The flurry of airline merger activity has raised the price of some of the stocks I talked about a month ago. UAUA and CAL of note have gained over 20%. But just like Ford and GM (when they were in merger talks) this is all speculation. There wasn’t any fundamental reason the stocks went up. Until mergers happen the airlines are still a risky play. Although I did like airlines at lower valuations now they’ve gone too high.
If you want an airline stock to buy now it’s Republic Airways Holdings (RJET). I’ve mentioned them before but now is the time to buy. With all the merger speculation the smaller carriers have held steady or gone down because analysts believe mergers would hurt the smaller airlines, which may be true. But RJET is a value play and a bet mergers will not happen to the extent they’ve been talked about.
There are six major airlines right now and merging them into three has a lot of regulatory issues, debtors and shareholder issues involved. Odds are that things will stay as they are, for the time being. So why not own a company that services American, US Airways, Delta and United. RJET has doubled sales in the last two years and with a P/E of 9.5 they’re a major value.
Buy RJET now and if UAUA falls when merger talks settle jump on UAUA.
$16.6 (12/20/06)
