Airline stock discussion

[NilesMike]

I will be looking at all the major names this weekend and with everyone's input here hope to push in a large stack of chips. There is no doubt in my mind that the airline industry will come roaring back. Cruise lines, not so much.

I will even be checking into the ETF-JETS

Any and all input welcome as I'm WIIIDE open.

[fenders53]

Depends entirely on what kind of assistance they get and what rules they have to comply with.
DAL had a good balance sheet last month but no revenue will change that soon. AAL was flirting with trouble before this even started

[chadnelson]

I like Delta Airlines, it has come off 65% from its highs and I understand Warren Buffet owns a boatload of this company. 

It also trades at 6 times forward p/e ratio, which is just ludacris! Anyone else looking at this airline?

[fenders53]

(03-20-2020, 10:35 PM)chadnelson Wrote: I like Delta Airlines, it has come off 65% from its highs and I understand Warren Buffet owns a boatload of this company. 

It also trades at 6 times forward p/e ratio, which is just ludacris! Anyone else looking at this airline?

I own a lot of DAL since before this all happened, because they are the best in breed.  The current PE means absolutely nothing.  The game just changed.  Their actual PE is more like negative 47.  They are burning $50M cash a day!  All airlines are bankrupt soon without a GOV assist.  It's reality they have to go further in debt.  Whether the financing terms set them up for failure is the question.  DAL was great because they controlled their debt, until now.  It's a dangerous investment until they truly bottom, wherever that is.

[NilesMike]

Did a little evaluating this AM and using 6 different criteria, I scored 5 companies. 3 airlines along with FDX and UPS. The 6 categories of comparison were: Divvidend yield, Payout %, Debt Ratio, Price/Book, 5 year PEG and EV/EBITDA. Each category was weighted equally and each stock was ranked 1-5 in each category. 1 being best, 5 being worst.
We know things will look differently going forward but this is the data available and pre-Corona should be a good harbinger of post-Corona IMO.
Best possible score would be 6 and worst score would be 30

Scores
UPS 23
FDX 20
DAL 11
UAL 18
LUV 17

For the put sellers, an 17APR20 put, 12.5% OTM on each of LUV, DAL, or UAL yields the following. 17%, 17.6% and 26%
I think I will sell DAL 17APR20 put at 18 strike for >$3.75. So break even would be down to $14.25

I can live with that but let's watch Sunday night open.

Good luck and health to all!

[divmenow]

I don't invest in airlines. Its just one sector I have always stayed away from. Just too much that can go wrong in that sector. With these planes flying at 50% less capacity they are in big trouble. My wife works in the rest business at the airport and the company she works for usually does over 3.5 million a week. They have done $47,809 this week total. That tells you how bad things are and will only get worse. This corona virus could last till the end of summer. I just don't see it getting better any time soon. If I could I would still short this sector.

The companies I invest in now have to have a A- or better credit rating. These airlines will all be downgraded soon. And will need a bail out. So none of them would even be close to my criteria. Sorry I'm so negative but I'm just speaking the truth lol

[NilesMike]

There is definitely short term pain but does anyone really think the skies will be empty long term?

Not me.

"If I could I would still short this sector". ?? Why cant't you be short airlines, just buy puts?

[divmenow]

Well the FAA they just restricted all flights to NY and Philly airports. News was just released. I don’t know how these airlines are going to survive. Government is going to have to ball them out and other sectors. How will there be enough money to go around to save all these sectors? Some will not survive And Boeing I don’t know how this is all going to play out for them. They will get a bailout, no doubt about that. They already cut the dividend and no more buybacks. But the question is. Is it already priced in? I remember a few years back we were at this $100 level and then we shot up. I have held on on buying BA but it will be back. I may buy a few shares on Monday just to keep tabs on it lol

And yes on puts.

[fenders53]

(03-21-2020, 12:20 PM)NilesMike Wrote: There is definitely short term pain but does anyone really think the skies will be empty long term?

Not me.

"If I could I would still short this sector". ?? Why cant't you be short airlines, just buy puts?

Not unless the government wishes to launch the Great Depression II.   I don't think travel will be blocked as long as it probably should be for health reasons.  I think you need to see the bailout package first and I suspect the outline is coming very soon.  As long as they don't restructure and make the shares worthless most of them will come back.  AAL being the one that may not survive this longterm.  

I don't see any of them buying any jets this year.  BA is going to be a bigger mess by the day.   It will take some creativity from the Gov to avoid a GM style restructure.  They need to be bought out but I don't know who wants any of that action right now.  It would be a risky purchase.

[NilesMike]

If airlines don't survive, airport workers (1.3M) get crushed, Disney gets crushed, vacation resorts get crushed, oil gets crushed if they don't sell 20B gallons of jet fuel yearly, professional sports gets trimmed along with the gambling, restaurants and everything else attendant to it.

The airlines MUST be saved one way or another.

[crimsonghost747]

The bigger ones will be saved. Of course they are not going to let the whole industry get destroyed.
But whether that does any good for the shareholders is another thing. Always remember that a bailout is about saving the company, not about saving the existing shareholders. And the one doing the bailing out has all the power.

One thing is pretty clear to me: any airline that gets bailed out will have to stop their dividend payments for the time being.

[fenders53]

Mike, I don't think anybody is seriously thinking all the airlines fold. It's not an acceptable outcome. I didn't say Depression instead of Recession to be dramatic. The pin action on allowing all the airlines to go BK would absolutely devastate the economy.

It's not the "if", it's the "how". This is a financial nightmare. It's getting cleared the US can't save every troubled company. "Bail out" the rich folks is a dirty word these days. There may be some grants, but this is mostly going to have to be loans. There are airlines that could service their new debt. There are some that can't and it will just be prolonging their demise. World travel has to be restored. If they wait until it is completely safe there will be no privately owned airlines in the entire world.

Many were concerned corporations are too far in debt before this all happened. Seems that's the new reality. It's going to be a very short list of companies that aren't much riskier for years to come. Even some aristocrats are tapping out their current credit lines right now. While I am bullish on the market by 2021, the game just changed for sure. There will be BKs, acquisitions, and many of the blue chip survivors will be damaged goods. Yeah, that was a Captain Obvious statement. I hope you all took notes lol. I guess that's why stocks are cheaper now maybe?