BUSINESS WEEK ONLINE--WELL SPENT

Many thanks to Amey Stone, for posting my comments in regard to the airline business. The following is a copy of my follow-up response.

"Thank you for posting my comments. As a regular reader of Business Week for 38 years, it was a thrill to see my name in print.

For my children’s accounts, I have purchased shares in CAL, DAL,NWAC, and AMR; spreading their risk but making substantial investments. Revenue seat miles are in positive trends and of course sentiment is close to rock bottom. CAL just negotiated $500 million in annual cost reductions; better than $7 per share! The numbers are large indeed. Any company that loses $16 Million in a quarter and then negotiates $500 Million in annual savings has made a significant score.

I agree with the premise of Maynard’s article. Balance sheets are terrible and liquidation of one, two or three carriers would be the salvation of the remaining players. However, brinkmanship is a way of life for these extremely leveraged businesses. The survivors will quickly make enough to pay-off the lawyers and creditors. The UAL lion financing will be Debtor-In-Possession Financing. My lawyer and accountant friends tell me the lenders can’t lose."

By the way, I am a
Carolina Blue Tar Heel from North Carolina. I’ll be in Chapel Hill, NC at 4:00PM Sunday to watch the Tar Heels beat Duke, clinch first place in the regular season ACC race and prepare for a run at the national championship.

Calling me a South Carolinian was an easy mistake as my family and I own resort rental properties at Kingston Plantation, Myrtle Beach SC.

I will post this response on my site tomorrow. One of the postings on the site shows the positive relationship of oil prices and airline stock prices. While it is true that fuel is a significant expense for the airlines, it is also true that the demand for fuel is only strong when the economy is strong. In a strong economy, airline ticket prices go up much more than enough to pay for the higher fuel costs.