Airline Economics, United Earnings Edition

It's not easy, being an airline. Thanks to high fuel costs, United (UAUA) lost $252 million in the third quarter, on an operating basis. On the other hand, United was hedged. And as a result of those hedges, United ended up losing, um, $779 million. As a result, United stock rose by 9% today, to $13.75 a share.

In case you were wondering, United's annual earnings per share are -$24.61. And I can't find a Q3 balance sheet, but at the end of Q2, UAL Corp had net tangible assets of -$3.3 billion -- and it's surely even deeper in the hole now. Who's buying these companies with negative net worth? I have to admit I don't get it at all.

Comments

[Burkey:]

UAUA is looking ahead, oil down 50% and expected to be at $60 or less....Airlines will turnaround to a profit. Also, capacity is cut AHEAD of demand, this means price increases, which also adds to bottom line. Plus, those new fees, it will add $500 mil to bottom line in 2009.

The safety net effect: $3 Bil in cash or equivalents, etc etc

These and others valuate UAUA to be higher than where it is now....

2008 Oct 21 05:44 PM

[Burkey:]

Capacity cut AHEAD of demand means price increases
Oil going to $60 means bigger bottom line

UAUA going up is a turnaround play....

2008 Oct 21 05:46 PM

[rrobin:]

I agree with you, Felix. I can't imagine anyone would want airlines now. They are in the process of losing their top customers, business flyers who will no longer have much budget for travel, so no one left to pay for seats. And how much can they raise prices - no one has any $$ to pay them. Some people do have to fly, but they will be the only ones doing so, everyone else will find other ways.

2008 Oct 22 12:50 PM