Out Fox The $treet

After decades of losing money and bankruptcies to all the major players, the industry may have finally consolidated enough to reach consistent profitability. The big signal might have been the AMR Corp (NYSE: AAMRQ) bankruptcy back in November. With the parent of American Airlines finally succumbing to reorganization and a merger with U.S. Airways (NYSE: LCC ) , the industry might have all the major players on board for a profitable more » Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

Below is great picture from a TulsaWorld article of the continual losses by American Airlines parent AMR Corp (AMR). In good years, AMR makes a decent profit. In bad years, AMR has crushing losses. Even worse is the fact the losing years outweighed the good years 8 to 3 accumulating in a net loss of roughly $10.5B. How has this company even survived? AMR recently made the historic aircraft order that some say was needed to survive. Sure it makes them more competitive, more appealing to customers, but how are they going to pay for the planes. Per my recent article , still see the airplane lessors  as the winners. Companies like AerCap Leasing (AER) will continue to benefit from major airlines that need new fuel efficient planes to compete, but can't afford to buy them.  This quote sums it up the best: "American can't really afford to do this, but they cannot afford not to do it," said Robert Herbst, industry analyst and founder of AirlineFinancials.com. "...

Wednesday morning, AMR Corp ( AMR ), the parent company of American Airlines,  announced  the greatly anticipated orders for 460 planes and options for 465 more. While the market focused on the shift of a US airline from a Boeing ( BA )-only focus to Airbus, everybody seems to have missed the announcement last week that American Airlines was going to sell/lease back up to 35 Boeing planes with AerCap Holdings ( AER ). Clearly it's justified to focus on not only the historical size of the order from American (some estimates are close to $40B) but also the shift in plane manufacturers. While the analysts call the order a split, the additional options clearly favor Airbus in a major way. If all the options are taken, Airbus will receive around 65% of the orders. Considering that fact, the media was generous to BA executives to only focus on a split of the orders instead of a major shift towards Airbus. Read the  full article at SeekingAlpha.com.  Disclosure: Long AE...

This is the sixth and final article in a series focusing on the plights of certain sectors since they peaked prior to the financial crisis in 2008. All of the sectors covered have struggled mightily to recover to pre-crisis levels, while other stocks and sectors have surged on to new highs. So far the series has covered  Steel Producers ,  Engineering & Construction , Women's Apparel ,  Life Insurance  and  Large-Cap Tech . This article focuses on the airline sector, and will be the first sector in which Stone Fox Capital neither owns a stock or expects to purchase a stock in the near future. Airlines have long been the suffering industry in the US market, and that doesn't appear to be changing. While several of the larger companies were able to reduce debt via bankruptcies in the 2000s, the companies still struggle with heavy competition and have a difficult time with passing on higher costs. The fear of ever higher fuel costs down the road and strong lab...

Typically buyout news can be very bullish for the industry and competitors of the firm bought. Potentially less focused competition or even a higher premium for stand alone operators can be very positive. In the case of the airlines, that usually isn't the case. As soon as one airline leaves, another usually is born to take their place. Despite being a long term losing industry, airlines seem to never lack for new entrants. Today's news that Southwest Airlines (LUV) is willing to buyout AirTran (AAI) for a roughly 69% premium is huge for shareholders of both companies and especially AAI. This deal allows LUV to more effective compete in the NorthEast not to mention to enter markets such as Atlanta. Does that make JetBlue (JBLU) or American Airlines (AMR) an attractive acquisition now that one competitor is gone? Hmm, more and stronger competition from LUV doesn't seem ideal. The headline of their press release says it all " Southwest Airlines to Acquire AirTran; Spre...

Listening to CNBC [Airline Profits Take Off] this morning and there feature on the airlines makes me think its about time to go short. Anytime people get bullish on them its time to get out or go short. US airlines have historically lost money and nothing has stucturally changed. Sure they charge a bunch of extra fees now, but that only offsets the lower ticket prices. There biggest issues continue to be that everybody wants into the industry and every time CNBC does a feature on profits the unions automatically line up for their portion. Airlines can lose billions for 5 straight years and the unions will want new contracts the year they make $50. Reading through this article in the Ft Worth Star-Telegram just reminds me of the reasons you don't want to invest in domestic airlines. The CEO and upper management of American Airlines (AMR) is heavily engaged in discussing contracts with the various unions instead of working on developing and implementing a profitable growth plan. A...