Air Canada (AC.TO)

This is a triumph of optimism over experience. Anybody who has ever invested in airlines in the long run, have lived to regret it. All the airlines have done a lot of interesting things to enhance revenue. Seats are getting smaller and thinner and you have to pay for everything. At the same time, this airline has been ruthless in cutting costs for labour and is benefiting right now from quite reasonable fuel prices. Inevitably, what happens is a price war and the profits, seemed to erode.

This has been a darling stock this year. Airlines in the US, with the exception of Delta, have come out with strong earnings. This one seems to be hitting very strongly as well. It is difficult for him to say how far this one is going to go. From a seasonal perspective, the best month for airlines stocks is September. This is a momentum trade, so you have to watch out. It is important to set a stop loss on this.

Was left for dead a couple of years ago. They have worked on their costs. Their revenue per passenger is increasing and they are growing in Europe and Asia. West Jet does not have the large international base of Air Canada and that is where the growth will be. Air Canada also brought on some new planes that are more fuel efficient.

This is a situation that went through 3 years of restructuring and have taken costs out of the business. Pension liabilities have come down dramatically. Thinks revenue line will grow. Use stops and look for a change in the numbers that de-validates the story to get out.

Doesn’t own the stock but owns their high-yield bonds. Too much debt for him. Also, has pension issues. A cyclical company and the cycle is going their way at the present time. Feels current management has done a very good job managing through this cycle. This could have a big profit bump in the next couple of years that will carry the stock somewhat higher.

Hates this whole business, so she stays away from airline stocks generally. Air Canada is improving some of their cost issues. It is still overleveraged for the cyclicality of the business. They should have straightened out their balance sheets when they had a chance and they didn’t. If you own, don’t forget to Sell it so that you don’t have to wait another 3 years to get back to these levels.

(Market Call Minute.)

(Market Call Minute.) Speculative buy. He owns and has made a lot of money. Pension liability is a risk but their seat miles is very strong and there capacity utilization is very strong.

(Market Call Minute.) Never recommends airline stocks. Stock has done well and the company has turned it around but he thinks the easy money is out.

Historically, airlines are the worst industry to invest in. Right now airlines are going through a recovery phase where, when economies pick up, travel starts to pick up. In the USA they have consolidated. Good time to own airlines, as long as you remember that they are for borrowing, not owning.

Got their load up which is absolutely critical for airlines. Not a fan of companies that have so many difficulties with their employees. Could double again, but they have a tremendous debt load. Starting another discount airline and have done poorly with this idea. Questions how well it will fly.

(Market Call Minute) Don't buy airlines and only buy the bonds and when the airline is in bankruptcy.

When oil prices come down airline stocks do well, but he thinks oil prices are rising year over year. This is speculative. We are at the top of a trading range. It will be speculative until it breaks out of a multi-year range.

(Market Call Minute.) Wouldn’t go near this one.