Delta Air Lines, Inc. (NYSE:DAL)

There's no future in that industry in the next two years at least, and at PE's over 20 it won't get any higher regardless of external positive factors.

they keep raising prices

Value stock bouncing back, next year should be kind although new legislation proposed may sink into baggage profits

Relative Bounce Likely Complete, Fall to Resume

Delta airlines? Really?
I think my screener is broken.

You know, I really like making contrarian calls, and this seems to be the ultimate contrarian call here on CAPS. People don't like the airlines because there's a belief that the industry has never been long-term profitable and that putting money into airlines is a giant sinkhole. There's been a lot of truth to that in the past, but we're in the present now.

The airline industry privatized several decades ago and many thought it move to profitability after that. They were wrong. Rather, the industry continued to destroy capital at an alarming rate. So why didn't privatization fix the problems?

Well ... my belief is that it might have. People just tend to forget the nature of the industry. Airline companies make very long-term fixed asset purchases. A company doesn't buy a plane and then dump it a few years later. Many of these planes are used for about 20+ years. So what people might have missed is that this an industry based on heavy fixed asset purchasing, which tends to give it longer cycles than many other industries.

Now, we have another trend: consolidation. As the airlines consolidate, they find they suddenly have a bit more pricing power and are able to become profitable for the first time in decades.

While many might believe the Southwest-AirTran merger hurts Delta, it actually probably helps them by turning Southwest into 'just another bulky giant airline.' Southwest's advantage was its slimmer business model. It now lacks that model.

Assuming a little bit of revenue growth and 5%-6% profit margins at some point, Delta could start churning out earnings in the $2 to $3 range. While the company does have some significant long-term liabilities that weight it down, I do believe if investors see it's able to hit those sorts of earnings numbers, that the stock price will go up to the $20 - $30 range.

There's another thing here: oil prices have recently spiked and that's the best time to buy airlines. The airlines are inversely correlated with oil, so if you believe oil will fall from here, this is the ideal time to buy.

Overall, I like DAL right now and own some long-dated calls in real life. The biggest worries to me would be the long-term liabilities, which are no laughing matter. All the airlines have too much debt in their capital structures.

How confident am I in this pick? Not overwhelmingly so. I think the thesis makes a lot of sense, but I've not ever seen the airlines ever do all that well historically, so there is obviously a lot of doubt in my mind. I green thumb it anyway.

I believe oil will retreat from highs, but don't believe in shorting. I'll take DAL to get a nice bounce over the next several months due to declining jet fuel costs, increased pricing power (raising airfare), and synergies from the NW acquisition.

7 million fine, High fuel Cost, poor quality, old fleet

while I have not have a problem with Delta arlines as a passenger on their brand name I took a flight on their lower fare SPIRIT and was completely dissatified by the fact they took my carry on bag from me and allowed another passenger with multiple bags to go on with theirs, then put my luggage one flight and me on another! They seem to do this sort of thing frequently with the carry on because they overfilled the flight and need people to check the bag "FREE" of charge. I watched this happen for both flights on this airline. Ok so I went cheep but I have done so with other flights and never encountered such horrible service. With this kind of customer service Delta will loose out to other "cheep" flights as I personally would not book another with their SPIRIT line

The increase in travel and ticket prices will result in higher profits. Rising gas prices is my only worry.

peroe15

Picked from a screen that looks for stocks with low pe/roe ratios and then further looks for the lowest possible forward pe ratios. This screen typically outperforms by 20% or more based on backtests over the last decade. No other due diligence performed.

Houston, we have a problem...

Delta is one of the worst airlines (as investments). Its balance sheet sucks, and its earnings and free cash flow are frequently negative.

I hate Delta, and its servise at all.

God I hate delta

Horrific earnings over time. Would take a perfect landing to save this one from sure disaster.

Always bet against union labor.

Short to bankruptcy. They are getting crushed by their debt, and people are unsatisfied with them quite frequently. The only thing they've got is the title of the world's largest airline. Plus, the industry is generally bad.