LFL

United’s Passenger Debacle An Immaterial Investment Consideration

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Image Source: Business Insider  The major airlines in the US have done a fantastic job capitalizing on the ongoing upswing in air travel demand, but their economically-sensitive business models remain the most operationally-leveraged out of any industry group in our coverage. This should be investors’ biggest concern: A downturn in the global economy and competitive pricing pressures are far greater worries for investors than United’s recent passenger debacle. However, as with many news-oriented items (as opposed to materially-relevant, investment-related items), United’s misstep is making headlines in a big way. Though the footage in this article is appalling, investors in airline stocks have much more important things to worry about, in our view. By Brian Nelson, CFA The airline industry has … Read more

Warren Buffett Is Back Into Airlines, Should You?

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Warren Buffett has changed his mind about airline stocks… In this 10-minute podcast, the Valuentum analyst team talks all about the hazards of the airline business model from substantial operating leverage to the risks of volatile jet fuel costs to bankruptcies and beyond. The team also highlights the long-term passenger growth prospects of the sector, and recent consolidation that has brewed a more optimistic tone from industry observers. To view Valuentum’s updated YouTube page, please see here. Ticckerized for airline-related equities around the globe. Brian Nelson, CFA: The worst sort of business is one that grows rapidly requires significant capital to engender the growth and then earns little or no money. Think airlines. There’s a durable competitive advantage that has proven … Read more

Merger Mania in the Brazilian Air Travel Market: A Net Positive

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This article appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/278846-merger-mania-in-the-brazilian-air-travel-market-a-net-positive As long-time followers of Valuentum know, we’re not too fond of airline stocks. Essentially, we view them as merely a speculative bet on the trajectory of economic growth and the direction of jet fuel prices. But while the price of black gold remains largely out of airline executives’ control, it’s hard not to like the economic growth prospects of the Brazilian air travel market, which has been on a tear during the past several years thanks in part to heavy discounts on fares offered by low-cost carriers such as Gol (GOL). Plus, the 2014 World Cup and the 2016 Olympics, both to be held in Brazil, will serve as temporary and … Read more

Airbus Has Boeing’s Back Against the Wall, Seek Opportunities in Supply Chain

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This article originally appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/276439-airbus-has-boeings-back-against-the-wall-seek-opportunities-in-supply-chain Last week in anticipation of the Paris Air Show–a huge event for the aviation industry–we outlined our forecasts for market share in the narrowbody aircraft segment, which showed Airbus’ A320 gaining a clear lead during the next few decades.  So far during the show, Airbus has received a plethora of orders for its A320neo (new engine option), a re-engining of its popular A320, which competes with Boeing’s 737NG [and within a few years, entrants from around the globe: Comac’s C919 from China, Bombardier’s (BDRBF.PK) CSeries, and the Irkut/UAC MS-21 from Russia]. Orders for the A320neo are coming from around the globe, with Airbus garnering wins from India’s Indigo, Chile’s LAN Airlines (LFL), and domestic carrier Republic (RJET). We’re currently watching for any major shifts within the discount airline … Read more