Greg,
I agree with you about what you say but the stock has been stuck here
for a little bit. Also, as Sam pointed out Southwest is trading at
around 15 to 16x Earnings, when for the last two quarters, they have
not increased their earnings. On the other hand, Delta is trading at
between 6 to 7x Earnings and they are growing theirs over the last
two quarters.
Southwest has not taken advantage of the strong economy or spike in
oil prices. They have chosen just to eat the costs of the oil instead
of allowing their prices to move up slowly. Even if their prices jumped
10%, they would still be one of the lowest cost airlines out there.
Instead they keep running ads selling their seats at $29 on certain
routes and other routes are cheaper.
Also, who say's that oil is going to go down. With China and the rest
of Asia chugging along on their growth prospects. Then I would figure
that oil should stay here for sometime because China and the rest of Asia
are just going to keep drinking the stuff down. Just my thoughts though.
As far as competitors, Delta is big down in the Southeast and of course
they started Delta Express, which is having a big presence in the Southeast.
I would not fly Valujet but other people would fly them. I would have to say
that there is some healthy competition down in Florida and the Southeast.
Southwest may emerge the winner but never the less, they will have to fight
for it.
You may be right about the increased travel during the summer because
more families will travel.
As I said before, I am keeping my eye on it and if it looks as if they
are going to get back on track or if oil prices start to go down. Then
I will probably take a position again but right now, as Sam said "There
are better stocks to be in during the short term."
Bryan
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