Tuesday, January 29, 2008


The Salt Lake City Airport is preparing to offer incentives to DAL as soon as DAL buys NWA. The airport officials believe this will be the first of the mergers between the "big boys" and it believes that Salt Lake can become the "Gateway to Asia". NWA is tied for the lead in Pacific Coast traffic and DAL is tied for the lead in Atlantic Coast traffic. The combined carrier could route a lot of traffic through Salt Lake. The city has been planning to raise fees at the airport to pay for a new light rail line between the airport and down town. The projected cost is peanuts compared to the 2 billion dollar upgrade Delta wants the airport to make. Delta wants the city to pay for the light rail independently and retain all airport fees for the purpose of airport upgrades. Undoubtedly, the city of Salt Lake will be called upon to contribute to the upgrade kitty.

The fact that DAL is in discussions with various cities and states that will be effected by the merger makes it all the more likely that a transaction is in the works. Minnesota has already apparently accepted the loss of a corporate headquarters in exchange for beefed up employment at other facilities.

My CPA friend and former Merrill Lynch Associate, Lamar Jones, says that CAL is projected to have free cash flow of better than $10 per share by next year. He sees $80 as a reasonable two year price target.

Over the past couple of weeks, there has been a turn in the transportation index. This "economically sensitive" index has run up on strength in airlines and the rails. With 49 coal electricity plants planned for construction in the USA, it is clear that trains are going to haul a lot of coal during the prosperity phase of the business cycle. It is also clear that the airlines will haul a lot of passengers.


This morning I wrote again about how China is building power plants at the rate of one new plant every 4 days. I suggested that these new plants will allow China to get into the manufacturing of even more goods that will be sold at lower prices. I just read where Wal-Mart has once again rolled back prices from 10 to 30% on thousands of items. Of course, Wal-Mart knows how to get publicity by rolling back prices before gradually raising others but the fact is that the price of goods keeps falling in real terms. Full seed ahead for international flights. The billion dollar airport is needed.