RE:Sober second thoughtsI think you summed things up when you talked about the market anticipating a 15,000-16,000 TSX in 2016. This is my take on things. Lower Jet fuel prices are indeed a huge tailwind for airlines, however when the aftershock of crashing Oil prices results inevitably in reduced ticket prices, I think the market wants to see where the RASM is going to bottom out and ultimately where the airlines' baseline pricing power lies. Yes low jet fuel costs are great, however when RASM decline follows, it gradually takes the benefit away from lower fuel costs. The market is forward looking and although the overall net profit is double year over year, falling RASM points to a gradual reduction in net profits as oppose to a further rise in net profit. If the market can find a baseline price in ticket sales and overall start to see RASM improvement, I think this is what signals sustained pricing power and profitability.
Other things to consider of course is that there have been continued downward revisions on forward looking GDP growth for Canada from the BOC. Consider that airlines as a rule grow an average of 1.5 times GDP, so downward revisions do not help the outlook for airlines by any means.
I was reading a statement from Mr. Rovinescu in the height of the financial crisis as I was going through the company's financial reports. During this time he stated that airlines are the first to feel the effects of a recession and the last to recover during economic recovery. What was interesting was how much they needed to drop ticket prices to sustain demand due to the weak economy, far moreso than today's environment. We are indeed flat as a whole in the economy however I think this is a different environment than 2009, as other parts of the economy are picking up the slack and demand for air travel is far greater. Also consider how severely the U.S. Economy was punished back in 2009 as a result of the financial crisis. You would not have seen the same influx of tourism from the U.S. Into Canada as you see today with the weak Canadian dollar. Also, When this stock ran from $2 to $8 in the fall of 2013, the price movement was backed not only by a run in the TSX but also a strong economy. I caution that we might be waiting awhile for this sort of movement again but I do anticipate a good leg up at some point. It might be when RASM finds a bottom, when the Canadian economy gains momentum, or both.
I enjoy listening to the naysayers when they can back up arguments with something other than today's price, or the fact that the stock has been on a 6 month downtrend. The longs can already see the price action which is why I don't get why the complainers are constantly reiterating what everyone can already see.