AirTran Delays Earnings by a Day: Flight Delay to Blame?

Considering that airlines keep turning belly up, or merged with their neighbor, you should be interested in the reports of a few airlines on Tuesday. The funny thing about the situation in the airline industry is that you can't make heads nor tails of how to play the group. Unless you are the shrewdest of analysts, and have close and friendly relationships with management, you could be handed your head. A company you peg for bankruptcy could prove a synergistic addition to some other industry participant's plans, or vice versa.

AirTran Holdings (NYSE: AAI) moved its conference call back a day, perhaps due to a flight delay? AAI investors better hope it's not due to a flight cancellation. I can just see the CEO telling the Investor Relations Chief, change the word "disaster" to "difficulty" and "recession" to "contraction." That's the new English folks!

The analyst community of four (with estimates) has grown increasingly sour on this one, as the consensus estimate has deteriorated by twenty-two cents over the course of the last ninety days, and now stands at a loss of $0.31 for the March quarter. The rest of the year has not moved counter to trend, and the full year '08 figure is now deep in the red also, at a per share loss of $0.44, according to Thomson Financial. Yikes!

AAI's price-to-book is about 1-to-1, but what matters more than any value indication is which way book value is headed and at what rate. Who cares what the P/B is when book value is disappearing. Debt stands at over two times equity, and EBITDA-to-interest is at 2.8X based on '07, and guess what, debt is growing (so it should not improve). I do not know this company well, but a quick look at the numbers says "watch out" to me. Just a thought... Of the few brave souls who cover the company, probably because they have to, most look asleep with a hold rating, while a couple are real rodeo stars with buy ratings. There's a big short interest and the stock chart says head for the hills. Some would say the short interest offers reason for optimism, but I would not be playing roulette with this one.

Also on the earnings slate for Tuesday are JetBlue (Nasdaq: JBLU) and UAL Corp. (Nasdaq: UAUA).

Comments

[firboy4:]

Why even write about this company when you say, "I do not know this company well, but a quick look.......". Though your guesses are possibly correct and the airline is getting into trouble. But if AAI is getting into deep trouble, then they ALL are. And people are going to be flying with SOME airline. And the airlines will adjust. AAI is well positioned to make adjustments to be competitive. But if panic is going to set in, then there's usually no stopping that, so, yeah, I suppose NO airline is worth buying now, even in the short run.

2008 Apr 22 09:22 AM