The airlines industry is in a very bad way, unless you are a Wall Street analyst making upside predictions for a sector that Warren Buffett hates. High fuel costs and fewer passengers are simply putting too much weight on revenue and profit. If it weren’t for fees for everything from checked bags to earphones, the airlines would be in even worse shape. The carriers have also boosted fares, which has helped staunch the red ink.Overall profits are expected to remain weak through the fourth quarter, even though another fare hike is on the horizon for the travel-heavy holiday season. The weakness will also carry over to those airlines with freight businesses. Cargo traffic is expected to remain soft due to the weak global economic outlook.

There appear to be some value plays in the industry right now, but whether that is true or whether we’re looking at value traps depends to forces beyond the industry’s control. Fuel costs and the overall US and global economies being the most critical.

All data from Yahoo! Finance and MarketWatch and current stock prices were gather just before noon today.

AMR Corp. (NYSE: AMR), parent of American Airlines, has a median target price of $4.75 from 10 brokers. Shortly before noon today, shares are trading today at $2.77, for an implied gain of $1.98, or 71%. AMR’s forward P/E is negative and the company does not pay a dividend. The stock’s 52-week trading range is $2.73-$8.98, and at today’s price that’s about 1.5% above its 52-week low, posted earlier this morning, and 69% below the 52-week high. AMR reported a loss of $162 million for the third quarter, mainly due to a 40% rise in fuel costs that more than wiped out fare and fee increases. Rumors of a Chapter 11 bankruptcy filing have also hit AMR’s share price hard.

Delta Air Lines Inc. (NYSE: DAL) has a median target price of $14 from 13 brokers. Shortly before noon today, shares are trading today at $8.52, for an implied gain of $5.48, or 64%. Delta’s forward P/E is 4.15 and the company does not pay a dividend. The stock’s 52-week trading range is $6.41-$14.54, and at today’s price that’s about 33% above its 52-week low, posted earlier this morning, and 41% below the 52-week high. Delta reports earnings next week, and the consensus estimate is EPS of $0.93 on revenue of $9.73 billion. The company has already announced a fare increase for the coming months of up to $10 per ticket, its 17th fare hike this year.

United Continental Holdings, Inc. (NYSE: UAL), parent of both United and Continental airlines, has a median target price of $32 from 13 brokers. Shortly before noon today, shares are trading today at $20.23, for an implied gain of $11.77, or 58%. UAL’s forward P/E is 3.95 and the company does not pay a dividend. The stock’s 52-week trading range is $15.92-$29.75, and at today’s price that’s about 27% above its 52-week low, posted earlier this morning, and 32% below the 52-week high. UAL has followed Delta’s recent fare hike and will also report earnings next week. UAL is expected to post EPS of $2.08 on revenue of $10.14 billion.

Southwest Airlines Co. (NYSE: LUV) has a median target price of $12 from 14 brokers. Shortly before noon today, shares are trading today at $8.70, for an implied gain of $3.30, or 38%. Southwest’s forward P/E is 11.35 and the company does not pay a dividend. The stock’s 52-week trading range is $7.15-$14.32, and at today’s price that’s about 22% above its 52-week low, posted earlier this morning, and 39% below the 52-week high. Southwest reported earnings this week that were hammered by non-performing hedges. The company took a non-cash writedown of $262 million, mostly attributable to hedging.

US Airways Group Inc. (NYSE: LCC) has a median target price of $10 from 12 brokers. Shortly before noon today, shares are trading today at $5.80, for an implied gain of $4.20, or 72%. US Air’s forward P/E is 3.96 and the company does not pay a dividend. The stock’s 52-week trading range is $4.53-$12.26, and at today’s price that’s about 28% above its 52-week low, posted earlier this morning, and 53% below the 52-week high. US Air is expected to report EPS next week of $0.49 on revenue of $3.43 billion. The company expects to offset the rise in fuel prices cutting its capacity and stronger demand.

JetBlue Airways Corp. (NASDAQ: JBLU) has a median target price of $7 from 13 brokers. Shortly before noon today, shares are trading today at $4.26, for an implied gain of $2.74, or 64%. JetBlue’s forward P/E is 8.52 and the company does not pay a dividend. The stock’s 52-week trading range is $3.49-$7.60, and at today’s price that’s about 22% above its 52-week low, posted earlier this morning, and 44% below the 52-week high. JetBlue’s CFO left the company this week, prompting speculation about his reasons for doing so. CFO departures always cause headaches — and falling stock prices — particularly when there is no solid information. JetBlue is expected to report EPS next week of $0.13 on revenue of $1.2 billion.

Alaska Air Group Inc. (NYSE: ALK) has a median target price of $80.50 from 12 brokers. Shortly before noon today, shares are trading today at $64.68, for an implied gain of $15.82, or 24%. Alaska Air’s forward P/E is 7.25 and the company does not pay a dividend. The stock’s 52-week trading range is $48.14-$70.61, and at today’s price that’s about 34% above its 52-week low, posted earlier this morning, and 8% below the 52-week high. Alaska Air fell victim to the same non-performing hedge fiasco that hit Southwest and cost the company more than $77 million. The company’s revenue increase more than made up for the rise in fuel costs, but hedging sunk the ship.

Hawaiian Holdings Inc. (NASDAQ: HA), parent of Hawaiian Air, has a median target price of $8 from 5 brokers. Shortly before noon today, shares are trading today at $5.25, for an implied gain of $2.75, or 52%.Hawaiian Air’s forward P/E is 6.27 and the company does not pay a dividend. The stock’s 52-week trading range is $3.67-$8.69, and at today’s price that’s about 43% above its 52-week low, posted earlier this morning, and 40% below the 52-week high. Hawaiian Air beat EPS expectations by more than 30% in its most recent quarter and is expected to post EPS of $0.20 on revenue of $421 million for the current quarter ending in December. The company handles more than 85% of Hawaii’s intra-state traffic.

Spirit Airlines Inc. (NASDAQ: SAVE) has a median target price of $18.58 from 8 brokers. Shortly before noon today, shares are trading today at $13.86, for an implied gain of $4.72, or 34%.Spirit’s forward P/E is 8.14 and the company does not pay a dividend. The stock’s 52-week trading range is $10.18-$16.27, and at today’s price that’s about 36% above its 52-week low, posted earlier this morning, and 15% below the 52-week high. Spirit makes up for ultra-low fares with a plethora of fees. The company reports earnings next week and is expected to post EPS of $0.29 on revenue of $275 million.

So, what happens when you see “Value stocks” where analysts have seen the prices of their companies sink and where the overall price targets imply upside of 40%, 50%, or even over 60% being the “norm” in the consensus?  It is a classic signal that the value stocks might actually be “value traps” where investors think they are buying something cheap but where there are problems lurking.   It happens all the time.  Still, these numbers are fairly hard to ignore.

Paul Ausick