Expecting U.S. Airways to Fly High Again

U.S. Airways Group, Inc. (LCC) is facing extreme downward momentum. The question in my mind is, is it sustainable?

LCC's book value is $16.01 per share, which is $4.80 over Tuesday's trading price. It's very oversold and only Tuesday we started seeing some after hours block trading (30,000 share block Tuesday night). This is a good sign.

It's difficult to tell when airlines will recover given our current oil situation. They're all raising prices and struggling to survive. It's worth monitoring and if you're a risk taker, possibly legging into one or two with a small position size.

Of the group, LCC is the most beaten down. LCC has more domestic exposure, but is expanding its international presence - flights to Heathrow begin in March 2008, and flights to China will begin in 2009.

Yesterday, UBS upgraded a bunch of U.S. legacy carriers, saying it expects a major deal to be announced in the next six months and airline stocks to rise as a result. The broker told clients it thinks a deal between Delta Air Lines (DAL) and Northwest Airlines Corp. (NWA) is most likely, which it said would put investor pressure on Continental Airlines Inc. (CAL) to act, perhaps by merging with UAL Corp. (UAUA). UBS upgraded AMR Corp. (AMR) to neutral from sell and Continental, Delta, U.S. Airways , Northwest and UAL to buy from neutral.

Disclosure: Author is long LCC.