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Why Is Morgan Stanley Bullish Airlines?

You may be intrigued to learn that Morgan Stanley upgraded Continental Airlines to Overweight from Equal Weight. It’s an interesting development considering Continental says its traffic fell 6.5% - and, on average, passengers flew less miles.

What’s so good about that?

Well, nothing except Continental managed to reduce capacity at an even greater rate; in other words flights were more full on average. That led to an increase in load factor, or average occupancy, to 84.8 percent from 83.7 percent a year ago.

Okay, so one airline is doing moderately better but that’s just one.

Hold your hats, you may be even more surprised to learn that Morgan is incrementally more positive on the entire sector.

In fact, they initiated coverage of Delta Air Lines with an "overweight," citing indiscriminate selling of all airline equities which has excessively punished some higher quality carriers."

Is Morgan Stanley onto something? And if so can you make some fast money?

If the oil prices go lower the airlines should rally, says Guy Adami. And there’s enough short interest that you could catch a spike. But if oil sucks down the broad market the airlines won’t spike that much.

The airlines are volatile stocks, reminds Pete Najarian. I consider them trading vehicles but not for buy and hold investors.

If you're looking for an emerging markets play, two airlines that I follow are Lan Airlines and Copa , reveals Tim Seymour.


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Trader disclosure: On July 2nd, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders: Seymour Owns (AA), (AAPL), (BAC), (BX), (EEM), (FCX), (FXI), (FITB); Seymour's Firm Owns (NOK); Seymour's Firm Is Short (PBR); Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Terranova Owns (XBI), (ABT), (MSFT), (UUP), (RIMM); Najarian Owns (F) Call Spread; Najarian Owns (GS) Call Spread; Najarian Owns (INTC) Call Spread; Najarian Owns (V) & Short (V) Calls; Najarian Owns (PALM) call Spread; Najarian Owns (YHOO) Call Spread; Najarian Owns (WNR) & Short (WNR) Calls

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