Two Ways To Play: Airlines Take Off
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For the second quarter, UAL reported a loss of $2.73 billion mainly due to record-setting jet-fuel prices. Jet-fuel expenses for the company jumped 53% from a year earlier to $1.85 billion, outpacing face increases and new fees.
But the company announced it will cut 7,000 job, or approximately 13% of its workforce. UAL also said it will free up approximately $350 million in previously restricted cash due to an accord with JPMorgan Chase (JPM). UAL will receive a $600 million infusion from the sale of frequent flier miles to Chase for distribution to credit-card holders.
The stock jumped 64% today to close at $8.41. Other notables include Continental Airlines (CAL) +43% to $13.26, AMR Corp (AMR), +37.44% to $9.25, and Delta (DAL) +17.5% to $7.71.
From the Bull Pen: Part of the sentiment in the airlines was due to crude oil's three dollar pullback. But bulls know some of the sharpest corrections occur in the context of a bull market. With that thought in mind, USO near $100 may look like a good risk/reward opportunity.
From the Bear Cave: "Short squeeze," says Boo. The airlines have never been able to make money and they likely won't do so now.
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