Airline stocks soared early in 2013, helped by a (slowly) recovering global economy, reasonable prices for jet fuel, and regulatory environment that was, to say the least, casual in regards to industry consolidation. That all changed earlier this month when the Department of Justice decided to nix the proposed merger between bankrupt American Airlines and US Airways (LCC).
Jon Najarian of OptionMonster says investors should not be sweating the DOJ all that much. He says the trial, currently set for next March, will be bumped up to November. What's more, Najarian thinks American and US Air will be allowed to merge, albeit with major concessions.
If Najarian is right on the merger, that makes things much more interesting for the industry. Though there are limited monster mergers left, there are opportunities for acquisitions of companies like the struggling Virgin America or JetBlue (JBLU) with its limited market share.
"I don't think the DOJ prevails here," Najarian says, "The issue here is what happened over the last decade which they're going to be able to reverse by blocking (the American US Air merger)."
As for the stocks themselves they've pulled out of the post-DOJ death spiral but have yet to take flight. They seem to be trading at least as much off Syria as they are the United States' judicial system. In all candor, it's difficult to suggest exposing even speculative money to assets even remotely tied in to either.
The airline sector isn't the rat-trap it used to be in terms of investing. The gun-slinging M&A environment has seen to that. If you caught the rally you deserve a tip of the cap. Now you might want to think about pulling a DB Cooper and parachute to safety.
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