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Airline Industry Earnings Ready to Take Off?

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    Wolfe Trahan & Co. Director Hunter Keay on the outlook for the airline industry.

  • Duration 3:56
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-- -- thank -- are airlines -- set to report third quarter earnings next week and expect.

Not to see profits all thanks in -- to steady to mildly covers over a barrel they've cut capacity but.

Can this continue through the rest of the year -- joining me now has come to K wolf -- having company director and senior analyst have been chatting away in the commercial break.

-- look.

Douglas wanna get to this united -- delta they raise prices.

And then immediately bring them down released within within less than a week they bring them right back down again is there -- saturation point for consumers.

-- there obviously is -- -- there's there's in the -- is the argument takes place at a certain point we price out certain portion of the costs surveys that passed until off sort of the back of the plane so to speak right right.

And periodically -- about trying to pass through five to ten dollar domestic one way fare increases.

And if they don't get match letter carriers.

They're out the market exposed so you search for a flight from the point to point B initial open page five of the orbit a soft I was gonna buy the tickets they roll back quickly if nobody matches are rising fuel prices is -- going to be a major headwind for the -- -- We at we love high fuel prices that is were really good transformational stuff happens in other might be some near term headwinds obviously in the -- -- NL but.

High fuel prices let's make no mistake about it have been the engine behind the transformation -- this industry -- get things like bag fees which consumers tape for a while the profit right right you know forces -- let's think about things like consolidation and cutting capacity.

Long term.

High fuel prices are -- gift.

-- -- American Airlines that just seems to stumble from one bad headlines to another we have the union fights we have faulty seats we have a bankruptcy of course.

And -- cutting their capacity a little bit to get through mid November oh what's the future for American Airlines like in my keep here in the -- -- -- -- US Airways what's next will.

We think that US service is gonna merge with American and possibly very soon I think -- -- them potentially announce a merger within the next.

For six weeks -- -- -- of the their accents they're feasible scenario it doesn't it's perfect sense so it would create scale.

It would create sort of pacification within the unions who are extremely distant franchise with the current management team and American.

It would give American good feed in to -- that are underperforming right now and it was short the finances longer term for this company so.

You know it's a question of do the synergies makes sense for the creditors to the buy into them and and you know our analysis is that they do make -- so keep an eye on that now as for airlines you like in particular delta.

The legion and Alaska why do you like these why they -- an arrest so I mean is that there's number I was that are good.

Delta first second is stock is commercial pressure since -- television -- I don't really know what this airline has to do to get the incremental investor.

Everything is going very well in this industry they're very to -- on capacity for delta should say -- this will not capacity pursuing aggressive ancillary fees are profitable this oil refinery -- bought a few months ago sort of had to be -- -- success they're expanding into Asia.

Expanding into Asia with probably soon to be announced joint venture with Korean air which is going to be a great hope for some beyond points in Asia.

Generating -- ton of cash and with that they're paying down debts of -- the balance sheet and pretty good shape.

Which I think should expand -- equity multiple probably.

Look there's been a lot of increases in airline regulations.

As you know this year what how does that impact the industry.

So I mean it's the most sort of pseudo shadow regulated non regulated industry that I think we know -- and obviously that's because a lot of consumers touch and annually.

What this would have to the election I think that's going to be kind of a did -- sense that yeah if you have a democratic White House and both chambers of congress controlled by Democrats.

There are a lot of bills right now that are floating around that I think are very scary pro consumer.

As one perspective anti airline is another perspective that -- Things like prohibiting airlines from charging for bag fees which are very very profitable or even things like eliminating the preferred security line for premier travelers I mean it's you name it it's out right right right.

So I you know at the election's going to be a big deal -- Republicans keep the house I think it's probably status quo very good stuff thank you so much for being here lots of great info come to K.

Wolf -- -- -- and company.

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