It Pays to Fly on Tuesday or Wednesday

December 30, 2007

On the Southwest Airlines site, their Click n’ Save weekly specials has quite an enticing offer that will save airline passengers money if they’re willing to fly on a Wednesday or a Thursday. They are basically offering flights for $49-$99 each way as long as you meet the following requirements:

– travel on a Tuesday or a Wednesday

– book at least 14 days in advance before January 21, 2008

– travel between January 10 and May 8, 2008 (with applicable blackout days)

You can play this deal in a few ways:

a) Think ahead early about what you want to do during spring break and plan some nice cross country trips for only $99 each way. I just checked and you can buy tickets from San Diego to New York for $99 each way. If you were to drive the 2,800 miles to get from SD to NY in a car that provides 22 mpg at $3/gallon on average, you would end up spending over $380 each way plus endless hours of driving cross country. Why pay $740 round-trip driving when you can fly on Southwest Airlines and spend less than $200 and get there in less than 10 hours?

b) If you have previously booked Southwest Airline plane tickets in the past few months at higher prices, just go to the Southwest site to change your air reservation to the lower prices and get a credit for the difference to be applied to another flight. Be careful to use your credits before the expiration date. Credits will expire one year from the date of the original purchase.

c) Even if you don’t know if you will be able to make a flight for vacation or visiting family, it might be worth it to just buy it anyways, just in case. If you are able to go on the trip during a given weekend or week, then you’ll have a cheap flight to go. If you aren’t able to go, just sell the credit on Ebay and you can generally recoup 85-90% of your money. Or if you don’t want to lose any of the money spent on the ticket, just give the credit to a friend or family member.

With oil prices testing the $100 limit again, it is very nice to have the option of traveling across country for a mere $99. While I wouldn’t buy Southwest (LUV) stock, I wouldn’t hesitate to take advantage of cheap flights.

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Stay Away From Airlines

October 9, 2007

A major part of investing has to do with picking quality companies. Once you pick a quality company, you have to have good timing and decide when to buy into the company. Another important part of investing is to know what sectors/industries to stay away from. Sectors that have uncertain growth or have a lot of negative news should be kept on the investment sidelines.

The major sector that I’m staying away from is airlines, especially in China. The Chinese airlines include China Eastern Airlines (CEA) and China Southern Airlines (ZNH). China Eastern Airlines hit a high of $147 in the third week of September and has dropped to its current level of $95. The $50 drop has occurred in response to the news that Cathay Pacific Airways decided not to challenge Singapore Airlines in a bid for China’s third largest airline. With takeover battles being discouraged for Chinese airline companies and oil prices consistently in the $80 range, it sets up a bad equation for China airline stocks. US airline companies may not have the drastic year-to-date stock price increases compared to the Chinese counterparts, but they still have to deal with the high oil prices and a slowing US economy. Some of those US companies include Southwest Airlines (LUV), Continental Airlines (CAL), and Jet Blue Airways (JBLU) with Jet Blue taking the largest percentage drop.

Yes, people will need to fly, but with financial analysts predicting $100/barrel oil in the next couple years, that doesn’t bode well for airline stocks in any country. China Eastern Airlines also carries a debt-to-equity ratio over 16 and a negative EPS for the next quarter. I don’t expect airline stocks to take off anytime soon so look to the energy sector, casinos, wireless technology, and green energy for stocks that actually have a chance of flying.