Delta Air Lines, Inc. (DAL) emerges from bankruptcy and a few weeks later their common shares fall flat on their face. US Airways (LCC) has been falling these past few months and after losing 38% of it’s share value since late February, hello new 52-week low today due to declining revenue. Remember what happened to JetBlue (JBLU) last week? How about $9 a share and just missing their 52-week low by a few pennies. The airline sector is not where you want to be putting your money. Period.

So that $10 fare increase you’ve been hearing about? Delta, Northwest Airlines and US Airways said they withdrew a $10 round- trip fare increase adopted because of higher fuel prices. Continental initiated the $10 increase May 4th, as jet-fuel prices have climbed 14% since the start of this year. With jet fuel prices on the rise and with no relief in sight, tack on all the major carriers whining about the slowdown in domestic fare growth – how can you expect to be profitable and why would you invest in the airlines?

Bargain airline stock hunters beware, it’s going to get worse before it gets better. It’s as if all the airlines have been thrown into a coffin and Wall Street is taking enjoyment in pounding in the nails to ensure the coffin is sealed air-tight (to ensure cabin pressurization is secure).

Yesterday (5/7) Forbes ran this headline:
Sector Snap: Airline Stocks Rise
Airline stocks rose Monday, boosted by easing crude oil prices and a Credit Suisse upgrade of United Airlines’ parent.

Today (5/8) Forbes ran this story:
Sector Snap: Airline Stocks Slip
Airline stocks slipped modestly in mixed midday Tuesday trading, as crude prices ticked up and Frontier Airlines Holdings Inc. became the latest carrier to report weaker unit-revenue trends.

This isn’t an intentional slam on Forbes, it’s just the nature of the beast – airlines stocks are as easy to judge as anticpating your lovely mother-in-law’s mood. Just keep in mind, if the hate for the airline sector grows, that’s probably the time when you want to be thinking about playing one of these stocks. So let the hate build and then let the airline CEO’s band together against Wall Street just as the 13th Century Scots did versus the English under the leadership of one William Wallace. They’ll all be standing there, faces painted blue, wind blowing in the breeze, and ready to open the NYSE one fine morning in the near future. Just as they will band together to open the market, I could imagine William Wallace arriving on horse back, then making a grand speech for all of Wall Street to hear:

William Wallace: Aye, fight and you may die, run, and you’ll live… at least for a while. And dying in your beds, many years from now, would you be willin’ to trade ALL the days, from this day to that, for one chance, just one chance, to come back here and tell our enemies that they may take our lives, but they’ll never take… OUR FREEDOM!
[crowd cheers]

That’s right, they will win back their Freedom and believe me, the airline sector will have it’s day in the shinning sun, but not for a few months. Until then, Wallace and his band will plan their attack quietly, and wait for the perfect moment to strike – you’ve been warned.

Frank Lara Jr.

Frank Lara Jr. can be reached at [email protected]; he does not own securities in the companies he covers.

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