{"id":26752,"date":"2012-01-20T19:00:16","date_gmt":"2012-01-21T00:00:16","guid":{"rendered":"http:\/\/8.29.132.176\/~kuhio4\/countingpips.com\/fx\/2012\/01\/the-only-airline-stock-worth-buying-this-year\/"},"modified":"2012-01-20T19:00:16","modified_gmt":"2012-01-21T00:00:16","slug":"the-only-airline-stock-worth-buying-this-year","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2012\/01\/20\/the-only-airline-stock-worth-buying-this-year\/","title":{"rendered":"The Only Airline Stock Worth Buying This Year?"},"content":{"rendered":"

By MoneyMorning.com.au<\/strong><\/p>\n

In August 2010 Kris asked if an Aussie Icon was on the ropes…<\/a> <\/p>\n

Back then, Kris laughed at broking firm, Morgan Stanley’s price target for Qantas [ASX: QAN]<\/strong> of $3.05. Turns out he was right to laugh. The stock didn’t get there.<\/p>\n

And now, it’s now trading at $1.52 – just above its three-year low.<\/p>\n

The other big airline stock<\/strong>, Virgin Blue [ASX: VAH]<\/strong>, hasn’t done much better. Since Kris told his Australian Small-Cap Investigator<\/em> readers to sell the stock, locking in a 100% gain in early 2010, the price has halved:<\/p>\n

<\/span>
\nYou can see the long-term share price performance of both companies in the chart below (Qantas – blue line; Virgin – pink line):<\/p>\n

\"long-term<\/div>\n

<\/p>\n

Source: CMC Markets<\/div>\n

<\/em>
\nThe bad news continued into 2011, with both stocks taking a beating. That’s despite revenue for both companies being higher this financial year, passenger numbers for the two airlines were up 3% in November over the previous year.<\/p>\n

That said it’s been a tough year for airline shareholders.<\/p>\n

Or has it?<\/p>\n

In less than six weeks since listing on the Australian Securities Exchange, Alliance Airways [ASX: AQZ]<\/strong> has gained more than 7.5%.<\/p>\n

And recently Credit Suisse set an ambitious price target of $2.38 per share by the end of this year\u2026<\/p>\n

Is it possible? <\/p>\n

It might be. But the rising stock price relies heavily on the mining boom. That is, the company has a small fleet of planes that specialise in dropping ‘Fly-In, Fly-Out’ (FIFO) workers, most commonly mining employees, at their work sites.<\/p>\n

By August last year, of the 90,000 resource industry employees in Western Australia, over 52% were FIFO. And the West Australian government reckons in less than three years, FIFO workers will make up more than 57% of the resources work force.<\/p>\n

And that growth estimate is just for workers on the west coast of Oz.<\/p>\n

But it’s not just WA that Alliance Airways covers. <\/p>\n

If you can name a dense mineral deposit, they’ll fly there. As this chart of the Alliance route map shows:<\/p>\n

\"Alliance<\/div>\n

<\/p>\n

Source: Alliance Airways Prospectus<\/div>\n

<\/em>
\nAnd there’s another benefit of running an aviation business that benefits from the mining boom. <\/p>\n

Unlike retail airlines, an empty aircraft isn’t a risk for them. That is, they charge a mining company the same flat rate per flight. Passing on the responsibility of filling an aircraft to the mining company. Empty plane or not, Alliance gets the same fee. <\/p>\n

But what if the mining boom in Australia comes to a quick end? Well, the company has aircraft that can reach as far as the South China Sea and to our cousins across the ditch in New Zealand. <\/p>\n

They’ve ensured the business is viable outside Australia by building up a small fleet of planes capable of flying internationally.<\/p>\n

But for now, if the mining boom slows… and the need for FIFO workers dries up… the Alliance share price could see a fall similar to Qantas and Virgin. <\/p>\n

There’s one more thing that could hold Alliance back should the ‘digging up rocks’ boom in Australia end. Alliance doesn’t have a retail market like the big two airlines. Alliance pretty much flies to big holes in the ground… and it’s hard to imagine these becoming tourist hot spots! <\/p>\n

Right now, the S&P\/ASX 300 Metal & Mining index is down 21% since this time last year. But in the last few weeks, it has gone back up. Given Alliance’s dependence on the mining boom, any change in the demand for resources<\/a> – and, therefore, workers – will drive the share price.<\/p>\n

And perhaps not surprisingly, for the few short weeks it’s been trading, the airline has tracked this index…<\/p>\n

<\/p>\n

Alliance Airways (AQZ) Tracks S&P ASX 300 Metals & Mining Index<\/div>\n

<\/strong><\/p>\n

\"Alliance<\/div>\n

<\/p>\n

Source: CMC Markets<\/div>\n

<\/em>
\n…A pattern that seems set to continue given the company’s relationship to the mining sector. <\/p>\n

In short, a bet on Alliance Airways is simply a bet on the resources boom kicking on. If the mining companies keep turning a profit it seems likely Alliance will too. <\/p>\n

Shae Smith
\nEditor, Money Weekend<\/em><\/strong><\/p>\n

\n<\/img><\/a> <\/img><\/a> <\/img><\/a>\n<\/div>\n


\nThe Only Airline Stock Worth Buying This Year? <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By MoneyMorning.com.au In August 2010 Kris asked if an Aussie Icon was on the ropes… Back then, Kris laughed at broking firm, Morgan Stanley’s price target for Qantas [ASX: QAN] of $3.05. Turns out he was right to laugh. The stock didn’t get there. And now, it’s now trading at $1.52 – just above its … <\/p>\n

Continue reading “The Only Airline Stock Worth Buying This Year?”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-26752","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/26752","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=26752"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/26752\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=26752"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=26752"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=26752"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}