Monopoly or not, British Airways is doing well

Common wisdom could suggest that purchasing commercial airline stock may be somewhat riskier than sticking with more stable investment options, especially inside the long term. Nonetheless, stock trading, particularly ETFs in British Airways (BAY) looks like a possible opportunity in light of the recently-announced merger between the flag carrier airline of the UK and Iberias Lineas Aereas de Espansa SA. Within the works since 2008, the marriage of these two companies for $9 billion presents various positive affects for shareholders. Such mergers tend to be often confidence-builders, encouraging the general population to commit to what is understood as a stronger, financially-healthier union.

Increased control over the profitable trans-Atlantic flight market will create the expected demand-supply opportunity to improve passenger load factors and raise costs. It also offers a low-cost way to handle competition with the larger 2 European carriers, Air France – KLM Group and Deutsche Lufthansa AG. Since the UK regulatory commission seems to be blind to monopoly issues at this point in time, the combination of the consolidation of like-minded airline players and prohibitive fuel prices seems to be ridding the field of smaller, lone-ranger competition. The new combination will generate a highly effective business that will be the 3rd largest European airline by revenue and 2nd largest carrier group for that exact same area.

Labor unions sometimes cause more concern than they are worth.  In this case, Iberias and BA stocks may be dropping to reflect this, and both companies have yet to get this under control. In fact, the 12,000 member cabin-crew union “Unite” response to the proposed merger was to call for a strike ballot. CEO Willie Walsh expressed small concern about the suggested walk-out. He may possibly be expecting the usual chaos that comes with merging labor unions to dilute the strength of Unite or at least create a far more un-unified front.

When it comes to choosing stock in an airline, the right time seems to be the critical issue. Moving in on the upswing can be opportune for short term profitability. Even outstaying one’s welcome will probably work out in the event you can weather the downturns in this incredibly cyclical industry. Correct now, JP Morgan analysts, even though not specific to British Airways, are predicting “record prosperity” and “unprecedented” operating income for airline stock for the last days of 2010, 2011, and even into 2012. With air traffic on the rise once extra, primarily from enterprise passengers (up 9.55%) and cargo (up 26.5%), planes are once once more filling their seats and increasing their revenue.

Although Walsh will probably be moving over to grow to be CEO for AIG, he plans to stay actively involved within the newly-joined firm. His aggressive leadership style has involved cutting costs wherever feasible but expanding the fleet with 24 Boeing 787s and 12 Airbus A380s on order, thus pegging a course for Finance Chief Keith Williams to follow. Yet another 12 carriers may be invited to join British Airways, strengthening the group even extra. A deal with American Airlines to share booking codes is also a piece of the expansionist plan Walsh has set in forward motion. With the cash capital infusion and reduced costs that a merger ordinarily produces, the new provider will need to be in very good position to get pleasure from the current updraft from all this activity.

If it really is true that “airlines have usually been trading vehicles…” this may well the time to consider buying stock in British Airways. Whilst no one can predict the future of the really unpredictable airlines industry or the length of this present positive upswing in consumer travel, this business appears to have strategically positioned itself for maximum possible growth and revenue. Flying larger and fuller planes to a greater number of destinations sounds like profitability to me.

The question is usually, should I buy airline stocks.  Whilst conventional wisdom dictates that stock trading in airline stocks might be really volatile, there have also been great opportunities inside the past, that if timed correctly together with your stock broker might have amounted to huge short term profits.  A stock trader ought to generally pay attention to these opportunities.

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