Buy Or Sell? Continental News Divides Analysts
Continental Airlines and AMR's American Airlines each reported that their load factor -- the percentage of seats filled with paying passengers -- jumped in March compared with the year prior. Does this jubilant metric mean investors should be buying? A bull and a bear took up the debate, on "Closing Bell."
Ray Neidl, airline analyst for Calyon Securities, told CNBC's Melissa Francis that Continental's news -- which included a revenue increase -- is clearly "an omen" of good things to come. He explained that the legacy carrier is "indicative of the industry" as a whole. He cited the combination of the oil-price slide with cost-cutting as the reason he favors traditional carriers over discount airlines.
But David Tice, president of The Prudent Bear Fund, lived up to his firm's name: He declared that the "big picture doesn't look good." Despite the cheering news, Tice slammed the airline industry as "a notoriously bad business," plagued by high fixed costs and incessant labor trouble. He conceded that for the commercial airlines, "the profits are there this year" -- but notes that "they're not making that much" even when "the utilization is high."
Tice said the airlines are "very shortable in the not-too-distant future."