Kremin - I agree with you entirely, it's just that our outlooks are different - I am a long term investor. I woudn't seek to short-term profit from further decline in DJ's share price, rather commence a gradual buy-in with a long term outlook for a $1.60 - $2.40 selling price in the future for a 100-200% profit. Might take time, and involves some risk, but here's my risk assessment.
VB's B737s consume as much fuel as QF's B737s, and about as much fuel as Tiger and JQ's A320s.
The increasing fuel price will only have one impact - each of the above 4 carriers will have to raise their prices (by the same amount) to sustain their businesses.
This means that no carrier will sustain a market advantage over any other carrier in the Aus domestic market (due to fuel prices). The only thing that will happen is that overall price rises will eventuate and the travelling public will fly less.
However the demographic of the travelling public that will fly less will probably be the leisure sector (the main bread and butter of the LCCs).
So DJ's decision to be less of a LCC and more of a business oriented carrier will probably end up proving a good decision in the developing climate.
The other difference is that Tiger has backers that won't LET it fail, and JQ has a parent company that won't let IT fail either.
DJ is a bit alone here - no cashed up parent Company that can cross subsidise. How much or long will Toll/Tricky etc support it until it can reform itself into a good profit making entity?
Toll have a lot of money tied up here, as does Tricky... It will be interesting to see if DJ respond by reinventing themselves as a LCC, or taking on the big QF and REALLY trying to get the good high yield business. I agree, they probably need to go one way or the other, not waffle around in the middle.
For example, I have a business traveller friend who tried DJ - he booked a 6 o'clock flight with them on the phone. Turned up at 5.15pm and was told his 0600 flight had departed 12 hours ago. He tried to explain that he had booked a 6 pm flight - they said oh must have been some confusion, but bad luck, not refundable, you'll have to buy another ticket (at last minute rates: some $350). He was dumbfounded, refused on principle, marched over to the QF terminal and bought a last minute ticket for about the same price. He explained the situation he had just experienced with DJ to the ticket agent at QF and they assured him that that would not happen with QF. He will never fly DJ again. That is the sort of thing they need to fix if they want to play with the big boys.
But, I digress. I think they will fix it, and I think they'll recover, and the current share price might prove a good investment for the long term investor.
And when I refer negatively to the comment that "the market is always right", the market may think it's right on the basis of the news stories currently on the headlines, but don't invest long term on this basis. Short term traders trade on news. Long term traders pre-empt the news. You need to speculate on next year's news headlines - eg "DJ upgrades profit forecasts due increasing yield - share price soars" - it'll be too late to buy shares after you read this news story, all the guys "in the know" will have already pumped up the share price. That's when I would SELL!
