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Delta vs United : Goldman Sachs’ call on aviation might be right priced

Though aviation majors like United (UAL: US) and Delta (DAL:US) have shown that they are capable of turning around

United Airlines

United Airlines (Photo credit: Wikipedia)

slower times into higher profits ith lower capacities and hub rationalisation that continue to crimp costs, it may ell be thtat despitre lower capacities, the falling predilection for airtravel may have turned the june quarter into a sea of red for the airlines. US Air may have also led in price increases on fares and economic data has shown that travel prices have been increasing their share in trade, but that and the falling price of fuel may finally go only so far. The pertinent indicator for this news would be the falling retail sales in June 2012.

United Airlines Boeing 777–200 taking off at A...

United Airlines Boeing 777–200 taking off at Amsterdam Airport Schiphol in the “Battleship Grey” livery, used 1993–2004 and commonly seen well into 2011 (Photo credit: Wikipedia)

The stocks have already seen a correction since the Goldman Sachs report rode recession fears into a red chaining of all aviation stocks last Wednesday. Just like last time, this cusp for the industry also rides the biggest backlog of orders for aircraft makers Boeing and Airbus both managing a backlog of over 4000 planes on order and trying to increase production capacity while trying to copy each other with Boeing selling its newly modified 737s to emulate the successful 320s and Airbus trying to add wings so its single aisle 200 seaters can fly the distance to New York from Europe. Investments by United and others in new airplane fleets and in bankruptcy negotiations on pay grade both count towards the same objectives of cutting costs even as Delta truns out a refinery under its wing to suppley the Minneapolis and other hubs ith its own oil. Falling crude prices during the quarter gone by also give the industy hope and one might just use this evaluation to further drive these prices before a big earnings pop as and when these airlines return with laurels in the Q2 profits numbers.

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This entry was posted on July 16, 2012 by in Amitonomics, Retail Lifestyle, US and tagged , , , , , , , .

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