Author Topic: Airline Stocks September  (Read 2006 times)

yvr111

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Airline Stocks September
« on: August 30, 2020, 01:16:17 PM »
Hi y'all
I wonder what you thought about putting money into airlines at this time? There seems to be a lot of value in the industry and upside that eventually (knock on wood) well all get back to it.

Was hoping to invest in an ETF (JETS) in order to avoid any single focus downside. Would be a small amount of my portfolio. Just curious on thoughts?

Abe

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Re: Airline Stocks September
« Reply #1 on: August 30, 2020, 09:12:20 PM »
The industry took years to recover from 9/11, and this is a much much bigger problem than that. I think whatever long-term returns you think you'll get from these will be less than a broader fund/ETF. Why risk excess exposure to the sector?

MustacheAndaHalf

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Re: Airline Stocks September
« Reply #2 on: August 31, 2020, 07:52:20 AM »
Abe - When I view Yahoo's historical stock prices for Alaska Airlines, I see a drop of -42% between closing prices on Sept 10 and Sept 27... and then recovered to it's Sept 10th stock price on Jan 3.  Alaska Airlines stock price recovered from 9/11 within 4 months, so that's one data point where a recovery was much faster than years.

yvr111 - Besides limiting your investment to "a small amount of [your] portfolio", I would recommend diversifying your investment to other Covid sensitive stocks.  For example, a retail stock, an airline, a cruise line, a restaurant stock ...

I think airline bankruptcies are related.  If one airline restructures it's debt (chapter 11), that will likely pressure other airlines to file for chapter 11 bankruptcy as well.  I view holding many airline stocks as roughly the same risk as holding a few.

Abe

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Re: Airline Stocks September
« Reply #3 on: August 31, 2020, 10:51:22 AM »
Agree with those points but obviously the airline industry as a whole struggled:

List of major airline bankruptcies in the 5 years before 9/11:
Pan Am (twice)

List of major airline bankruptcies in the 5 years after 9/11:
US Airways
United Airlines
Hawaiian Airlines
Midway Airlines (again, but first time was before 9/11)
US airways (again)
Northwest Airlines
Delta Airlines (merged with NW to get out)


Bankruptcies in the following 5 years:
Aloha Airlines
Frontier Airlines

https://www.airlines.org/dataset/u-s-bankruptcies-and-services-cessations/#
There's a reason you can't find stock prices on a lot of these airlines from the early 2000s... they went bankrupt.

Here's why:
https://www.transtats.bts.gov/Data_Elements_Financial.aspx?Data=7 (Look at Net Income)

Also ALK doesn't look awesome in the long term. Note the lack of dividends and nearly flat performance for most of the 2000s. I guess if you timed its bottom and sold before it bottomed again 2 years later, then yeah you'd make some money off this airline while the other ones in your ETF were tanking.
« Last Edit: August 31, 2020, 11:13:37 AM by Abe »

theolympians

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Re: Airline Stocks September
« Reply #4 on: August 31, 2020, 11:22:49 AM »
As an anecdote, I have recently traveled near Portland Seatac airports. In years past, the planes were stacked up coming in for landing. It is almost dead air over both now. Spooky.

With that, I can't believe the airline industry will completely collapse. At some point all of this foolishness will stop and the country will be open for business again, and airlines will return to typical passenger loads. If you accept my assumptions, then investing in airlines would be a good bet, though the timeframe could be years.

Looking at my assumptions, a counterpoint is the actions of a couple governors in the NW, maybe my assumptions are off!!!! LOL


Telecaster

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Re: Airline Stocks September
« Reply #5 on: August 31, 2020, 12:11:01 PM »
It is worth thinking about.  Historically, the airline industry has been pretty crappy, but in recent years the majors have consolidated down into a profitable oligopoly.   Then COVID hit and we all know what happened after that.

Airline stocks are down by about 50%.  Assuming they can return to their former profitability and stock price in five years (I have no idea if they can, but it seems reasonable) that would mean a 100% gain and would give you a CAGR of about 15%.   Even if it took seven years, that's still a CAGR of 10%. 

I probably wouldn't buy the ETF.  I'd probably just buy the top seven passenger carriers equally weighted. 


Abe

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Re: Airline Stocks September
« Reply #6 on: August 31, 2020, 12:18:48 PM »
Well the question isn't really are they going to return to profitability, but will their stocks perform better from here than the overall market.

If you compare JETS and SP500 prior to Covid, I'd say no.

yvr111

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Re: Airline Stocks September
« Reply #7 on: August 31, 2020, 12:23:20 PM »
I appreciate everyone's responses! I am 29 and this is actually my first time posting to a forum, ever! I was worried I would get lambasted for asking a silly question so thank you :)

TheAnonOne

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Re: Airline Stocks September
« Reply #8 on: August 31, 2020, 12:33:02 PM »
I appreciate everyone's responses! I am 29 and this is actually my first time posting to a forum, ever! I was worried I would get lambasted for asking a silly question so thank you :)

To be clear the general mantra here is to just buy VTI/VTSAX and call it a day.

Airlines may or may not do well, but either way, I think the broad market is in for a good 5 years, given the propensity to print money these days.

Telecaster

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Re: Airline Stocks September
« Reply #9 on: August 31, 2020, 04:52:41 PM »
Well the question isn't really are they going to return to profitability, but will their stocks perform better from here than the overall market.

If you compare JETS and SP500 prior to Covid, I'd say no.

I don't know about JETS specifically, but for the decade or so prior to COVID the major carriers were doing really well compared to the S&P.   Southwest, Delta, and AA in particular blew the doors off the S&P. 

In my back-of-the-back-of-the envelope musing above, a return to former profitability (implying a return to the former stock price) over the next 5-7 years would be a CAGR of about 10-15%.   

I'm not saying that will happen, or that anyone should follow this strategy, but there is a non-crazy pathway here. 

MustacheAndaHalf

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Re: Airline Stocks September
« Reply #10 on: August 31, 2020, 06:46:17 PM »
Well the question isn't really are they going to return to profitability, but will their stocks perform better from here than the overall market.

If you compare JETS and SP500 prior to Covid, I'd say no.
You're ignoring that American Airlines and Delta Airlines both lost half their value because of Covid.  If they return to normal, their stock prices should reflect returning to normal, as Telecaster points out.  In the case of AAL and DAL stock, when the market anticipates their situation returning to normal, their stock price should follow.

yvr111 -
There's also another "option" for this investment.  If the main risk is bankruptcy, that impacts stocks and options equally: a total loss.  So you could buy long-dated call options at the current stock price.  Although I'm not recommending AAL specifically (I don't own it), I'll use it as an example:

AAL stock at $13.05 versus pre-Covid about $28.  So if you bought AAL stock and it recovered, you hold $28/sh stock that you bought for $13, giving a +115% profit (or it goes bankrupt).

AAL call options with a $13 strike (Jan 2022) cost $5.30 now.  If AAL stock recovers before Jan 2022, the options are worth $28 - $13 = $15/share.  Investing $5.30 with a $15 return is a profit of +183%.  But that takes on an additional risk of the options expiring.

In my view, the biggest risk for airlines is bankruptcy.  Since that impacts stocks and options equally, I prefer to hold call options on airline stocks rather than the underlying stock.  It's more profitable, and the biggest risk is the same.

I currently hold options for one airline stock and one stock related to the airline industry.  While I held Alaska Airlines (ALK) stock for a few months, I sold in order to avoid having 3 positions related to the airline industry.

cloud7272

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Re: Airline Stocks September
« Reply #11 on: August 31, 2020, 09:50:40 PM »
I started selling puts on JETS since march for 4 months, made 40% ROI. So it's 10% per month. Not bad!  THE IV has died down now so I stopped selling.  It's almost the same return as if I were to bought the stock at $13.5 in March but selling puts gave more consistent ROI every month and provided the cash flow benefits.

Considering JETS was at $30 before the COVID, I don't see much upside once it's past $20 per share.  Not much growth in airline industry.
The IV died down also means the market doesn't expect much movement in the near months.

« Last Edit: August 31, 2020, 09:57:16 PM by cloud7272 »

park10

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Re: Airline Stocks September
« Reply #12 on: August 31, 2020, 09:56:43 PM »
Hi y'all
I wonder what you thought about putting money into airlines at this time? There seems to be a lot of value in the industry and upside that eventually (knock on wood) well all get back to it.

Was hoping to invest in an ETF (JETS) in order to avoid any single focus downside. Would be a small amount of my portfolio. Just curious on thoughts?
For every question like this, the OP should address: What is the timeframe ?, Is this a trade or a long term investment ?, how much will you risk i.e Will this have a stop loss and if so where? Is the idea based on technical setup, some fundamental thesis or something else ? Will you enter full position or leg in ? Options or common? if options, risk defined or undefined ? straight premium buy or multi legged strategies?
 ----Without this info, the question is incomplete and hence answers totally meaningless.....

JetBlast

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Re: Airline Stocks September
« Reply #13 on: September 01, 2020, 04:29:37 PM »

There's also another "option" for this investment.  If the main risk is bankruptcy, that impacts stocks and options equally: a total loss.  So you could buy long-dated call options at the current stock price. 


Unfortunately the recovery in these stocks may take longer than even the latest dated calls that are normally traded.  American, Delta, and United are all thinking summer 2021 they're going to be probably 30% smaller than summer 2019.  Q3 cash burn this year around $25 million per day, hoping to be cash flow neutral by the end of this year.  You might still catch a nice gain if it becomes clear bankruptcy is off the table, but normal isn't likely any time soon.  At this time next year they will be significantly smaller and much more indebted.  For them to get back to where they were in 2019 is likely a minimum 4-5 years away. 

reeshau

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Re: Airline Stocks September
« Reply #14 on: September 01, 2020, 05:47:16 PM »
September will be a terrible time to invest in airlines.  As the wage guarantee portion of their federal bailout comes to an end, they have signalled they will lay off 10's of thousands of skilled employees, to more accurately reflect their current operating level.  If that goes through, it's not just a blow to the economy, but would also be a further obstacle to their return to normal, as those employees change careers or look to work internationally, and will not be available to return.

Or, the government could cave to pressure and keep the airlines in a holding pattern (oh, the irony!) until demand returns and drives their size adjustments.

Given all that, you could ask if September is a good time to *speculate* about the airlines,  Some would say there is no difference.  But here, there is little historical information to go on, and the results depend primarily on factors outside the company's control, namely further active government intervention.  (and no negative intervention, like another shutdown)  Given those two factors, this is much riskier than an investment, although the payoff could be higher, too.  Same is true in Vegas.

MustacheAndaHalf

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Re: Airline Stocks September
« Reply #15 on: September 01, 2020, 09:35:10 PM »
There's also another "option" for this investment.  If the main risk is bankruptcy, that impacts stocks and options equally: a total loss.  So you could buy long-dated call options at the current stock price. 
Unfortunately the recovery in these stocks may take longer than even the latest dated calls that are normally traded.  American, Delta, and United are all thinking summer 2021 they're going to be probably 30% smaller than summer 2019.  Q3 cash burn this year around $25 million per day, hoping to be cash flow neutral by the end of this year.  You might still catch a nice gain if it becomes clear bankruptcy is off the table, but normal isn't likely any time soon.  At this time next year they will be significantly smaller and much more indebted.  For them to get back to where they were in 2019 is likely a minimum 4-5 years away.
Is there a source for the predicted 4-5 year recovery?  I'm curious about viewpoints that counter my view of things, so I'd be interested in reading about that.

Former FDA commissioner Gottlieb believes data from vaccine trials will be available in November, and vaccination in the first half of 2021.  This summer airline travel was down 70-90% (depending on the month), so a lot of people missed traveling on vacation.

"America's retail sales surged 17.7% in May ...  far better than economists had expected ... Still, sales in May were down 6.1% compared with last year"
https://www.cnn.com/2020/06/16/business/retail-sales-shopping/index.html

Retail sales are at 94% of pre-pandemic levels, and we still have a pandemic!  With a vaccine probable, and pent up demand for vacations, I would expect next summer to have more demand for air travel than an average year.

JetBlast

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Re: Airline Stocks September
« Reply #16 on: September 02, 2020, 09:25:22 AM »

Is there a source for the predicted 4-5 year recovery?  I'm curious about viewpoints that counter my view of things, so I'd be interested in reading about that.

To some extent it's my own guess based on how things have developed.  Probably somewhat shorter for airlines less exposed to international travel or high dollar business travel. 

Commentary back in April from the CEO of Delta was 2-3 years.  Since then the recovery has slowed and been choppy, not the V shape that was hoped for at the time.  For the big 3 (American, Delta, United) just training pilots to get back to the size they were last summer will be probably a three year process. They're cutting so much in terms of staffing that I don't see how any of them in the back half of 2021 will be even close to the size they were heading into this year.

If it takes them three years to get back to their current size, they might have similar revenue but will be billions of dollars further indebted than they were before the crisis.  Money that would have gone to investors in the form of dividends and buybacks will instead be used to pay down debt, which I suspect will result in Wall Street suppressing the multiples of the airlines until they start returning significant cash to investors.

Part of the problem is that airlines have very little visibility for how the future will look so they're playing things cautiously.  Bookings right now are happening much closer to date of travel than they have in the past so revenue management and network planners don't have even a rough idea what demand looks like six months from now.  Airlines would rather reduce costs in a big way now and take a few years to build back up instead of not cutting enough and heading into bankruptcy if the recovery is slower than expected.

A vaccine will certainly help but there's still a lot of uncertainty there.  What if human trials don't show a strong immune response?  What if the response is short lived?  If it does work I suspect a large portion of the population will not want to get injected with a vaccine that was rushed to market, and will wait a bit to see if others suffer adverse reactions.  Especially younger adults that see little risk from the virus.   

reeshau

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Re: Airline Stocks September
« Reply #17 on: September 02, 2020, 11:17:42 AM »

Is there a source for the predicted 4-5 year recovery?  I'm curious about viewpoints that counter my view of things, so I'd be interested in reading about that.

To some extent it's my own guess based on how things have developed.  Probably somewhat shorter for airlines less exposed to international travel or high dollar business travel.  .

It's a great guess--it is also the guess of the IATA, the global trade organization for airlines.

https://www.iata.org/en/pressroom/pr/2020-07-28-02/

To go further on this topic, I am invested in Air Lease.  For a number of reasons, they look to come out of this situation in an even stronger position.  Check out their earnings call transcripts for more details.

For airlines, Wizzair looks to also be using this opportunity, rather than trying to survive through the starvation.
« Last Edit: September 02, 2020, 11:20:07 AM by reeshau »

JetBlast

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Re: Airline Stocks September
« Reply #18 on: September 02, 2020, 05:16:23 PM »

To go further on this topic, I am invested in Air Lease.  For a number of reasons, they look to come out of this situation in an even stronger position.  Check out their earnings call transcripts for more details.


I'll have to take a look at that earnings call.  There have already been some relatively large airlines that have entered reorganization (Avianca, LATAM, AeroMexico, Virgin Australia, and Virgin Atlantic come to mind) and aircraft lessors tend to take it in the shorts as leases are rejected, and there's ZERO demand for new aircraft right now so I'm interested to hear their reasons for optimism. 

reeshau

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Re: Airline Stocks September
« Reply #19 on: September 02, 2020, 06:16:41 PM »

To go further on this topic, I am invested in Air Lease.  For a number of reasons, they look to come out of this situation in an even stronger position.  Check out their earnings call transcripts for more details.


I'll have to take a look at that earnings call.  There have already been some relatively large airlines that have entered reorganization (Avianca, LATAM, AeroMexico, Virgin Australia, and Virgin Atlantic come to mind) and aircraft lessors tend to take it in the shorts as leases are rejected, and there's ZERO demand for new aircraft right now so I'm interested to hear their reasons for optimism.

You may want to listen to Q1 and Q2, to hear all the pandemic-related questions and hypotheticals.  To be honest, Aercap is doing well also, but I like Air Lease better. 

A few reasons:
So far through the pandemic, airlines have preferred to use newer leased planes (and so, continue to pay for them) since they have less maintenance due.
While there have been lease deferrals, they are short-term, and result in lease extensions as well. (net increase in revenue for the asset)
Lessors have much better access to financing.  Air Lease just did a 5-year, unsecured bond at 2.875%.  Airlines need to pay 10+ for *secured* debt.  That's a lot of float to play with.
European airlines' bailouts came with environmental provisions i.e, they need to accelerate fleet renewal
China domestic traffic (and therefore, narrowbody usage) is at 85% of pre-pandemic levels
Airlines are deferring deliveries from OEM's in part by switching positions with lessors, due to financing difficulty (ex: Korean Air / Air Lease 787's)

I didn't know it would turn out this way, but so far it seems that the pandemic is accelerating trends toward newer models and leasing, rather than stretching out older or owned models.  If the pandemic lasts through all of 2021 with no vaccine, things could look drastically different.  But Air Lease has avoided the worst lessor situations, like Norwegian and Virgin Australia.  They have no current planes with Virgin Atlantic, but the current reorg plan has their future deliveries unchanged.  The only repo was 1 plane from South African.

MustacheAndaHalf

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Re: Airline Stocks September
« Reply #20 on: September 02, 2020, 11:58:48 PM »
Is there a source for the predicted 4-5 year recovery?  I'm curious about viewpoints that counter my view of things, so I'd be interested in reading about that.
To some extent it's my own guess based on how things have developed.  Probably somewhat shorter for airlines less exposed to international travel or high dollar business travel.  .
It's a great guess--it is also the guess of the IATA, the global trade organization for airlines.
https://www.iata.org/en/pressroom/pr/2020-07-28-02/

To go further on this topic, I am invested in Air Lease.  For a number of reasons, they look to come out of this situation in an even stronger position.  Check out their earnings call transcripts for more details.
From that article:
"While pent-up demand exists for VFR (visiting friends and relatives) and leisure travel, consumer confidence is weak in the face of concerns over job security and rising unemployment, as well as risks of catching COVID-19"
"The recovery in short haul travel is still expected to happen faster than for long haul travel."

Unemployment fears are a good point: even after a vaccine, people would need to see hiring and stability before they plan vacations.  I think rising retail sales suggest a recovery underway, but some job cuts have become permanent.  Congress has allowed the paycheck protection program to lapse, so companies might be less able to afford employee salaries, and that could lead to more unemployment.


And one key paragraph I'll quote entirely:
"Meanwhile, since domestic markets are opening ahead of international markets, and because passengers appear to prefer short haul travel in the current environment, RPKs will recover more slowly, with passenger traffic expected to return to 2019 levels in 2024, one year later than previously forecast. Scientific advances in fighting COVID-19 including development of a successful vaccine, could allow a faster recovery. However, at present there appears to be more downside risk than upside to the baseline forecast."

The experts (Dr Fauci, Dr Scott Gottlieb) I've heard view a successful vaccine as likely.  IATA seems to be disagreeing with expert opinion when they acknowledge a possible vaccine, but say there is more "downside risk".  While either view could be correct, the experts are more likely to be right than the IATA about vaccines.

In the case of a vaccine, IATA doesn't say anything behind a possible "faster recovery".  That suggests sooner than 2024, but leaves it entirely unclear when.  I wish they hadn't stuck to one predicted outcome, and one year, and provided more information about how a vaccine might speed up the recovery in the airlines industry.

reeshau

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Re: Airline Stocks September
« Reply #21 on: September 03, 2020, 05:54:07 AM »
Is there a source for the predicted 4-5 year recovery?  I'm curious about viewpoints that counter my view of things, so I'd be interested in reading about that.
To some extent it's my own guess based on how things have developed.  Probably somewhat shorter for airlines less exposed to international travel or high dollar business travel.  .
It's a great guess--it is also the guess of the IATA, the global trade organization for airlines.
https://www.iata.org/en/pressroom/pr/2020-07-28-02/

To go further on this topic, I am invested in Air Lease.  For a number of reasons, they look to come out of this situation in an even stronger position.  Check out their earnings call transcripts for more details.
From that article:
"While pent-up demand exists for VFR (visiting friends and relatives) and leisure travel, consumer confidence is weak in the face of concerns over job security and rising unemployment, as well as risks of catching COVID-19"
"The recovery in short haul travel is still expected to happen faster than for long haul travel."

Unemployment fears are a good point: even after a vaccine, people would need to see hiring and stability before they plan vacations.  I think rising retail sales suggest a recovery underway, but some job cuts have become permanent.  Congress has allowed the paycheck protection program to lapse, so companies might be less able to afford employee salaries, and that could lead to more unemployment.


And one key paragraph I'll quote entirely:
"Meanwhile, since domestic markets are opening ahead of international markets, and because passengers appear to prefer short haul travel in the current environment, RPKs will recover more slowly, with passenger traffic expected to return to 2019 levels in 2024, one year later than previously forecast. Scientific advances in fighting COVID-19 including development of a successful vaccine, could allow a faster recovery. However, at present there appears to be more downside risk than upside to the baseline forecast."

The experts (Dr Fauci, Dr Scott Gottlieb) I've heard view a successful vaccine as likely.  IATA seems to be disagreeing with expert opinion when they acknowledge a possible vaccine, but say there is more "downside risk".  While either view could be correct, the experts are more likely to be right than the IATA about vaccines.

In the case of a vaccine, IATA doesn't say anything behind a possible "faster recovery".  That suggests sooner than 2024, but leaves it entirely unclear when.  I wish they hadn't stuck to one predicted outcome, and one year, and provided more information about how a vaccine might speed up the recovery in the airlines industry.

Yes, I think there are two special concerns for international (intercontinental) travel.  The first is that governments will need to coordinate opening up service, and standardize on health requirements to that end.  If people make the trip and end up being denied at the other end due to some technicality, that would spoil the whole thing.  That is happening in limited corridors, which is important to get practical experience, but there is no coordinated effort at this, yet.  Think of this not only for health metrics (i.e. taking temperature) but also vaccination:  which vaccine?  And how long ago?  It will require health authorities to also coordinate closely, as much as air authorities.

Second is the need for the return of business travel, which significantly subsidized leisure travel.  All businesses were forced to try videoconferencing.  To whatever extent skeptical people have come to like it, there will permanently be fewer business travellers.  This disruption may not only impact flying schedules, but may also require reconfiguration of airplanes to a dust seating ratios.  But until airlines are able to try flying in a significant way, it is all just guessing.

ChpBstrd

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Re: Airline Stocks September
« Reply #22 on: September 14, 2020, 11:36:10 AM »
I'm sure there is a lot of pent-up demand for vacation travel that will break through in late 2021 when we're all hopefully vaccinated.

However, I think the pandemic put a nail in the coffin of the practice of "business travel" which is usually a euphemism for spending $2,000-3,000 of the company's money to waste two days traveling and sleep in a mid-tier hotel for the purpose of attending a meeting in person. Zoom, Go To Meeting, and WebEx all work great and don't tie up an expensive executive for days at a time. Microsoft Teams is an awesome tool. Docusign and a dozen copycats have eliminated the perceived need to fly somewhere to sign a document.

I don't think the world is going back. The old way of doing things is simply too expensive. And now we've all had a crash course on the new way. This means the industry has overcapacity. Overcapacity coupled with debt is bad news for these stocks because it means relentless price wars are coming. I'd rather buy a restaurant stock like Dave & Busters than an airline or cruise line stock, because at least in that industry the competition has been reduced and there is hope for margins.

On the flip side, the rise of electric cars and the reduction in commuting could mean low jet fuel prices for the next decade. Flying somewhere for a 3 day weekend could become a middle class thing to do.

reeshau

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Re: Airline Stocks September
« Reply #23 on: September 14, 2020, 01:49:56 PM »
I'm sure there is a lot of pent-up demand for vacation travel that will break through in late 2021 when we're all hopefully vaccinated.

However, I think the pandemic put a nail in the coffin of the practice of "business travel" which is usually a euphemism for spending $2,000-3,000 of the company's money to waste two days traveling and sleep in a mid-tier hotel for the purpose of attending a meeting in person. Zoom, Go To Meeting, and WebEx all work great and don't tie up an expensive executive for days at a time. Microsoft Teams is an awesome tool. Docusign and a dozen copycats have eliminated the perceived need to fly somewhere to sign a document.

I don't think the world is going back. The old way of doing things is simply too expensive. And now we've all had a crash course on the new way. This means the industry has overcapacity. Overcapacity coupled with debt is bad news for these stocks because it means relentless price wars are coming. I'd rather buy a restaurant stock like Dave & Busters than an airline or cruise line stock, because at least in that industry the competition has been reduced and there is hope for margins.

On the flip side, the rise of electric cars and the reduction in commuting could mean low jet fuel prices for the next decade. Flying somewhere for a 3 day weekend could become a middle class thing to do.

I do think business travel will take longer to recover than leisure travel.  But I think "nail in the coffin" is a bit much.  We've had the ability to work remotely for decades.  (Microsoft Netmeeting was introduced in 1996)  Now that most people have tried the current state, will some be more comfortable?  Yes.  And have some been driven crazy by the downsides?  Yes.

I also think, when you are really spending that much for a ticket, there is a matter of who you are talking about.  Big cats like to get stroked; they want to see the people they are making a deal with.  I think for the top--the ones that are paying that much, although short of having their own jet--they will still travel.  And they won't be too price sensitive.  I also think there is the whole consultant industry who, for the reasons above, will follow along.

At my former company, we sprang for Cisco telepresence systems 5 years or so ago, on the basis of travel savings to the company.  Were they used?  Yes, although only 1 or 2 of 20 nodes had any issue reserving time on demand.  In the end, did they appreciably reduce travel?  Not really.  There is room for teleconferences to better fill in the gaps between visits, rather than viewing it entirely as a zero-sum game of contact.

It's not gone--it might be smaller.

And this will also accelerate the growth of airlines like Southwest, Ryanair, Easyjet, and Wizz Air, who don't cater to that group, anyway.

terry1979

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Re: Airline Stocks September
« Reply #24 on: September 19, 2020, 05:07:02 AM »
I know Warren Buffett owned Delta Airlines for many years. The stock has doubled to $35 off its May lows of $17.5.

But I wouldn't chase it up here. It's still below the 200 day moving average, and risk of global shutdowns is rising.

Plus the dividend is too paltry; 2.45%?!

JetBlast

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Re: Airline Stocks September
« Reply #25 on: September 19, 2020, 10:23:11 AM »
I know Warren Buffett owned Delta Airlines for many years. The stock has doubled to $35 off its May lows of $17.5.

But I wouldn't chase it up here. It's still below the 200 day moving average, and risk of global shutdowns is rising.

Plus the dividend is too paltry; 2.45%?!

Dividend was eliminated months ago to conserve cash. 

chasesfish

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Re: Airline Stocks September
« Reply #26 on: September 20, 2020, 05:18:48 AM »
I enjoyed browsing this thread.

Lots of considerations on what any of the "recovery" stocks will look like.  Personally airlines aren't for me.  Too many fixed costs, too many government regulations and unions, and capital controls are probably coming thanks to having to go to Uncle Sam for money earlier this year.

Banks did that last decade and now have to file a Comprehensive Capital Analysis and Review with the federal government every year.  The requirement to retain more equity, while better for the taxpayers, creates a drag on return on equity.

MustacheAndaHalf

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Re: Airline Stocks September
« Reply #27 on: September 20, 2020, 09:59:16 AM »
For covid sensitive stocks, I view airlines as diversification.  Congress allocated relief specific to airlines, for example, suggesting they might get special treatment where other businesses don't.  So airlines could be one stock of many.

Personally, I bought long dated stock options in an airline.  I'm waiting for recovery or bankruptcy.  In bankruptcy, stocks and options are worth the same - so I used options, which have more leverage and upside.  But options expire where stocks don't.

I'm a bit concerned at how long vaccines will take to help air travel.  It would be very lucky if vaccines were 100% effective - a lower effectiveness is more likely.  If it's 75% effective, will people take a 1 in 4 chance of traveling, and catching Covid-19?