CAL EARNINGS

CAL increased revenues per seat mile by 6% while cost per seat mile went up 3.1%. One never knows how the market will react (some folks are always disappointed with good numbers) but from my perspective the net yield gain was a home run.

The cost per mile was an especially good number given that fuel cost went up 4.3% and fuel use went up 4.9%. The company is clearly keeping a lid on non fuel costs. Even the 4.9% increase in fuel use was less than the traffic increase so once again the company is doing a great job to control costs.

The reported earnings, $2.15, were reduced by a 10 cents charge for pension contributions. Adjusting the number to $2.25 makes it 21% higher than the forecast of just two months ago and better than a 70% increase over the prior year quarter!

LONG BOND

Long term interest rates are falling. The 10 year bond is trading around 4.5%! What inflation? With the average wage up better than 8% over the past two years and with inflation dying, prosperity is breaking out. Consumers are paying down debt and buying more stuff all at the same time!

BUY, BUY, BUY!