Airlines Ready to Fly Again

As anyone who has flown this summer knows, flying has become a major-league hassle with overbooked flights, significant delays and expensive fares. Are you so annoyed that you feel like writing your Congressman? First, get a life. There's no entitlement to flying anywhere in the continental U.S. for $300.

Then get even. You can't change the airline system, but you can profit from it. Once again, it's time to buy some airline stocks.

Last year, I wrote about UAL(UAUA). Since then the stock has appreciated about 100%, outperforming the entire sector. I am long since gone that profitable trade, but I do have a replacement idea that has similar upside potential. I think it's time to own US Airways(LCC) in a big way.

First, the case for the airlines. All of the stocks, excluding United, are down and very cheap. Most recently, airlines dropped on recession fears. So now, they fit my buy formula. I only buy stocks that are down and cheap with solid near-term business prospects.

Despite being oversold and at low value levels, the airlines also have solid fundamentals . Strong business and leisure demand for air travel has planes full and ticket prices strong. Airlines are a major beneficiary of the declining U.S. dollar. Hordes of foreign tourists are flying to USAMart to take advantage of cheap American consumer goods. And, courtesy of the weak dollar, many a U.S. businessman is jetting off all around the globe to open new accounts, especially in Europe.

In a natural response to supply and demand, airlines are shifting capacity to their more expensive, more profitable, foreign routes and away from their less attractive domestic ones. Every airline with a healthy international business gets a boost. But even those with all or mostly domestic exposure benefit as well.