Saturday, August 23, 2014

Airlines in North America Set for a Great Year

According to the most recent industry data, airlines in North America are set to have a highly profitable year in 2014. In fact, the trend appears to be strengthening. This is good news for full-service airlines such as American Airlines (NASDAQ: AAL  ) and Delta Air Lines (NYSE: DAL  ) , and also for budget carriers such as Southwest Airlines (NYSE: LUV  ) and JetBlue (NASDAQ: JBLU  ) . It's also good news for passengers, as airlines tend to upgrade their fleets when the going is good. So, what is the evidence that North American airlines are doing better, and what does it mean for The Boeing Company  (NYSE: BA  ) ?




A Delta Boeing 757 taxies prior to takeoff.


North American airlines set for a great year
The International Air Transport Association, or IATA, is the single most important trade association in the airline industry. Its biannual "Airline Industry Economic Performance" report outlines various forecasts for the airline industry. I've selected some data from previous IATA forecasts to demonstrate how the outlook is strengthening for North American airlines.


READ THE FULL ARTICLE LINKED HERE

Sunday, July 13, 2014

Is Warren Buffett Wrong About this Economic Indicator?

It's widely understood that Warren Buffett's favorite economic indicator is freight car loadings. While the reasoning is obvious -- more industrial activity equals more rail traffic -- all indicators are subject to changing circumstances, and rail traffic data is no different. The question is whether the data is still important, and what is it saying about the U.S.industrial economy? In addition, what does the make-up of the data say for the railroad companies like CSX Corp. , Union Pacific  and Norfolk Southern ?


All about coal
Buffett's acquisition of Burlington Northern in 2009 was a classic purchase of a highly cash generative business, that has a strong competitive moat, operating in an industry set for steady long-term growth. Throw in Buffett's predilection for freight car data, and it appears to be an obvious play on U.S. GDP growth. While, all of this is true, readers should note that the rail traffic data has been somewhat skewed in recent years by the tail-off in coal demand.

This chart demonstrates the issue:


US Coal Rail Traffic Chart


READ THE FULL ARTICLE LINKED HERE