Is U.S. Airways the Next Kmart?

Well, judging from the stock price action lately, you can see some correlation. Kmart stock began a rapid ascent after emerging from Chapter 11 bankrupcty (it has risen 700% in fact). Similarly, U.S. Airways (LCC) recently completed a merger with America West and new equity began trading in late September at around $20 per share.

Here we are only six weeks later and the stock is breaking through $30, for a move of 50 percent. Is this the start of a bigger move a la Kmart? Let’s not get ahead of ourselves. It is true that the airline’s cost structure has been greatly improved and debt has been wiped away by the courts, but we are still talking about an airline here, with oil at $60 a barrel.

With other airlines also emerging from bankruptcy court, LCC is not alone is having a new, leaner, and meaner business. However, these companies still can’t make money with energy prices this high, and the competition will hardly let up with carriers able to revamp and go at it all over again.

Monitoring future financial results out of LCC (they just reported Q3 today) may prove a valuable use investors’ time, as it’s quite possible the new U.S. Airways will turn out to be nothing like the new Kmart.