Stocks Holding Their Own As Blue Chips Fall

Stock analysts who for years have been turning up their noses at the airline industry are now forced to acknowledge that, in a time when blue chips are tanking, airlines don't look so bad as an investment. 

Having come through a decade-long gauntlet of the 9/11 attacks, the SARS and Bird Flu scares, bankruptcies, mergers and last year's crippling oil price spike... US domestic airlines are widely projected to have a profitable year. They even look good against foreign competitors, as the US dollar's recent strength against foreign currencies has had the effect of lowering fuel costs for US carriers.

But Reuters reports influential analysts still aren't giving the industry much respect. Of the capacity cuts which positioned airlines to do well this year, independent analyst Michael Boyd suggests that what looks like successful strategy was dumb luck, with capacity cuts planned to battle oil prices happening to come just in time to match falling demand.

"That was only serendipity... They didn't see the demand drop any more than anybody else," Boyd says.

Morningstar analyst Basili Alukos predicts that as demand falls further, airline stocks will not continue outperforming the overall market. "The industry is so dynamic it could change on a dime," Alukos said.

Independent airline consultant Robert Mann is especially cynical about current airline stock prices. "It may never occur again. Enjoy it while it lasts."

FMI: www.aviationplanning.com, www.morningstar.com, www.rwmann.com/