American Airlines (NYSE:AMR)
American Airlines (NYSE:AMR)
American Airlines is seeing its stock decline by near 12% today as gas
rebounds after a prolonged down trend in the commodity. Airlines
generally move in the opposite direction of gasoline as fuel is a large
part of their variable expense in flight costs. Only Southwestern was
able to hedge against the large spike in gasoline that the US
experienced over the summer. But the decline in oil has helped the
airline industry tremendously.
OPEC Stiffens
Today OPEC has moved to reduce production barrels of oil to help boost
the price and their profit margins. This has led to close to a 3% rally
in oil. I think the longer term decline in the price of oil will
continue and see the airlines as a way to play this continued decline.
Global economies are slowing including the US and China, therefore
demand for oil is being reduced leading to the drop in price.
The Trade
Over the past two weeks, American Airlines has moved from a low of
$6.45 share to its most recent close at $11.97. This one day spike in
oil prices provides a good opportunity to create a small position in an
airline like American. This is not based on fundamentals but the
inverse trade action of airline stocks to the price of oil solely.
Suing Yahoo!
In a related note, American Airlines has sued Yahoo! over the use
of specific trademarked terms which Yahoo! has allowed competitors to
bid on for search traffic. The company recently sued Google for similar
damages and settled with the search giant out of court.