Airtran -- why is the stock so cheap?

[iahphx]

Has anyone else been watching this? It's gone from $18 to $12 in about 6 weeks, even though the favorable RASM trends are obviously accelerating to the upside. Fares to ATL and Florida are soaring, and AAI should be a prime beneficiary of this.

I haven't been much of a fan of AAI stock the past 5 years because I thought it was comparatively overpriced to AWA/LCC, but it seems to me that the tables have now turned. It also looks quite cheap compared to JBLU (lower valuation with much less business plan risk).

 

[Crapdog]

Has anyone else been watching this? It's gone from $18 to $12 in about 6 weeks, even though the favorable RASM trends are obviously accelerating to the upside. Fares to ATL and Florida are soaring, and AAI should be a prime beneficiary of this.

I haven't been much of a fan of AAI stock the past 5 years because I thought it was comparatively overpriced to AWA/LCC, but it seems to me that the tables have now turned. It also looks quite cheap compared to JBLU (lower valuation with much less business plan risk).

Profits do not drive stock prices. Supply (available shares) and demand (monkey see monkey do). Right now all the big money players which are the transportation funds, Saudis and Rockefellers are buying American and Continental because they are not in bankruptcy. This drives up the price because of demand. Everyone wants to get on the bandwagon and make money. The average investor will lose their xss because when its time to take profits the price will crash. Airtran is a LCC that needs low hedged fuel costs to survive. The investors are going away right now because of the 2009 industry wide fuel hedging. Look at Jet Blue. Fuel costs are killing them because they tried to grow too fast.

 

[SoftLanding]

Has anyone else been watching this? It's gone from $18 to $12 in about 6 weeks, even though the favorable RASM trends are obviously accelerating to the upside. Fares to ATL and Florida are soaring, and AAI should be a prime beneficiary of this.

I haven't been much of a fan of AAI stock the past 5 years because I thought it was comparatively overpriced to AWA/LCC, but it seems to me that the tables have now turned. It also looks quite cheap compared to JBLU (lower valuation with much less business plan risk).

All you said is true, but the big boys were selling a few weeks ago, and shorting it as it rolled over.

Their 1st quarter was weak, and management blamed the seasonal Florida traffic, Easter in April, oil prices...(They didn't blame themselves BTW, 1st quarter avarage fares were $89...Management also said on one of the CC calls this year that they "could be a feeder for a lagacy carrier", which I found strange. (If DAL should decide to pull back substantially, maybe someone would feed their international flying?) They also signed with Boeing for B737's back in 2002/2003 timeframe, and thus have a lucrative contract for future aircraft, but will someone buy AAI for that?

They have very low cost, are expanding VERY fast (need to slow?), but what kind of carrier are they? With Delta rebuilding (if that happens), they have their work cut out for them.

They are one of the lowest rated airlines in the IBD rating system (#27), where GOL is #1, Alaska (ALK) #4, and US Airways (LCC) #5. JetBlue (JBLU) is rated #10, Southwest #25. Amr and CAL are 6-8'ish.) BTW, Frontier Airlines (FRNT) is the lowest rated, #32.

That all being said , their 2nd quarter started great, because of Easter in April. Also, they have some hedges the next couple of quarters.

My understanding is they have/are giving Southwest the fits in BWI due to pricing-power, i.e. low fares. Not surprising to see Southwest go to PHL and Dulles.

Looks to me a buy point is upcoming soon... Maybe sometime this fall...

SoftLanding