the global economy can translate into some fairly poor performance for airline shares. Today, perhaps unsurprisingly, the International Air Transport Association (IATA) cut its profit forecast for the airline industry by more than half to just $4 billion in 2011, (down from the $8.6 billion it had estimated in March). For perspective, the industry earned $18 billion last year. This equates to roughly a 0.7% net margin and raises the probability of yet another year of airline losses. The major causes of this revision are well-known and have been in the headlines for weeks — natural … Read more

Is AMR’s Equity Practically Worthless?

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This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/270933-is-amrs-equity-practically-worthless As outlined in “Why Airline Stocks Are Not Long-Term Investments,” pegging a fair value on an airline’s equity is a nearly impossible task due to the tremendous operating leverage inherent to their business models and the fact that key valuation drivers such as unit revenue and unit cost are largely out of their control. That said, let’s take a look at what AMR’s equity investors have to overcome to recognize any value in their holdings. AMR’s pension obligations are staggering: ~$24 per share. Unlike peers that passed along their pension obligations to the Pension Benefit Guaranty Corporation via Chapter 11 reorganization (United Continental (UAL), Delta (DAL), etc.), AMR still retains … Read more