"Market Monitor"- Julius Maldutis of Aviation Dynamics
Friday, March 13, 2009PAUL KANGAS: My guest "Market Monitor" this week is Julius Maldutis, the president and chief airline analyst for Aviation Dynamics and welcome back to NBR Julius.
JULIUS MALDUTIS, PRES. & CHIEF AIRLINE ANALYST, AVIATION DYNAMICS: Thank you very much. I'm delighted to be with you as always.
KANGAS: There have been a lot of changes in the airline sector since we spoke with you last in May, early May. We've seen everything from bankruptcies to mergers. Where does the industry stand now?
MALDUTIS: Well the problem is that they went through a doubling in oil prices and economic recession and then oil prices came down. Unfortunately, they made a bet that oil would be at $200 barrel. So that's why they lost $6.3 billion last year.
KANGAS: You told us then that Delta and Northwest would merge, but that a combination of US Airways and United was doubtful. You were right on both counts. What's the consolidation picture look like now?
MALDUTIS: I think the only thing that United is trying to do is reach a alliance with Continental Airlines, but we'll find out in May whether the anti-trust immunity gets approval or not. But I don't think we're going to see any other mergers this year.
KANGAS: Has the recession overcome the benefits of lower fuel prices?
MALDUTIS: Well, that is a very tough and a very good question, Paul, because what you have is that the airline fares are dropping very quickly and consequently, could offset the benefits from the oil prices. But nonetheless, most people are predicting that this year would be profitable.
KANGAS: Let's take a look at labor costs. Some of the unions have given some very good concessions. Is it much improved now?
MALDUTIS: Yes it has been, because of the huge losses last year, particularly Delta Airlines has done an extraordinary job. Unfortunately, American Airlines is in a very difficult negotiation with their pilots.
KANGAS: Now, you gave us three buy recommendations to our viewers during your last visit in early May. Let's see how they've done. I guess we pretty well know they haven't fared very well. Delta (DAL) down 31 1/2 percent and JetBlue Airways (JBLU) down 12.6 percent. How about some new recommendations?
MALDUTIS: Well, there are two other carriers. AirTran (AAI) that --
KANGAS: Let's have a look at Delta's chart first, here, if we may. It's been all over the place, and you-- you're not afraid of the volatility in that stock.
MALDUTIS: No, absolutely not because the management has predicted that they will be profitable this year.
KANGAS: OK and Northwest is now a part of them, right?
MALDUTIS: Absolutely.
KANGAS: It was a share-for-share exchange with Delta the surviving company.
MALDUTIS: That is correct.
KANGAS: All right. How about a number two recommendation?
MALDUTIS: Airtran.
KANGAS: OK, let's have that chart up there. We see -- pretty bumpy ride there too.
MALDUTIS: But the interesting thing is they also have predicted that they will be profitable this year and they have disengaged in competing so hardly against Delta in Atlanta.
KANGAS: All right, let's have a third choice.
MALDUTIS: And that's JetBlue.
KANGAS: OK, you still like JetBlue?
MALDUTIS: Because they have that very interesting and a very good agreement with Lufthansa.
KANGAS: Could be a merger?
MALDUTIS: Well, Lufthansa owns slightly less than 25 percent of the stock so they are already involved and working closely together.
KANGAS: OK. We have 30 seconds left Julius, one more recommendation quickly.
MALDUTIS: Alaska, (ALK), very interesting and a very good management and a very interesting story going forward.
KANGAS: OK, the question is do you personally own any of these stocks or have other disclosure to make?
MALDUTIS: I still own Delta and JetBlue.
KANGAS: And you would buy them at these levels?
MALDUTIS: Yes.
KANGAS: OK. I want to thank you for being with us again. Great to see you.
MALDUTIS: Thank you.
KANGAS: My guest, Julius Maldutis of Aviation Dynamics.
