Late last week, Boeing (NYSE:BA) said that its long saga of delays and frustrations with the much-hyped jet are coming to an end. The first Dreamliner is now on track to leave terra firma by the end of the year, and the jet will actually be delivered to various international airways by the end of 2010.

Just how late is the Dreamliner? Japanese airliner All Nippon will get the first in 2010… since they were originally promised delivery by the start of the Beijing Olympics.

“My next buy recommendation is based on some of the historic changes happening in air transportation,” notes Chris Mayer, who chronicled the Dreamliner saga in the latest Capital & Crisis alert. “One of the key drivers of this change is what I call the Silk Roads of the sky. The aerospace industry has a $6 trillion backlog for new aircraft — which will double the global fleet over the next 20 years.

“In large measure, new and booming trade routes will link all kinds of cities and markets flung all over God’s green footstool. There are hundreds of new airports planned and thousands of new planes that will connect China to Africa to the Middle East and more.

“The thing about the new aircraft is that they are titanium intensive. Titanium is a silvery, lustrous metal that is corrosion resistant and has the highest strength-to-weight ratio of any metal. Aircraft manufacturers love titanium, especially now that the market has crushed the price of titanium, along with everything else.

“That creates some space for us to buy a quality operator now. Titanium prices are way down. Sentiment is terrible, with most analysts only lukewarm to the idea. Most of the near-term news is bad. That gives us a great price to get in on a promising long-term story. Of course, this is already in the process of changing, thanks to the Dreamliner announcement.”

Source: A Dream-like Time to Invest in Titanium

Wall Street cheered the announcement as Boeing’s stock soared more than 6% in New York trading after the company said it still expects the 787 to be profitable.

The rally came despite news that costs for the first three test planes would be charged-off as having no commercial value, resulting in an estimated pretax charge of $2.5 billion, or $2.21 a share, in the third quarter. Boeing said the charge wouldn’t affect its cash flows.

“This new schedule provides us the time needed to complete the remaining work necessary to put the 787’s game-changing capability in the hands of our customers,” said Boeing Chief Executive Officer Jim McNerney.

The 787, already two years behind its original schedule, was scheduled for its first test flight in the second quarter of 2009, but the flight was delayed so Boeing could address newly discovered structural problems. The latest development marks the seventh delay in the production cycle for the highly anticipated plane.

“The real challenge for Boeing is to actually stick to this revised 787 timetable — something it has been unable to do in the past.” Rob Stallard, a New York-based analyst with Macquarie Capital Inc., wrote in a note to clients obtained by Bloomberg News.

All Nippon Airways Co. Ltd. (OTC: ALNPY), which is scheduled to take delivery of the first 787, was quick to register displeasure with the latest delay.
“We understand the need to make the best and safest aircraft possible and appreciate that delays due to engineering issues of the current nature must be solved in order to move forward and achieve this,” ANA said in an emailed statement obtained by Reuters. “However, as launch customer and future operator of the 787, the length of this further delay is a source of great dismay, not to say frustration.”

The repeated delays have cost Boeing millions of dollars in penalties and concessions to customers.

Major airlines have used the delays as bargaining chips to squeeze concessions from the plane maker on delivery dates, incremental payment schedules and even the final purchase price.

Some airlines have gone so far as to threaten to cancel orders for the 787, as well as larger 777s, because of delays caused by disruptions at Boeing.
“Boeing doesn’t realize how much they’re hurting their customers’ plans,” Akbar Al Baker, chief executive officer of Qatar Airways WLL told The Wall Street Journal at the Paris Air Show in June. It’s now uncertain when that airline might receive the first of 30 787s it had ordered to be delivered starting in 2011.

The fastest selling plane in history, the Dreamliner has racked up over 900 orders since it was announced in 2005, largely based on fuel efficiency.  With recent cancellations that number is now closer to 850.

In addition to technical problems, getting the plane to production has also been hampered by major labor disruptions.  A prolonged strike by machinists in 2008 was largely responsible for an 8% drop in aircraft sales.  Commercial aircraft generated $28.3 billion of Boeing’s $60.9 billion in sales last year, behind only defense contracts.

“Work stoppages over the past several years have cost Boeing $9 billion in revenue and $2 billion in lost profits,” Sen. Mike Hewitt, R-Wash. told the Spokesman Review.

The setbacks in bringing the plane to production have had a “significant impact” on company finances, Boeing Chief Financial Officer James Bell said in an Aug. 20 memo to employees obtained by Bloomberg.

Despite Thursday’s market rally, Boeing’s stock has lost more than half its market value since the 787’s first delay in October 2007.  At least seven Wall Street analysts have downgraded the stock since last December, including Credit Suisse (NYSE: CS) and Barclays Capital PLC (ADR NYSE: BCS).

Source: Boeing Will Test Dreamliner in 2009 but Delays Delivery, Again

• Both the Dow Jones Industrial Average and the Nasdaq Composite Index flirted with 9,200 and 2,000 yesterday (Thursday), respectively. Thanks to a continuing string of better-than-expected earnings reports, the Dow jumped 83.74 points, or  0.92% to close at 9,154.46. The tech-heavy Nasdaq eclipsed 2,000 in trading before finally settling in at 1,984.30, up 16.54, or 0.84%, its highest close since October 1. Meanwhile, the Standard & Poor’s 500 also posted a gain, closing at 986.75, up 11.6 or 1.19%. “Institutional and retail investors are so anxious to make up the lost returns of the last year, they are using any cue to buy aggressively,” Kevin Mahn, managing director and chief investment officer at Hennion & Walsh told MarketWatch.com. “We got to the point in the first quarter, when everyone was so risk averse they lost out. And, in just six months, they have now become overly aggressive.”

• U.S. taxpayers yesterday (Thursday) became Citigoup Inc.’s(NYSE: C) largest shareholder with a 34% stake in the company. The federal government swapped $25 billion of its $45 billion Troubled Asset Relief Program (TARP) investment into common stock. The remaining $20 billion will remain in the form of preferred shares that pay an 8% annual dividend.

• Initial claims for jobless benefits rose by 25,000 to a seasonally adjusted 584,000 last week the Labor Department said yesterday (Thursday). However, the number of people still on benefit rolls after collecting an initial week of aid fell by 54,000 to 6.20 million in the week to July 18, the lowest since early April. That fueled optimism that the economy is on the mend.

• Light, sweet crude for September delivery yesterday (Thursday) rose $3.59, or 5.6%to settle at $66.94 a barrel on the New York Mercantile Exchange (NYMEX). The surge left some analysts miffed, as there was no obvious motivation. “You need to really worry about a market that sells off on a very large build and supply one day, and then it rebounds on no headline at all,” analyst and trader Stephen Schork told The Associated Press.

• Motorola Inc. (NYSE: MOT) yesterday (Thursday) posted an unexpected profit for the second quarter after several quarters of losses. Motorola said cost cuts including 8,000 layoffs so far this year were largely responsible for the turnaround. Revenue dropped 32% to $5.5 billion for the quarter, but the company reported a profit of $26 million, or 1 cent a share. That’s up from $4 million a year ago.

• The worst recession in more than 60 years is taking its toll on theWalt Disney Co.’s (NYSE: DIS) advertising and theme park revenue. The Burbank, Calif.-based company saw its net income drop to $954 million, or 51 cents a share for the quarter ended June 27. That compares to a net income of $1.28 billion, or 66 cents a share in the same quarter last year. Operating income from its highly seasonal theme parks dropped 19% to $521 million in the quarter, compared to last year’s $641 million, which was up 3% from 2007. Advertising on its media networks which include ESPN decreased: The operating revenue was down 13% to $1.3 billion, compared to last year’s 9% increase to $1.5 billion.

• Microsoft Corp. (Nasdaq: MSFT) Chief Executive Officer Steve Ballmer weighed in on the beating his company’s new partnerYahoo Inc. (Nasdaq: YHOO) took Wednesday, when investors unloaded shares to send Yahoo’s stock down more than 12%. “People haven’t figured it out,” Ballmer said. “Yahoo gets 88% of the search revenue they have today. They have 0% cost of goods sold against 88% revenue and they have no [research and development] expense and no ongoing [capital expenditure],” Ballmer said in a Dow Jones Newswires report, which cited an event at Microsoft’s headquarters in Redmond, Wash. Yahoo’s Wall Street beating continued yesterday (Thursday), with its shares closing at $14.60, down 54 cents or 3.57%. Microsoft’s shares climbed 1 cent yesterday, closing at $23.81, up .04%.

• Southwest Airlines Co. (NYSE: LUV) made a minimum bid of $113.6 million for Frontier Airlines Holdings Inc. (OTC: FRNTQ) in a bankruptcy auction that would eliminate its low-fare rival. The bid would compete with a pending offer of $108.8 million fromRepublic Airways Holdings Inc. (Nasdaq: RJET). The winning bidder will get a bigger foothold in the Rocky Mountain region. “Taking the Denver gates and equipment from Frontier would give them a large presence there, and the cities that aren’t on Southwest’s route map now could easily be integrated,” said Dave Swierenga, president of an aviation consulting firm AeroEcon toldBloomberg News.

Source: Investment News Briefs Friday, July 31, 2009

When Airbus recently announced the delivery of its first China-built passenger jet, it was more than just the usual bit of corporate PR. It was an admission that any company that wants to remain a global leader in its industry will have to embrace China as a customer – and probably as a partner.

Airbus – a subsidiary of defense giant European Aeronautic Defense and Space Co. NV, also known as EADS NV – said it assembled the A320 passenger jet in a plant in Tianjin, China’s sixth-largest city. The factory is 49%-owned by a Chinese consortium, and is expected to produce another 10 passenger jets this year alone.

The China connection doesn’t end there, either: The just-completed A320 will be sold to a leasing company and eventually put into service by Sichuan Airlines Co. Ltd., a regional carrier.

Both Airbus and its U.S. rival, The Boeing Co. (NYSE: BA), understand that the Chinese market is crucial to their futures. Boeing has said that China will become the largest aviation market outside the United States by 2028, with the mainland set to require 3,700 additional aircraft - worth more than $350 billion – in that time. Airbus, which projected a slightly lower figure of about 2,800 aircraft, hopes to see its market share rise from about 30% now to about 50% in the next couple of years.

In the near term, the global downturn has left China’s carriers feeling the pinch, too, but it’s the long term that has companies such as Airbus and Boeing feeling both excited – and worried.

In many industries, partnerships represent the price of entry. And in the long haul, China has ambitious plans of its own. In the commercial airliner business, for instance, it is already developing a regional airliner and more recently has launched plans to design and build a globally competitive jumbo jet of its own.

The Rise of China as a Powerhouse Market

One of the hallmarks of any great economy is its ability to produce technically complicated machinery. I’m not talking flat screen TVs here but stuff like spaceships and, closer to earth, commercial and military aircraft. While Airbus is a partner right now, the point is that China is moving up on the technology scale both hard and fast. Faster, in fact, than most Westerners realize.

But the rollout of a completely Chinese-built Airbus A320 highlights something else, the significance of which is lost on most investors: It’s not really about Chinese airplanes or even the fact that China is making something new. The real key here is that Airbus – like many companies – understands that the Chinese market is growing so fast, and has the potential to be so huge, that that it has to invest there, and do so as a partner, or risk getting left behind.

Chances are good that Airbus understands something else that I’ve been telling investors since I first visited China nearly 20 years ago: There will come a time when China makes the transition from just being the world’s biggest manufacturer and becomes the world’s biggest market. In the long run, it’s not about China the export machine – it’s about the Red Dragon’s transition into a full-fledged consumer market.

With more than 300 million people – the majority of whom save an average of 35% of their income, China’s quickly emerging middle class is by itself potentially larger than the entire U.S. population. And the top 2% of China’s academic community – I’m talking the best and brightest only – is larger than our entire university population.

The bottom line: China not only has the capability to produce entirely new and different products, but its consumers increasingly have the ability to buy them. Consider Snow Beer. Most people have never heard of the ubiquitous green bottled stuff because it’s sold only in China. Yet according to beer-market-researcher (yes, they do exist) Plato Logic Ltd., Snow Beer sold about 6.1 billion kiloliters of beer in 2008, up 19.1% from the year before – outselling such former brand leaders as Bud Light and Budweiser.

Not surprisingly, Snow Beer is a partnered product - the result of a collaboration between China Resource Enterprise Ltd., and London-based SABMiller PLC (OTC ADR: SBMRY) news portalalibaba.com reported.

Maybe this won’t surprise you, but it never fails to surprise the majority of people I talk with when they learn that China is now the world’s largest beer market, having surpassed the United States as early as 2001.

It’s much the same story with cars. For the past four months running, China has been the world’s largest automobile market. There are still a dozen or more automakers slugging it out for Chinese consumers’ hearts and minds, but all the biggies are there – including the only profitable business unit of General Motors Co., the Japanese, European makers and more. China this year also became the world’s largest producer, consumer and exporter of light-duty electric automobiles.

China Profits Poised to Zoom

And that brings us back to Airbus.

After delivering the 10 planned A320s from its Tianjin factory this year, Airbus plans to deliver aircraft at a rate of four a month by the end of 2011. Overall, Airbus expects to deliver 70 A320s to China in 2009 – a total that includes jetliners built in Europe.

But it’s just not enough, notes Airbus China President Laurence Barrons. In fact, the executive told the China Daily that the “ramp-up [production] capacity of 48 planes a year is insufficient to meet [domestic] demand.”

It’s not surprising, then, that Airbus is planning on boosting production to 286 aircraft a year in Tianjin, which puts the China production facility on par with Toulouse and Hamburg, where the company has its European plants. Ultimately, and again here’s the really important stuff, there’s no reason in the world why Airbus won’t begin selling Chinese-made aircraft overseas to non-Chinese carriers within the next few years. Not only will this further pressure Boeing, but also it demonstrates yet again that there isn’t an asset class on the planet that won’t be affected by China’s growth – a point that I’ve made so often that it’s basically become a Money Morning mantra.

Speaking of which, Chinese domestic air passenger growth would make a western air exec drool. According to China’s Aviation Administration, domestic traffic is up 17% to 56.9 million in the first four months of 2009, at a time while international traffic fell 17% to 5.6 million. Some consider that a wash, but get this: Over the past 30 years, air passenger traffic rose at an average annual rate of 16% – reaching 190 million at the end of 2008.

In a statement issued on April 8, Li Jiaxiang, the director of the Civil Aviation Administration of China, stated that China intends to boost travel to some 700 million trips a year by 2020. And that underscores yet again the projected growth in China’s middle class strength. Somebody’s going to be paying for all that travel. My own travel experiences in China suggest that it will be the Chinese Yuppies, or “Chuppies.”

With the increase in demand has come an escalation in quality – of products and services. Gone are the days when flying Air China meant taking your life into your own hands and ghostly silent terminals at a few scattered airports. Also gone are the formerly ubiquitous souvenir shirts depicting overcrowded aircraft with parts falling off as they zoom skyward.

Flying in China today is a wonderful experience that I look forward to each time I visit China. The airports are modern and well staffed, the security is generally excellent and the flight crews are as sharp as they get. Increasingly, the aircraft are mostly all new – a welcome change from some of the timeworn airframes I routinely hop aboard when traveling back here in the United States. Of course, having real food with real silverware is a nice perk, too, in an era when a boxed lunch sets you back seven bucks.

Now, before you guys jump all over me with comments about state subsidized travel and the like, I know – you’re right. But that doesn’t change the fact that air travel in China is a throwback to an earlier – and eminently more pleasurable – time when travel was an experience to be enjoyed, and not just time spent getting from Point A to Point B, as is now the rule in the Western world.

In a recent interview, the president of Sichuan Airlines Co. Ltd., showed me that China understands the path to take to win in the global game of business when he said that “when air travel becomes a consumer pastime, that’s when you will see the real peak of aviation demand and industry growth.”

That’s true of virtually every market in China these days – which is why investors better not miss their flight: The Red Dragon’s domestic market is just getting ready for takeoff … 

Source: Airbus Deal Shows Investors That China Profits Are Cleared For Takeoff

Editor’s Note: Fifteen trades. All profitable. Since launching his Geiger Indextrading service late last year, Money Morning Investment Director Keith Fitz-Gerald is a perfect 15 for 15, meaning he’s closed every single one of his trades at a profit. And he did this during one of the most volatile periods for the U.S. stock market since the Great Depression. Fitz-Gerald says the ongoing financial crisis has changed the investing game forever, and has created a completely new set of rules that investors must understand to survive and profit in this new era. Check out our latest insights on these new rules, this new market environment, and this new service, the Geiger Index.

Source: Investment News Briefs Wednesday, July 15, 2009

Just last week – for the first time in 60 years – Taiwan opened its doors to investments from Mainland China. The impact was almost immediate. On Friday, Guangzhou-based China Southern Airlines Ltd. (NYSE ADR: ZNH) submitted the first bid under the new regulations and became the first mainland company to apply to invest in Taiwan.

By the day’s end, three more of China’s air carriers had joined the race and filed applications to invest in Taiwan: Air China Ltd. (OTC ADR: AIRYY), China Eastern Airlines Corp. Ltd. (NYSE ADR: CEA) and Hainan Airlines Co. Ltd. Clearly, these companies understand the stakes here, which is what’s behind the rush for these potentially lucrative new routes between Taiwan and China.

Speaking for China Southern, spokeswoman Zeng Qingning noted in theTaiwan News “we can begin selling tickets once our office is approved to become a branch.” My experience suggests that other companies are well advanced in their preparations too, which is why this probably isn’t the last we’ll hear on this topic.

One-Way Street

Just last Tuesday, Taiwan’s Ministry of Economic Affairs (MOEA) announced that China-based companies and investors would be permitted to invest in more than 100 different product-and-service categories, and that regulations governing applications by China-based companies seeking to open branches or subsidiaries in Taiwan also were ready.

These initiatives were an outgrowth of several new investment accords reached in May between the Association for Relations Across the Taiwan Straits (ARATS) and the Straits Exchange Foundation (SEF). When I reported on these at the time, I told Money Morning readers that they literally were watching history in the making just as I was from my perch in China as the news unfolded.

Prior to last week, “cross-strait” investments had been a one-way street – from an official standpoint, at least – with Taiwan companies having invested hundreds of billions of dollars in Mainland China,including about $77 billion since just the late 1990s alone, The Wall Street Journal Asia reported.

In return, China’s been allowed absolutely zilch and has been legally barred from making investments in Taiwan. The fear – at least what’s been stated publicly – is that China would use its rapidly expanding economic might to blunt Taiwan’s efforts to remain an independent nation.

(You may recall from your history books that China views Taiwan – formerly known as Formosa – as a “breakaway republic,” a position the island nation has held since 1949, when the two split during a civil war that led to the creation of the communist-controlled People’s Republic of China.)

China’s Newfound Role as an Economic Savior

Behind the scenes, however, the story is much different. Many Taiwanese business leaders I’ve spoken with confidentially welcome normalized relations and view the opening process as a development that’s long overdue. For them, it’s not about political aspirations; it’s about what China can do for their over-leveraged, underutilized assets. Many, including new Taiwan President Ma Ying-jeou, for example, are acutely aware of the fact that Taiwan missed out on many of the benefits of China’s rapid industrialization and global emergence over the past 10 years, thanks to poor political relations and antagonistic regulation.
And it’s cost Taiwan dearly. The desire for continued independence aside, once-proud Taiwan has become another in a long list of nations around the world that are eating big slices of humble pie and that now see China as a potential savior from the current global financial crisis.

Taiwan’s experience with the Taipei 101 Tower is a concrete example of the potential benefit of China’s emerging economic might. The tower was supposed to stand as a symbol of Taiwan’s newfound economic prowess and, at the time of its construction, was the world’s tallest building.

But it soon became a colossal white elephant. In fact, until very recently, it stood less than 50% occupied. That’s when several of China’s corporate powerhouses took up residence, including:

• Lenovo Group Ltd. (OTC ADR: LNVGY), the growing global PC giant.
• Sinosteel Corp., the major iron-ore importer.
• And Tiens Group Co., a China-based direct-selling conglomerate that is the world’s fifth-largest healthcare products firm.

According to The Wall Street Journal, the building is now more than 80% occupied and rents in the area have risen by 5% to 10% in anticipation of more highbrow Chinese clients. Of course, it doesn’t hurt to have such big-name players as Bank of America (NYSE: BAC), Google Inc. (Nasdaq: GOOG) and even Merrill Lynch (NYSE: SAR) as tenants, but the reality is that the Mainland China companies are the firms that are really being sought right now. That’s particularly true at a time when the mainland economy remains on track for annual growth of 8% or more this year, and appears to be the only one of the world’s top industrialized economies that’s not in a deep state of denial or contraction or both.

The fact that China’s bucking the trend is not lost on the Taiwanese business community. Nor is the fact that many of the best-positioned and fastest-growing Mainland China companies are state-owned enterprises.

“In contrast to the past, when this was seen as a threat, they’re more attractive now for their deep pockets,” said one local real estate professional I interviewed who wanted to remain anonymous.

Not surpassingly, the welcome mat is not out for military-backed enterprises. Nor does it include potential investments in high-tech or real-estate-development projects. I think that will change, particularly if Taiwan’s economy registers a couple more consecutive quarters of contraction, and if its companies continue to experience weakened global demand for its products.

The Art of the (Asian) Deal

Despite the very clear need, Taiwan is still trying to exercise some caution in deciding which deals to approve. According to Deputy Economic Minister John Deng, if the capital comes directly from China the economics ministry will review it. Capital coming from third party destinations “investing over 30% in, or effectively controlling local companies” falls under the same scrutiny. Likewise, Deng noted, if China invests in more than 10% of a company’s stock, it will be “seen as [a] direct investment.”

So far, the first couple of Mainland China delegations have already reached $68 billion worth of deals in various industries.  Some are undoubtedly smaller and involve a smattering of the 200 industries open for direct investment, but it’s the bigger transactions that have everybody excited because they are a harbinger of better times and more profitable relationships ahead.

In April, for example, China Mobile Ltd. (NYSE ADR: CHL) offered $527 million for a 12% stake in Taiwan-based FarEasTone Telecommunications Co. Ltd. Because it was made prior to the new rules and involved the politically sensitive telecom industry, the consensus is that the deal won’t pass scrutiny. But you never know and that’s part of the thrill of the hunt.

Portfolio manager Henrietta Luk of Melchior Asian Opportunities Fundnotes that “local retail investors have gone on a treasure-hunt frenzy guessing which is the next industry or company to link up with China, leaving foreign investors chasing any stocks that are not limit up to make up for their hugely underweight positions in Taiwan.”

And they will have to chase them – literally. According to the Taiwanese Tourism Board, more than 300,000 Mainland Chinese visited Taiwan through April of this year, versus 320,000 during all of 2008. The number of mainland airports serviced from Taiwan has increased from 21 to 27, while the number of direct flights has soared from 108 to 270 per week, an increase of 150%.

Given that jump, it’s no surprise that China Southern Airlines submitted the first bid under the new regulations – or that the three rivaling carriers joined the hunt that same day.

If you’re of the same opinion, and want to attempt to ride this wave yourself, consider getting started with an investment in an exchange-traded fund (ETF) – specifically, the iShares MSCI Taiwan Index Fund (NYSE: EWT). With top holdings in computer hardware (42.44%), industrial materials (21.93%) and financial services (16.42%), you’ll no doubt hit something on China’s wish list soon.

Watch for agreements either late this year or early in 2010 that will permit the two countries to trade one another’s shares for the first time in 60 years – and then watch for the huge jump in liquidity that goes with it. I’ve been hearing for several months now – very quietly, I might add – that regulators in both Taiwan and China are considering a dual-listing agreement that would at least partially remove restrictions that prohibit individual investors from directly investing in each other’s stocks.

There’s clearly a long way to go here with regard to the global financial crisis, but the flurry of cross-straits activity we’re seeing and the accelerating nature of the activities there provide important confirmation that we’re on the right track.

I have no doubt that Taiwan will turn out to be one of the region’s powerhouse investments over the next five years – albeit one that is more closely tied to Beijing’s fortunes than many people on this side of the Pacific are inclined to accept.

Source: By Opening its Doors to China for the First Time in 60 Years, Taiwan Paves a New Path for Investor Profits

Editor’s Note: Fourteen trades. All profitable. Since launching his Geiger Indextrading service late last year, Money Morning Investment Director Keith Fitz-Gerald is a perfect 14 for 14, meaning he’s closed every single one of his trades at a profit. And he did this during one of the most volatile periods for the U.S. stock market since the Great Depression. Fitz-Gerald says the ongoing financial crisis has changed the investing game forever, and has created a completely new set of rules that investors must understand to survive and profit in this new era. Check out our latest insights on these new rules, this new market environment, and this new service, Geiger Index. ]]> http://www.contrarianprofits.com/articles/by-opening-its-doors-to-china-for-the-first-time-in-60-years-taiwan-paves-a-new-path-for-investor-profits/18799/feed 0 http://www.contrarianprofits.com/articles/boeings-flight-delayed-or-canceled/18349 http://www.contrarianprofits.com/articles/boeings-flight-delayed-or-canceled/18349#comments Thu, 25 Jun 2009 15:45:56 +0000 Adam Lass http://www.contrarianprofits.com/?p=18349 BA obviously can’t land its 2009 numbers. So when does arrogance become fraud?

Anyone who has ever flown on most any commercial airline is familiar with this scenario: Your plane is supposed to depart in the next few minutes. The big board says the flight is on time. The lady behind the counter is all smiles.

But you haven’t actually boarded or anything. In fact, as you squint out the window, you can see that there is no plane available to board, a fact that the oblivious clerk seems unable or unwilling to acknowledge.

Thirty minutes after your takeoff slot has come and gone, the ubiquitous screens that decorate the departure lounge’s walls suddenly blur, flicker and light up with the announcement that…

Source: Investment News Briefs Wednesday, June 24, 2009

The summer sun is seducing stir-crazed American families tired of penny-pinching. Add to that a strong dollar and I predict that those who can will travel.

Now, as swine flu continues to make the news, it will perhaps prompt some to avoid cruise lines and foreign travel to “high-risk” destinations.

That leaves European and domestic travel and as airlines have taken a hit lately, I chose that industry to sort through for just the right bargain.

JetBlue Airways Corporation (NASDAQ:JBLU), Deutsche Lufthansa AG (ADR) (OTC:DLAKY) and Air France – KLM (ADR) (OTC:AFLYY) look to be ready to bounce, but not as high as these two airline stocks…

Cleared for takeoff

On the domestic front, AirTran Holdings Inc. (NYSE:AAI) has felt the recession like other airlines. It announced earlier in the week that it anticipates a drop in second quarter revenue of perhaps as much as 7%.

And like its competitors, it will seek to mitigate the loss by cutting capacity around 8%.

But Airtran is small and consolidated. But the most compelling aspect of this stock is its fundamentals. Its got a forward P/E of 5.52 and a tiny PEG of .18.

The price and most importantly, the timing, are just right to invest in this company.

I recommend you buy shares of AirTran Holdings Inc. (NYSE:AAI) at or under $5.75 and hold on for 20% gains in the next 6 months.

My other pick is British Airways plc (ADR) (OTC:BAIRY). To cope with declining business, the company asked pilots to accept a pay cut in return for shares. The pilots agreed.

I think they were right to… The companies P/E of 4.02 is just where I like it to be, and the current share price is under half of its 52-week high.

British Airways is set for a rebound.

I recommend you pick up shares of British Airways plc (ADR) (OTC:BAIRY) under $23 and hold on for at least 20% gains in the next 6 months.

Source: The Best Way to Play a Strong U.S. Dollar

When the economy is solid, demand rises and more people fly. But a rising economy also pushes up oil prices and offsets the airlines’ bottom line. Add to that the large number of carriers within the industry all fiercely competing and battling to win passengers, and that eats into profitability, too.

When the economy is struggling and the job market is poor, many people have less disposable income – and consequently fewer people want to fly. Here in Baltimore, for example, BWI Airport saw 7.5% fewer passengers in March, compared with March 2008. In addition to less demand, oil is a volatile resource, under threat from geopolitical shenanigans at any time.

Right now, of course, we have the latter. And the numbers paint an ugly picture…

Consider the following ugly bunch of data from the International Airline Transport Association (IATA).

1) From an estimated $4.7 billion loss as recently as March, it now forecasts $9 billion worth of losses.

2) Airline industry revenues are projected to hit $448 billion this year – a 15% drop over 2008.

3) By region, the numbers show a $1 billion loss for North American airlines this year (much better than the $5.1 billion loss in 2008, but this is largely due to the oil price decline)… a $1.8 billion drop for European carriers… and a $3.3 billion tumble for airlines in the Asia-Pacific region.

4) On Monday, Japan Airlines, which boasts the best revenues in Asia, said it will cut its international routes by 10% during the current business year. It was the latest in a string of route cutbacks from global airlines.

5) The IATA says passenger demand will fall by 8% to just over two billion this year, with cargo demand suffering a 17% drop, as the global economy slumps.

Martin says an easy way to profit from airlines woes is to short the Claymore/NYSE Acra Airline ETF (NYSE:FAA). This relatively new ETF tracks highly capitalized and liquid US and international passenger airlines. FAA is down 12.6% since its recent May 6 high. And there could be plenty more pain on the horizon.

Martin recommends shorting two airline indexes: The Airline Index (AMEX: ^XAL) and the Claymore/NYSE Arca Airline (NYSE: FAA).  Good luck!