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Airline Stocks: Making the Connection. Why airlines?. XAL: NYSE Arca Airline ETF. Yahoo finance. Back to basics. Airline bankruptcies in recent years F undamental challenges Fuel prices volatile Fare wars break out frequently Capital -intensive C omplicated business model

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Presentation Transcript
why airlines
Why airlines?
  • XAL: NYSE ArcaAirline ETF

Yahoo finance

back to basics
Back to basics
  • Airline bankruptcies in recent years
  • Fundamental challenges
    • Fuel prices volatile
    • Fare wars break out frequently
    • Capital-intensive
    • Complicated business model
    • Mother Nature interference
confessions of an aeroholic warren buffett
Confessions of an aeroholic: Warren Buffett
  • Warren Buffett is skeptical!
    • “seriously, the airline business has been extraordinary…
    • …It has eaten up capital over the past century like almost no other business because people seem to keep coming back to it and putting fresh money in.”
    • I have an 800 number now that I call if I get the urge to buy an airline stock. I call at 2 in the morning and I say: 'My name is Warren, and I'm an aeroholic.' And then they talk me down.”
positive point
Positive Point
  • Worst is over: Passenger revenue up 1.4% in January 2010
    • ↑ seasonal travel
    • ↑ financial footing
    • ↑ capacity constraint & cost controls
  • Low cost carriers (LCCs) creating new markets
  • Government support for state-owned airlines
china flying high
China flying high
  • Citi2010 forecast 18% air-travel growth for Chinese airlines
  • Evidence:14% passenger growth already in first two months
    • Momentum to the The Shanghai World Expo:70 million visitors.
  • Chinese airlines elevating competitiveness
    • Balance-sheet restoration
    • Network optimization
    • Operating efficiency improvement
    • Embracing global airline alliances
  • State help: Domestic consolidation opportunities
  • As such, the [mainland Chinese airlines] sector looks interesting with many positive features," Citigroup analysts Ally Ma and Brian Lam
china southern airlines co ltd 1055 hkg
China Southern Airlines Co Ltd 1055:HKG
  • China’s biggest carrier
  • Outperformed HIS
  • Balance Sheet:
    • Latest price: 3.47 HKD
    • Market Cap: 6.11bn
    • P/E (ttm): 7.60
    • EPS (ttm): 0.457

http://finance.yahoo.com/q?s=1055.HK

Financial Times

opinions on investment
Opinions on investment
  • OK to long winners
  • 2010: Global outlook –only way is UP
    • ↑ seasonal travel
    • ↑ global economy
    • ↑ capacity constraint & cost controls
  • Caution (or short) for industry as a whole
  • Fundamental issues remain