Tom Konrad

Why Airline Stocks Are a Prime Candidate for the Short Side of a Clean Energy Portfolio

Your gallon numbers are about the same as mine; mine was a per passenger number (just like the airfare.) 18 gal/passenger * 233 passengers = 4200 gal.

Delta's website says they charge $15 for the first bag.
www.delta.com/travelin...

What airline did you say you were with?

If airlines only fly profitable flights, why aren't they profitable every quarter?

On Dec 23 11:31 AM Prof Pilot wrote:

> Your Ph.D may be in math but your facts and figures are way off.
> The 757 burns approximately 8800 lbs an hour. Your flight to DEN
> took at this time of year approximately 3:14 or so give or take.
> In short your flight burned 28,160 pounds of jet fuel. (around 4200
> gal) Delta Airlines also does not charge for the first bag as long
> as it is within Domestic and International weight restrictions published
> on the website. Domestically the max weight before baggage charges
> is 50 pounds according to Delta.com. Additionally, often airlines
> offer such reduced seats in coach because the flight is not able
> to be filled, however, many times your cheap ticket rides on the
> backs of big business fares in first class which alone can recoup
> your cheap coach fare and actually make the flight profitable. You
> got a great deal, but all it takes is one first class full fare ticket
> to offset your $115 gift and the airline is making money on those
> seats. If it wasn't it would change the aircraft flying it, alter
> the route, change the price, or lastly cancel the flight. I agree,
> ticket prices aren't nearly as high as they should be. Please, before
> you go slighting all airlines, do your homework. The number 1 priority
> at Delta is safety followed by timeliness and customer satisfaction.
>
> -A Professional Airline Pilot

Why Airline Stocks Are a Prime Candidate for the Short Side of a Clean Energy Portfolio

I think this is a good point, HJ but I decided not to distinguish between particular airlines.... I think that is best left to industry experts. The decision on LUV has to be "Do other investors have an *unjustified* faith in LUV or not?" I can't answer that, I only know that they have a lot of faith in the airline.

I do know that LUV did well hedging fuel prices in 2008, but hedges only work for a couple of years, so they are just as exposed to long term changes in oil prices as any other airline... and efficient operations mean that fuel will be a higher *percentage* of their operating costs than other airlines.


On Dec 22 08:57 AM H.J. Huneycutt wrote:

> I totally agree on most of your points in regards to the airline
> industry. The entire industry is dependent upon government support.
> (Another example of misguided transportation policies that actively
> harm the environment and reduce effeciencies). If it weren't for
> that, fares would be significantly higher, which would reduce economies
> of scale.
>
> All the same, I'd probably avoid shorting LUV. If rising oil prices
> do harm the airline industry, it will probably weed out the weaker
> players and LUV is the strongest of the bunch.

Why Airline Stocks Are a Prime Candidate for the Short Side of a Clean Energy Portfolio

Cap'n CCS-
I totally agree that the low price producer will win in the transport market. My point is that airlines (even LUV and JBLU) cannot continue to be the low cost producer when liquid fuel prices are rising... the only reason airlines are still cheap now is that they pay much less in fuel taxes than autos or trains.

I'm also aware of renewable alternatives to fossil fuels, but they are all research stage projects at this point, and, as I mention in the article, they will always be limited resources, even if they make it out of the lab. This means that the price of renewable fuels is likely to be set by the price of fossil fuels... it won't matter to the airlines if they are using expensive fossil fuels or expensive renewable fuels... the problem is that the fuel will be too expensive.


On Dec 22 10:10 AM captainccs wrote:

> This articles overanalyzes the airline industry because it starts
> from a totally mistaken viewpoint. Transportation, flying included,
> is a commodity, it does not have and never will have pricing power.
> In commodities the low cost provider wins. Curiously, the article
> mentions that two low cost providers, JetBlue and Southwest, don't
> charge for the first or second checked luggage yet misses entirely
> the significance of this policy. In commodities, if you run into
> problems, lower the price! That's what Ryanair has been doing for
> years in Europe to become their biggest local carrier.
>
> The article also misses the fact that several companies are working
> on making green jet fuel to replace hydrocarbon (fossil) based jet
> fuel. Rentech (RTK) is a prime example. While still a development
> stage company, its green jet fuel has been certified by both the
> Air Force and for commercial jets. Rentech is not the only one but
> I like them specially well because they make their fuel from waste
> solving two problems at once. Others have to plant crops or to cultivate
> algae meaning their feed-stock is more expensive and more energy
> intensive.
>
> Disclosure: Long RTK and short RYAAY puts.

Why Airline Stocks Are a Prime Candidate for the Short Side of a Clean Energy Portfolio

Well, the Ph.D's in mathematics, but I'm notorious for making arithmetic mistakes... What was your result?


On Dec 22 07:11 AM godofbrew wrote:

> "My $114 flight on a Boeing 757 from Baltimore to Denver alone used
> about 18 gallons jet fuel (using numbers from here)."
>
> You’re not much of a mathematician are you?

Shorting the Least Green Companies

Speaking of antiscience religion, I seem to have offended one, judging by the last 7 comments, most of which seem to be reactions to the title, not the content of the article.

I do agree with the more rational commenters above that shorting a stock just because it is no "Green" makes no more sense than buying one just because it is "green." Investing needs to be much more focused than that to be successful.

Airline stocks, however, are probably doomed by peak oil, which is why I am currently shorting them.

What's greener than driving on asphalt? Carpooling on asphalt: it requires a lot less asphalt.