and then this curmudgeon checks him with his gloom.................
The Last Airline Standing Won't Win
By James J. Cramer
09/20/2001 08:29 AM EDT
URL: thestreet.com
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They can create new insurance for the airlines. They can create better security. They can create a fund to help those airlines that need the cash flow. But they can't create passengers.
Of course, that's the real problem with the airlines: They don't have any passengers. They will return, eventually. But the airline industry, like many industries, it turns out, operates on razor-thin margins and has no cash in the bank. These companies can't withstand weeks and weeks of no business.
Airlines aren't typical businesses. They have horrendous fixed costs in the price of planes. They have huge insurance bills that were just made three times as astronomical after Sept. ll. They have giant labor costs. They have difficult and volatile fuel prices. I know what you are thinking: Who the heck would want to own an airline?
For as long as I have been in the business, the airlines, with the exception of Southwest Air (LUV:NYSE - news - commentary) and Atlantic Coast (ACAI:Nasdaq - news - commentary) , were simply trading vehicles, not investments. You bought them only when they looked like they were on the ropes, and you sold them when they rallied big. They were and always will be strictly trades.
Now they really are on the ropes. And unless you think the government is going to subsidize your ticket and give you a marshal on your plane and make you want to go somewhere, the ropes are just a prelude to the canvas. For those who want to speculate that there could be a last-man-standing game playing out here, the Southwest Air will be that last man standing. That would be the one to own.
I just wish, and I know this will sound strange, that it were cheaper. It still is expensive vs. the prospects of industry-wide bankruptcy.
Why do I say that? Because the lesson of the telecom-tech disaster is that the good ones get pulled down by the bad ones. That's the way it happens. I have to play the odds, and the odds are still not in your favor with this group.
Random musings: Salomon cuts United Technologies (UTX:NYSE - news - commentary) to hold. That, to me, is a way late call and I would be a buyer. The suppliers are not as crushed as the planemaker, which is not as crushed as the plane companies ... Mario Monte from the European Union? As a shareholder of General Electric, I thank you for rejecting the Honeywell bid. Where would that stock be now if that deal had been done? ... I will be buying stock again today. To see what I am buying before I buy it, register here for the product that tells you what I am doing. Remember, I tell you what I would do if I could. Given my restrictions, that is a lot more valuable than just seeing my portfolio in static fashion. |
