Two Ways To Play: With Crude At $115, Airline Profits Clear For Takeoff

Terry Woo  Aug 11, 2008 4:53 pm

Two Ways To Play: With Crude At $115, Airline Profits Clear For Takeoff
 
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Bloomberg reports the retreat in crude oil may be a “game-changing event” for US airlines, according to an analyst at Morgan Stanley. Analyst William J. Green wrote today in a research report that the industry will be profitable if crude oil averages $115 a barrel in 2009. The hypothesis assumes crack spreads, the difference between the price of crude oil and its eventual products (i.e. gasoline, jet fuel, heating oil, etc.), to remain at $20 per barrel.

Companies like Continental (CAL), Delta (DAL) JetBlue (JBLU) would join Southwest Airlines (LUV) in recording profits next year said Greene. “We see significant upside in shares should oil prices and demand trends remain consistent with our model.”

Green maintains an “in-line” rating on the industry.


From the Bull Pen: The decline in crude has been violent but oil could be due for a tradable bounce. USO into the 200 DMA ($87.60) could be one option for bulls.

From the Bear Cave: Have the airlines ever been able to make money? Bears might see a downside play in CAL as the stock approaches the $20 mark.
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Comments (3) See All Comments »
08-11-2008, 7:04 pm
With all the hype of the oil price decline everyone forgets that the airlines have picked the consumer to death with their add on fees.

I for one will take the bus if it is over 1,000 miles and drive if it is less!!!

I belie
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08-12-2008, 8:53 am
Where in our Constitution does it say we have some sort of birth-right to cheap air travel? If you want to pay bus service prices for an airplane ticket you will get bus service experience. Get real folks. Travel by air has become a mass transport c
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08-13-2008, 4:02 pm
The service of air travel has only one appeal, the ability to exchange money for time. The one-week vacation and a plan to see Disney World, when seen from Chicago, looks like this. Three days in the car, one day at Disney and three days in the car
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