Friday, May 13, 2005

BrownCo | News & Research: Related News & Research - News

NWAC, "the world's fourth largest airline" is a member of a world wide alliance called SkyTeam. NWAC and its partners serve more than 900 cities.

I have great confidence in Continental Airlines. However, CAL has gone up in price while NWAC has gone down. It is expected that NWAC will negotiate a similar employee pay package and then will be in the same competitive position as CAL.

My family owns AMR, CAL and NWAC. This is considered a risky investment by many. The airline business has certainly been through a tough time dealing with the aftermath of 9/11. Another attack would be devastating but otherwise, profits at airlines should be strong in 2006 to at least 2010.

Load factors are such that a strong business economy will push up the price per seat. Lots of seats at lots of dollars per seat combined with lower cost per seat makes for a profitable combination. It will take years to restore balance sheets but cash flow is strong and getting stronger.

The call by JP Morgan to highlight NWAC over CAL appears to have been well received by the market. NWAC is up nicely two days in a row. For a stock to be up two days in a row may not sound like much but this occurred during the middle of a "flight to quality" in the bond market. Pretty soon, money is going to flow into stocks for lack of any reasonable alternatives.