Monday, July 7, 2008
Oil Isn't Everything
As crude oil prices climbed last week, the airline sector took a hit across the board. Nothing new here. But, then you see news that Allegiant filled 94% of its seats in June, up 5.4 points from the previous year, and you wonder if the stock should really should have fallen 17% over the last five days?
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2 comments:
Often the marketplace punishes an entire industry sector = even when an individual security may have specific fundamentals that should be more highly valued. This can create disparities and real return opportunities.
As you must know, load factors do not necessarily translate into high yields and profit margins. Overall, its likely the airline industry values are going to remain depressed - especially with the concerns over fuel prices and the apparently broken US business models.
Yeap, of course, load factor is only one factor in a larger puzzle. However, as you note in your first paragraph, I think there is a disparity in the level of punishment handed out to particular airline stocks when crude oil increases.
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