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How much higher can they go? On "Squawk on the Street"--CNBC’s Mark Haines asked David Strine--Airline Analyst with Bear Sterns.
Strine said the cycle is sturdy and his firm is still positive about the group for 3 reasons:
- supply looks like it will be constrained
- the fuel hedges for the low cost carriers are declining so they will need to raise fares
- there's an increasing probability of M&A activity in the industry.
He also said capacity is always an issue in this industry, and there's a window for a year or two where it will be hard to get aircraft. Mechanisms are in place that will keep a cap on the growth of supply - and if that happens while the economy grows, we have a sweet spot.
Strine says on a valuation basis the carriers that look least expensive to his firm are United [UAUA
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Analyst Disclosure: AAI, ALK, CAL FRNT are or during the past 12 months have been a non-investment banking client (securities related services) or Bear Stearns & Co. AMR is or during the past 12 months has been a non-investment banking client (securities related services) of Bear Stearns & Co.
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Data is a real-time snapshot *Data is delayed at least 15 minutes