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Jim,

Just saw your tip on shorting airlines again. They have definitely had quite the run lately, along with the market.

However, don't you feel the dynamics of the airline industry are somewhat changing. They are merging, reducing capacity, charging more fees, etc. Sure oil is somewhat cooperating, economy could slow down, etc. and airlines could go down in the short-term.

TIA,
BLSH
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No. of Recommendations: 4
However, don't you feel the dynamics of the airline industry are somewhat changing.
They are merging, reducing capacity, charging more fees, etc. Sure oil is somewhat
cooperating, economy could slow down, etc. and airlines could go down in the short-term.


In short, no, I don't see any change in the economics.
There is almost never any capacity reduction, as the aircraft from
bankrupt airlines don't evaporate.

The industry loses money on average through the years, and has for decades.
It has it's occasional little good run, as now, but it never seems to last.
Check the year by year profits of the majors over the last 10 years.
Deeply scary.

In this case it's pretty likely I'm a bit early on the short call, as I
don't think they have quite peaked yet, but FWIW I have started the trade myself.
(short 2 parts LCC, short 2 parts UAL, short 2 parts DAL, long 3 parts ALGT)
I may add more of the same if they do well for a while longer.

At the moment

UAL 25.50
LCC 14.97
DAL 14.17
ALGT 74.01

Jim
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Jim,
Any thoughts on Alaska Air?

Thanks
-John
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Don't know 'em well enough to say anything.
I have heard a few good things over the years, but not enough to put
them into the good bucket or the bad bucket.
The general rule for the industry is definitely stay away, Allegiant is
very unusual, but it's the majors that are worth shorting.
Legacy pension costs are horrible, union agreements are horrible, even
repeated bankruptcy hasn't helped some of them.

When I did this trade last year I shorted American too, but I can't do
that now because they went bust in the mean time!

Jim
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