This is my first post on this wonderful forum. Thanks for reading. UAL has $15.33B market cap, 334M diluted shares outstanding. DAL has a $27.9B market cap, 648M diluted shares outstanding. They have similar revenue, UAL bringing in slightly less in recent history. Similar net PPE, $44.5B for UAL and $43.2B for DAL. UAL has $20B current assets, $220M long term investments. DAL has $11.6B current assets, $3.3B long term investments. UAL has $10.53B equity, $4.53B being goodwill = $6B, which is $17.96 per diluted share. Share price as of this post: $46.61 DAL has $12.39B equity, $9.75B being goodwill = $2.64B, which is $4.07 per diluted share. Share price as of this post: $43.23 UAL has almost zero long term investment risk. DAL has 125% of their equity-less-goodwill in long term investments, only 0.37% for UAL. This is a gigantic disparity, along with the book-value, and they both should be examined accordingly. Their share prices move in tandem with one another, which isn't uncommon for a pair of market leaders. Let's look at Southwest Airlines (LUV). LUV has a market cap of $16.18B. Share price as of this post: $27.04 LUV has an equity-less-goodwill of $9.49B and diluted shares outstanding of 643M = $14.75 per diluted share. LUV has $20.8B net PPE. Let's compare their TTM stats. TTM revenue: UAL: $55.63B DAL: $60.12B LUV: $27.03B TTM EBITDA, EBIT: UAL: $7.66B, $4.89B DAL: $8.63B, $6.19B LUV: $1.36B, $-0.239M TTM Diluted EPS: UAL: $8.82 DAL: $6.95 LUV: $0.12 The theme of the day is reducing capacity. I believe the reason for this is that post-pandemic and the subsequent recovery, most of the airlines have not made the cut and have proven to the market that they will be left behind. The question is which airline will emerge as the leader. Having considered that question, I have concluded that United is by far the most likely to finish first in this approaching cycle. Recent court decisions and the increased likelihood of a Trump presidency has been received as very pro-airline. I believe the company best situated to benefit from the failing of the smaller airlines is United. While Delta is considered the better airline today as far as customer sentiment goes, they are bound to be overtaken by the much financially-stronger United in the years to come. Southwest is a very strong company and will continue to be. Delta is not well-situated financially and will relinquish its place as market-leader. If we take one of either Delta's or Southwest's current price to be "fair value", United should have a share price of at least twice its current level. The fact that it has a lower market cap than Southwest which it far outperforms, or half the market cap or Delta who it slightly underperforms while having 4.5 times its real book value is a puzzle that needs solving, in one way or another.
why no aal and jblu? if you were to play airlines... i have many cash secured puts on aal at 10 and 11, for premiums only
I mainly wanted to show the discrepancy between United and Delta. I threw in Southwest because of the enigma of its market cap compared to United. LUV now has almost a 20% higher market cap than UAL, which is comical. Bear in mind that rising likelihood of a serious war does affect United and Delta more than Southwest and the other regional players. If we have a less restrictive M&A environment in the "next" FTC, assuming aircraft supply is limited as outlook suggests, some smaller airlines would be absorbed, and that scenario likely favors United and its cash-heavy balance sheet.
I have UAL on my watch list but for me there is a macro economic view that I can get this cheaper during an economic slowdown. I know what you mean by no long term risk with this valuation but there is certainly a risk of the entire industry getting crushed in a slow down. I think something like UAL will offer diversification buying during a recession that I didn't have the funds to worry about in 2009. We will see though. The airline business seems over regulated and difficult that there might always just be better things to buy.
UAL & DAL - Downtrend started in Feb 2025, after start of President Trump's 2nd term. LUV - downtrend started in Jun 2021. now price is going sideways Those who HODL should be weeping and gnashing their teeth in despair
his thesis was right and still performed well. no one catches the top or the bottom. I would hope your hindsight trading is clearly better than his forward looking analysis.