Airline Industry Opportunity? JBLU Wins

Investment Analysis Clubs Saul’s Investing Discussions
1

I’ve been noticing the last 6 months a sharp decline in the airline industry which may be shaping up for a near term opportunity. Not all high growth stocks are in the technology industries!
I picked 11 companies in the industry and analyzed them for which one may be the best choice for 1 to 2 year profit. Interestingly, you can go with SKYW which is the only airline company bucking the down trend and is consistently hitting 52 week highs, is 3rd highest in TTM Adjusted Earning growth (83%), but has the highest PE (11.7) OR you can go with JBLU which is one of the hardest hit companies (39% off 52 week high), is #1 in TTM Adj Earnings growth (99.1%) and has a below industry average PE of 7.7. Both have low 1YPEGs of 0.14 and 0.08 respectively.
All adjusted earnings by quarter are from TD Ameritrade.

Price Performance Follows as of July 1st Closing Price:


Stock	KLEIN	High 	Low	Current	% down	% up	% Return to High
AAL	n/a	47.09	24.85	29.33	38%	18%	61%
ALGT	n/a	238.13	134.64	148.78	38%	11%	60%
ALK	bad	87.17	54.51	58.74	33%	8%	48%
DAL	n/a	52.77	32.6	36.77	30%	13%	44%
HA	n/a	50.95	19.87	38.26	25%	93%	33%
JBLU	n/a	27.36	14.76	16.64	39%	13%	64%
LUV	bad	51.34	32.25	39.62	23%	23%	30%
RYAAY	bad	89.67	66.09	71.1	21%	8%	26%
SAVE	n/a	64.81	32.73	46.06	29%	41%	41%
SKYW	bad	27.17	13.23	27.15	0%	105%	0%
UAL	n/a	62.21	37.41	41.37	33%	11%	50%

Adjusted Earning per Share Follows:
Stock	2013	2014	2015	Q1 2014	Q2 14	Q3 14	Q4 14
AAL	2.91	5.7	9.12	0.54	1.98	1.66	1.52
ALGT	4.84	6.35	12.92	1.86	1.86	0.8	1.83
ALK	2.71	4.18	6.5	0.64	1.13	1.47	0.94
DAL	3.14	3.35	4.64	0.33	1.04	1.2	0.78
HA	0.86	1.52	3.13	-0.02	0.35	0.79	0.4
JBLU	0.51	0.7	1.98	0.01	0.19	0.24	0.26
LUV	1.12	2.02	3.53	0.18	0.7	0.55	0.59
RYAAY	2.45	4	4.32	-0.19	1	2.93	0.26
SAVE	2.43	3.24	4.36	0.52	0.91	1.01	0.8
SKYW	1.12	0.65	1.99	-0.44	-0.23	0.5	0.82
UAL	2.66	4.96	11.9	-1.33	2.34	2.75	1.2

Stock	Q1 15	Q2 15	Q3 15	Q4 15	Q1 2016
AAL	1.73	2.62	2.77	2	1.25
ALGT	3.74	3.18	2.62	3.38	4.29
ALK	1.12	1.76	2.16	1.46	1.45
DAL	0.45	1.27	1.74	1.18	1.32
HA	0.38	0.61	1.29	0.85	0.8
JBLU	0.4	0.44	0.58	0.56	0.59
LUV	0.66	1.03	0.94	0.9	0.88
RYAAY	0.06	1.03	2.79	0.44	0.22
SAVE	0.96	1.03	1.35	1.02	1.01
SKYW	0.18	0.61	0.71	0.49	0.52
UAL	1.52	3.31	4.53	2.54	1.23

And the good stuff last (using the last 4 reported Quarters):
Stock	TTM Earnings	PE	TTM Growth	1YPEG	Interest?
AAL	8.64	3.4	25.4	0.13	maybe
ALGT	13.47	11.0	63.7	0.17	YES
ALK	6.83	8.6	46.6	0.18	No
DAL	5.51	6.7	58.8	0.11	YES
HA	3.55	10.8	84.9	0.13	YES
JBLU	2.17	7.7	99.1	0.08	YES
LUV	3.75	10.6	50.0	0.21	No
RYAAY	4.48	15.9	5.4	2.93	No
SAVE	4.41	10.4	19.8	0.53	No
SKYW	2.33	11.7	83.5	0.14	YES
UAL	11.61	3.6	48.7	0.07	No

I think JBLU has the best high growth, lower PE, most comfortable seats.
Does anyone have thoughts on why the airline industry is falling with such high growth on the books? They all correlate with each other pretty well (except SKYW), but JBLU happens to have the highest return to 52 week upside as well (64% gain to return to the previous high set just 7 months ago). Or do you think the industry is still falling down?

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I went to edit that last table formatting and it accidently posted, but I think you smart people will be able to figure it out. What an archaic system we are using…

Happy 4th of July to all and cheers to a better 2nd half of the year!

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Well there aren’t many things I’m an expert in aviation is my field. & airlines (buy out, bankruptcies,layoffs)air traffic controller and airport manager.

Prior to deregulation (1979) airlines had protected routes to fly & unprofitable routes received compensation for the gov’t. Load factors for breakeven was around 65% anything over was profit. Load factors for the airlines after deregulation moved up to 75 to 80% break even and there was no protected routes although there were slots into overcrowded airports like Washington national and LGA.

Fast forward to today airlines need about a 93% load factor to break even and they have to overbook a flight to ensure that they make 100% loadfactor because anything less is lost inventory(empty seats).

Infrastructure issues & security beyond the airlines control. There hasn’t been and likely won’t be a major new airport built in this country in the next 15 to 20 years and hasn’t been one since Denver Int’L in 1995. Terminals across the country were built in the 60’s& 70’s and many (LGA,JFK,STL, etc.) were designed for propeller driven aircraft in the 1930. They are land locked and can’t expand. Security cost are continuing to increase and provide little to no improvement. Terrorist threat have increasing monetary impacts (false alarms cause the evacuation of terminal and re screening issues. Drunks on a flight causing flights to divert. Bomb threats (false alarms) cause diverts.

Weather expenses. IMO there are simply way to many costs that the airline industry can not control.

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I bought Air Methods earlier this year, sold at a loss at $39.71. Closed Friday at $36.01. I might give it another try after it really bottoms out.

http://invest.kleinnet.com/bmw1/stats16/AIRM.html

Denny Schlesinger

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I bought Air Methods earlier this year,

I’ve been “playing” AIRM for the last year or so.
Buying around 36 and selling above 40 several times.

If they could get thru a winter without excessive cancellations
I could see it lifting it’s range to high 40’s, low 50’s again.

Good cash flow and a possible buy out candidate. Forward PE a 10.

http://finance.yahoo.com/q/ae?s=AIRM+Analyst+Estimates

JT

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The other opportunities to play the airline sector is in aircraft leasing for a yield play or in emerging markets fuel supply and leasing (e.g. China and Asia). This year I bought into BOC in HK and looking at China Aviation Oil in Singapore.
Ant