Wednesday, July 06, 2005

WSJ.com - Delta Air Lines Reports June Traffic Up 4.7%

WSJ.com - Delta Air Lines Reports June Traffic Up 4.7%

HIGH VOLUME LEADS TO HIGH PRICE!

My wife and I rented resort property condos for 20 years. Setting rental rates was always the toughest job. Most people set their resort rates by playing follow the leader. If the market leader raises rates 6% then the followers do the same. The trouble with this strategy is that the leader does not tell his competitors about discount plans offered.

The best way to set rates is to adjust based on volume of business. If the last week of April in 2004 is booked solid, then one should raise the price for the same week in 2005. If the whole summer is booked solid, the company that does not raise its price is leaving money on the table. Of course, those who raise their price too much are apt to lose money to vacancies.

DAL is just one more airline enjoying very high load factors. In the sort run, airlines will continue to struggle to make profits--fuel costs are high and fares are relatively low. However, the public is flying again. Business travel is exploding. Coach seats are being taken out and first class seats are being added.

Seat prices are ready to surge. High loads and high seat prices will result in a multiplier effect of much higher total revenues. It does not really matter if oil prices are up or down from here, airline profits are ready to surge.

DAL and NWAC have not avoided bankruptcy yet. UAL and USA are not out of bankruptcy yet. Competition is keen. Caution is recommended.

My family owns more CAL than any other stock--more than double the amount of Google. We also own shares in AMR, AWA, DAL and NWAC(in that order of position size). We added more AWA recently. (We also recently added to our DRI and WMT holdings.)

A bomb on a plan would hit our stock prices pretty hard. However, we are confident that the business is recovering. It is such a leveraged business that we believe the upside is large. Buy at your own risk!

BUY THE BULL! GREENSPAN IS NOW FACING A RISING DOLLAR! THE SHORT TERM INTEREST RATE INCREASES HAVE DONE THEIR JOB! THE MARKET IS BEING PRESSURED NOW BY THE INCREASE IN THE DOLLAR. ONLY A FEW MONTHS AGO, NERVOUS NELLIES WERE FRIGHTENED BY THE FALLING DOLLAR. THE STRENGTH MAY CAUSE A TOUGH TIME FOR INTERNATIONAL COMPANY EARNINGS BUT FOREIGN BUYING OF US STOCKS SHOULD TAKE OFF. BUY THE BULL!

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