Air Canada (AC.TO)

Airlines have done a tremendous job of squeezing money out of passengers. The question is, how far does it go before passengers revolt. He isn’t crazy about airlines because there is too much they can’t control, such as fuel prices, labour costs and load factors. If he wanted to own an airline, it would be this one rather than Westjet (WJA-T).

This has done tremendously well. A good story in regards to a come-back in the stock price. This doesn’t interest him at all. He would prefer Air Transat (TRZ.B-T), which is on his watch list.

He has never owned an airline stocks. This is a business that has too much out of their control. The industry has gotten a lot smarter in the last several years and has tightened up the way they run their business, but this is a stock that has gone bankrupt 3 times and he is not interested.

A sector that she does not see as a long-term investment, it is quite volatile. The group has done well on the prospects of lower crude; however the airline operators themselves are not passing that through to the consumers. Also, transporter traffic has been quite strong. There is additional capacity coming on stream. If crude starts to strengthen, fuel costs will go up. If you own and have made a decent profit on it, she would sell it and move on to something else.

The gas prices are very positive for them. They have gotten really, really good at managing their seats. Everyone wants to be an elite flyer. They have gotten really good at doling out their perks. They invested in computers. The way they price their flights is that they increase the price as the departure date gets closer.

The airline industry has gotten a lot better in Canada and the US. Load factors are a lot higher. Fuel is much cheaper. Fuel surcharges are still on the ticket and now baggage charges.

Will do well in a falling energy environment. They are benefitting here from a capacity situation. All the planes are very full and airfares are not coming down. They are renovating their fleet and taking advantage of the energy environment. He is a big bond investor with this one.

Doesn’t own airlines. Basically this is a bad business. Everybody thinks this time is different because they’ve evolved and consolidated. He doesn’t think it is different. When this year is over you are going to oil in the $60-$70 range, and people will start talking about what happens if it goes to $80. Eventually you are going to go against that current.

Undertaking a multiyear cost reduction program. We have seen some of the benefit, but will continue to see more. There is obviously the significant tailwind of lower oil prices, which translates into lower jet fuel prices. Thinks they could earn upwards of $3 a share this year, which would suggest that they are trading at half the multiple of the group.

Thinks the airlines are starting to see a Renaissance in Canada. Overall, there are some headwinds obviously with a lower Cdn$, but he thinks people will go on vacations in any case. Have a lot of destinations in Asia and Europe, so they are definitely expanding routes. Reduction in fuel costs is a huge benefit for airlines. Overall, he likes this one.

She doesn’t usually buy airlines because they are so leveraged to so many costs that are beyond them. Because fuel prices have come off, their fuel costs have come down. If you own, consider taking some profits here.

It is the lower oil that sticks out. The impact of the lower oil prices as their hedges run out is significant. It is volatile but there is upside here.

Fundamentally a lot of transportation companies are benefiting from lower oil prices. Because he doesn’t think there is going to be an immediate turnaround, he is bullish that oil will start to pick up in the latter part of the year. This could allow this company to gain more upside. The chart shows a little bit of an upward trend channel, and it is kind of at the top of the channel.

Likes turnaround stories. Had participated in this and did very well, but is out of it now. Thinks there is still probably more upside on the stock, but if you own, you might want to consider taking some profits. Their Rouge division should do quite well.

Trailing stop? There are a lot of targets for this between $16 and $21 because most of the analysts are still using much higher oil prices in their forecasts. He thinks you are still going to see some upgrades in earnings estimates, and it could go higher. Stop Loss is perfect when you have a big gain on a company and want to protect it. He would consider a 15% or 20% Stop Loss.