Continental Could Bounce

A look at recent performance in the airline sector offers a starting point for finding potential winners -- and losers -- in the industry. We're talking short-term buying here. No long-term discussions are allowed -- not even medium-term. Let's just focus on quick get-'em-and-hit-'em stocks.

In the following chart, the first column shows how the stock fared for the third quarter before Sept. 11. The second column indicates its performance for the balance of the quarter after Sept. 11, and the third shows what the stock has done for the past seven trading days.

Eyeing the Skies Here are percentage changes for selected airlines before and after the attack
Company	June 29 - Sept. 10	Sept. 10 - Sept. 28	Sept. 21 - Oct. 2
Air Canada (ACNAF:Nasdaq)	-31%	-50%	-23%
Atlantic Coast (ACAI:Nasdaq)	-12	-50	39
America West (AWA:NYSE)	-14	-78	-14
Amtran (AMTR:Nasdaq)	3	-62	2
Continental (CAL:NYSE)	-20	-62	19
Mesa Air (MESA:Nasdaq)	21	-78	2
Mesaba (MAIR:Nasdaq)	-2	-35	10
Midwest Express (MEH:NYSE)	-9	-33	23
Northwest (NWAC:Nasdaq)	-22	-42	25
Ryanair (RYAAY:Nasdaq)	-10	-12	19
SkyWest (SKYW:Nasdaq)	13	-47	65
Southwest (LUV:NYSE)	-7	-13	13
US Airways (U:NYSE)	-52	-60	13
WestJet (WJA:Toronto)	-28	-5	16
Source: PlaneBusiness.com

On the Radar

Right now I like Continental (CAL Quote), only because it has the most bounce potential. Its stock dropped more than any other major airline after the hijacking tragedies. However, it has rebounded only 19% in the past seven days. The airline said Tuesday that it has about $1.2 billion in cash, so I don't think bankruptcy is on the immediate horizon.

US Airways (U Quote) is another good one. It dropped 60% immediately after Sept. 11, but bounced up only 13%. A good portion of that bounce came Tuesday, after the feds announced the reopening of Reagan National Airport near Washington, D.C. However, US Airways is a potential bankruptcy candidate, so be wary.

Caution Ahead

Atlantic Coast (ACAI Quote) may have done most of its bouncing already. It jumped 39% over the past seven days because United Airlines, its code-share partner, is giving Atlantic Coast additional routes to fly -- most of which used to be mainline United routes.

Caution is also needed with Mesa (MESA Quote), which counts both America West (AWA Quote) and US Airways as partners. To put it bluntly, I don't know how America West will avoid bankruptcy, and US Airways has its own problems, too. Because of these issues, Mesa's stock took a huge hit when trading resumed Sept. 17. For the period after Sept. 11, the stock was down 78%.

However, the stock surged 35% Tuesday on news that it would start flying some former mainline routes for America West. But even with this sizable leap, the stock is up only 2% over the past seven days. That's very volatile property, and it could give you a big hit up or down.

Just like Atlantic Coast, SkyWest (SKYW Quote) has bounced very hard in the past seven trading days. How much more is left in the shorter term?

WestJet (WJA:Toronto) and Ryanair (RYAAY Quote), both clones of Southwest Airlines (LUV Quote), have held up extremely well. I love them for the long term, but other stocks may see a better bounce in the short term. The same goes for Southwest.

Stocks to Avoid

Air Canada (ACNAF Quote) and America West are both bankruptcy candidates.

Amtran's (AMTR Quote) attempt to go private is now dead, as financing was pulled. I wouldn't play with this one, and the float is too small.

I've got some cash questions about Northwest Airlines (NWAC Quote). I'll be interested in the traffic numbers it reports for September.

Mesaba (MAIR Quote)? It's just a no-growth airline.

Mystery Stock

For an airline that wasn't doing well financially before Sept. 11, Midwest Express (MEH Quote) has seen an explosive increase in volume over the past few days. Its stock is up 23% over the past seven days and was still moving Wednesday. Something's going on here.

Outside the Immediate Sector

I've also noted recent performance of some airline-related stocks, such as online travel services and aircraft manufacturers.

Behind the Scenes Here are percentage changes for selected airline-related stocks before and after the attack
Company	June 29 - Sept. 10	Sept. 10 - Sept. 28	Sept. 21 - Oct. 2
Boeing (BA:NYSE)	-22%	-23%	14%
Bombardier (BBD.B:Toronto)	-12	-42	-4
Expedia (EXPE:Nasdaq)	-22	-33	25
priceline (PLCN:Nasdaq)	-45	-24	59
Travelocity (TVLY:Nasdaq)	-28	-40	6
Source: PlaneBusiness.com

Look how well the travel-related stocks have done. priceline (PCLN Quote) has done very well, as a matter of fact. Is there more bounce left? Could be. Remember that priceline tends to be a volatile property in the best of times.

Aircraft manufacturers? I'd forget them. Nobody is looking to buy new planes anytime soon.