5 Airline Stocks to Sell to Now

How to Protect Your Portfolio During a Pandemic

The single biggest risk facing your portfolio has nothing to do with the economy, financial credit crisis, global recession, massive unemployment,
easy monetary policy, green shoots or corporate earnings.

The single biggest risk facing your portfolio is the swine flu. Don’t let the summer season in the Northern Hemisphere fool you — swine flu
is alive and well; you need to be prepared now to protect yourself from what could be a bigger issue for the market than many currently expect.

InvestorPlace has the vaccine for your portfolio. Over the coming weeks, we will provide you a snapshot of industries likely to be negatively impacted
by the swine flu, which is estimated to impact 40% of the
population. We’ll also have some suggestions for where to put your money if this virus spreads like wildfire.

One way or another, the information provided will help you navigate one of the biggest uncertainties now facing the market.

Are you prepared?

NEXT: 5 Airline Stocks to Sell Now

5 Airline Stocks to Sell Now

The perpetual bust cycle of the airline industry is likely to strike again as the flu season begins this fall. Given the spread of the virus through
human contact, load factors will surely fall as individuals seek to defend themselves from contracting the flu.

We already saw this happen when swine flu first appeared at the end of the last flu season. Air travel, especially to Mexico, dropped but that fall
would have been much worse had the outbreak happened at the start of the season instead of the end.

Airline stocks have been big losers so far in 2009, but green shoots are appearing in the form of firmer load factors and price increases that are
sticking. But don’t be fooled.

Just like any other time when airlines thought they were primed to do well, this too shall end badly. Swine flu may be off the radar this summer,
but it will return to top of mind very soon.

Here are five airline stocks to avoid now…

NEXT: Airline Stock #1

Airline Stock #1 – United Airlines (UAUA[1])

Does United Airlines (UAUA[1]) really break guitars[2]?
All kidding aside, United with its central location and old line hub and spoke system will be greatly impacted by a reduction in air travel during
a flu pandemic.

With a large international and domestic route structure, United is vulnerable to flyers across the globe traveling less in hopes of avoiding the
virus. And the timing could not be worse.

Last week United posted a $28 million second-quarter profit due to reduced costs and falling fuel prices. One could argue that a profit is a profit,
but the good news may just be a mirage as United still expects to lose $7.40 to $7.50 per share this year and $2 in 2010. And there is no mention
of a swine flu risk or inclusion of such risk in the guidance.

A nightmare stoppage of travel could sink UAUA. Owning the stock at these low prices does not compensate for the risk.

NEXT: Airline Stock #2

Airline Stock #2 – US Airways (LCC[3])

US Airways (LCC[3]) has always been a bit of a dog with fleas. The company has had numerous brushes
with bankruptcy, and the current crisis has pushed the air carrier to the brink once again.

Shares of LCC dropped below $2 per share this year on fears that it would not be able to withstand a long recession. Those fears were calmed a bit
last week as the company posted a profit of $58 million or 42 cents per share. Those gains were illusory as they included one-time gains from settled
jet fuel contracts. Without those gains, the airline lost $95 million.

Shares of LCC rallied on the news as investors covered short contracts or were speculating that the worst may be behind the company. Like many companies
during the recession, the “it’s not as bad as it could be” angle seems to be buoying shares.

But what happens if swine flu explodes? As far as I know, there is no market taking swine flu contracts to hedge against the pandemic.

Use the gains as a chance to exit a position before things get too crazy this fall.

NEXT: Airline Stock #3

Airline Stock #3 – Delta Air Lines (DAL[4])

On the surface, the acquisition of Northwest Airlines was strategically wise. The deal eliminated another large competitor and provided Delta (DAL[4])
with more leverage in negotiations with unions.

Indeed, DAL has been one of the best performers this year with a loss of only 50% as compared with much larger losses across the airline industry.
But factor in the threat of the swine flu, and the deal may not look so good and shares may be vulnerable. Northwest’s global routes would suffer
tremendously if an outbreak were to occur.

Irrespective of swine flu, Delta is feeling some pain. In the current quarter, Delta lost $257 million and withdrew its forecast of a profit for
the year. Management stated that it did not expect a material recovery anytime soon. Now, add swine flu to the mix, and you have a very significant
problem.

I would sell Delta now taking advantage of relative strength as compared to its rivals.

NEXT: Airline Stock #4

Airline Stock #4 – JetBlue Airways (JBLU[5])

Discount airlines will be particularly vulnerable by a protracted pandemic that keeps consumers from flying commercially. Low ticket prices require
higher volumes of traffic to support the business. Take away that volume, and the business suffers.

With a low-price strategy and point-to-point flight model, JetBlue (JBLU[5]) made a big splash in the
industry by providing flyers with cheap, high-quality travel options. But a blip in customer service and overly aggressive expansion hurt the airline
in its push to rival fellow discounter Southwest (LUV[6]).

The stock has been trading aggressively lower since peaking in early 2007. In the second quarter, JBLU made a profit of $20 million or seven cents
per share. More importantly, in stark contrast to the rest of the industry, the company expects to post a profit in the last half of the year based
on fare hikes and a stronger economy.

In my opinion, that seems to be a bit aggressive and does nothing to warn investors of what would transpire should the swine flu drastically cut
passenger loads. In the short term, that aggressiveness is supported by current share price. But all bets are off if a pandemic hits.

NEXT: Airline Stock #5

Airline Stock #5 – Southwest Airlines (LUV[6])

It’s really hard to put fun-loving Southwest Airlines (LUV[6]) on this list, but doing so is a must
if investors are to protect their portfolios. LUV is the clear leader in the discount space, and the one carrier that has been able to consistently deliver
profits. But now chinks in the armor are appearing on the heels of a deep recession that is reducing demand in key markets.

Not even Southwest is immune to economic weakness, nor are they immune to the impact of a flu pandemic that will essentially ground planes for days
or weeks should the swine flu truly reach 40% of the population.

The company posted a profit of $58 million in the second quarter but said that it could not guarantee a profit for the third quarter. The rating
agencies immediately downgraded Southwest debt as a result. It should be noted that rival JetBlue (JBLU[5])
had no problem with guiding towards a profit for the second half of the year. Swine flu could not be coming at a worse time for airlines already weak from
a long recession.

There is still love for LUV. Use that affinity as an exit opportunity.

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