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AMR Corp. (NYSE: AMR), the parent of American Airlines, reported earnings for the first quarter on Wednesday. Revenues decreased 15%, and on an adjusted basis, the company lost $1.30 per share. According to this source, the market was calling for a loss of $1.62 per share. Since management was able to beat by such a wide margin, Wall Street decided to reward the stock by bidding it up over 20% (that's how the shares were trading at the time I started this article).
Airlines are still having a problem with the economy. Consumers aren't traveling as much, businesses are cutting back on sending executives across country. Indeed, I'm sure the summer months are going to see a lot of vacation plans being eliminated as people decide to stay closer to home.
One thing that was on AMR's side is the cost of fuel. Remember the days oh so not long ago when everyone was screaming about energy prices? Well, the recession has seen to that. In addition, AMR was able to get almost $100 million of liquidity via an aircraft-backed loan.
So, the stock is up. You know something, whenever I think of airlines, I think of CNBC's Jeff Macke, one of the traders on the fun show Fast Money. He sometimes says something along the lines of whenever the market is open, it's an opportunity to sell airlines.
He's right. It's a sector that I just never want to own for the long term. I think most individuals should stay away from airlines since they can be so volatile and so dependent on fuel prices. In some sense, you might as well go trade oil futures if you're thinking of fooling around with airlines. I know there are other factors involved, but I'm sure everyone gets what I mean.
Traders may be buying AMR today, but I won't be joining them. It's just not the investment for me (as I finished this article, shares of AMR were up roughly 15% in afternoon trading).
Disclosure: I don't own any company mentioned; positions can change without notice.
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