View Full Version : BA - Time to Buy?

21st Sep 2001, 12:10
BA has dropped dramatically of late down to 107.5p. Lehman's are targetting 80p. On that basis, not a good buy. But in May 1977 BA was trading at 760p.

It's now capitalised lower than Ryan. Well remember when Lastminute.com was worth nearly as much as Thomson's?

That was nonsense and this is nonsense.

Isn't it time to buy? :p

21st Sep 2001, 12:15
Time to buy? Not if it goes bust!

21st Sep 2001, 12:16
If I had money that I could tie up for a few years I'd be very tempted. It's not going to make anyone a quick buck, but it seems inconceivable that things wont pick up for BA in the future.

Final 3 Greens
21st Sep 2001, 12:18
Unless we believe that the world as we know it will no longer exist, then BA at this price is a good bet for the longer term.

I am just about to buy some shares, since I have spent the last few months working as a consultant for the company and believe that it will get through the short term difficulties and succeed in the longer term.

Having worked with BA people they are mainly a good bunch who will do their best for the airline. The next year or two are going to be very hard, but they have a strong leader, a well defined strategy and a good reputation around the world.

To answer your question - yes!

21st Sep 2001, 12:27
...BA and Marconi at 24p http://www.stopstart.btinternet.co.uk/sm/mcqueen.gif

21st Sep 2001, 12:43
I was under the impression that Marconi had debts that were greater than the value of the company. Not such a good buy, even at 24p.

I may be wrong, though. I frequently am :)

The Guvnor
21st Sep 2001, 12:56
I firmly believe that BA remains an excellent investment. It has a core of excellent managers and generally top-flight line personnel. Would I buy now? No. The current insurance problems are going to continue to batter the price and so will the effect of the loss of transatlantic and business traffic. And, of course, if the Yanks go overboard on their response you can expect every share on the board to nosedive.

I see the potential for their shares to drop as low as 50-75p within the next couple of months; after which we should be past the worst.

Anyone who holds BA shares at the moment that they bought at a price of up to 2 would be advised to sell; anything over that they might as well hang onto as their losses would outweigh any gains.

Remember that they key to the value of any business is twofold: (1) the nett asset value and (2) the Price:Earnings ratio (P/E Ratio).

The moment that the market value of a company dips below its nett asset value, you're making cash as the break-up value is greater than the price you've paid (kind of like parting out aircraft!) and a P/E of under 10 is seen as being good, as well.

BA is, however, one of the highest geared airlines in Europe (which means that its ratio of debt to assets is higher than the ideal 2:1 or 3:1) which presents a risk as that debt has to be serviced; and given its distressed price it could well be a takeover target in which cases prices will rise. One drawback of that is that any potential purchaser would almost certainly have to be British, as foreign ownership is limited by law to 49.9%.

21st Sep 2001, 13:14
With a question mark over insurance it is probably not the right time. I have gone for Costain instead. Market cap 30m but with 45m in the bank and it make a profit. They also do a fair bit of sky scraper building.

21st Sep 2001, 13:16
Don't agree with you Guv (not the first time you've heard that on these boards ;) ). I think they have pretty much reached the bottom. I've read a few Analyst reports over the last few days as BA's share price has headed south. Most are advising "Hold". A couple have suggested a "Buy" if you were prepared face a rocky ride. All expect BA to come out of the current problems, although there were mixed opinions how long the slump would last. In another post there are many comments about how loads do not seem to have been as badly hit as some are making out. Most of the pst are about UK domestic or UK-Europe so we don't have the full picture. Perhaps intercontinental is suffering.

I received an unexpected bonus from the tax man this week so I think I'm going make a call and put some of it in to BA shares.

Capt Byrd de Styrke
21st Sep 2001, 13:34
Remember share price is just as much affected by spin and PR in the short term than it is by pure financial performance..... I seem to remember a certain code share deal with American Airlines on the cards!!

Surely government negotiations between UK and will be accelerated to consolidate capacity in these difficult times and possibly 'save' two of the worlds largest airlines even at the expense of 1 or 2 others.. I'm buying plenty that's for sure !!

21st Sep 2001, 13:55
Carefull when you buy!
I`ve been watching BA share price over the last week (via Halifax plc on line Share Dealing), as hoping to get a good price.
Every day the price is falling and then tends to level for the day with the price going up or down by a 1p-2p.
Begining to the week they were around 160p now 119p.
EasyJet shares higher and swing between 255-302p a share, in a day.

21st Sep 2001, 14:06
What surprises me is that BA is disposing of 4 767’s along with 747’s. I can understand the logic of reducing the number of seats especially when the 747 has higher seat mile costs.
What I find strange is that to maintain or increase market share, they must maintain the number of flights that they operate. It would surely be reasonable therefore to change the fleet from 747’s to 767’s or 777’s, reduce capacity but maintain the number of flights. This of course would mean redundancies among cabin staff but maintain the number of pilot positions.

What they should be in the market for is short term leases on 762’s - they have enough 757 pilots to operate them.

21st Sep 2001, 14:33
Are those 76s going south for the winter, by any chance, equipped with a red and white colour scheme?

Desk Driver
21st Sep 2001, 14:37
I would'nt buy until after the Military action? Then you'll get an excellant price, hold on to them for a few years and watch BA emerge leaner meaner and much fitter. If all hostilitys are finished by 2002 then by 2008 the shares will be over 10....That's my prediction.......On the other hand......BA needs just like all the other airlines as much support as it can muster. So if they need to re-instate commision for angents and Fast!!

The Guvnor
21st Sep 2001, 15:57
As predicted, BA continues to fall (although it has experienced a rally recently, which could have been a dead cat bounce with arbs closing out their positions) - this trend is likely to remain for the next couple of months or until the military situation resolves itself, whichever comes first. As of lunchtime the FTSE was down over 6% to its lowest level in four years, with a total drop of some 12.7% since the 11th.


BA is currently trading at 127.25, down 15.75 on the day.

Note that these charts will be automatically updated, but with data running 15 minutes behind market.

[ 21 September 2001: Message edited by: The Guvnor ]

21st Sep 2001, 16:14
Desk Driver
Commission to Travel Agents tends not to make much differents to the Sales Consultants who sell you your airline ticket.

Having spent a year at a Thomas Cook branch as both a manager and sales consultant you may be suprised to learn that the Sales Consultant receives nil commission on flight tickets. The fare or sale of the ticket does get added to their monthly sales figure, but the direct financial benefit is ZERO!
When a customer comes into a branch the only two airlines named for flight enquires were EasyJet and Ryanair, which Thomas Cook do not deal with.
What usually happens is a customer asks for a destination and this is checked on World Span system or possible charter destination the tour op. systems.
From there on its the lowest possible fare, seat availiblity, which airport is closest to customers home, and departure time. Whether its BA, bmi, or JMC to Air 2000 is usually irreverent to the customer.
I have found that 80% of the time the big guys have been cheaper than the low costs that the customer was quoted.

21st Sep 2001, 16:46
I have seen the BA shares slide from my initial investment at 650p down to this new low today. I feel as though it would be a good time to buy. This is because the company has cash assets of 2bn (as reported in the standard yesterday) and they do have a good company outlook.
One point to bear in mind is that BA have the experience of similar situations before, unlike some of the newer smaller airlines.


21st Sep 2001, 18:01
Yes, but their debts total 6.4bn, which means that it they go under, you will get zilch. It might be rosier if there was the prospect that they could be takenover, however in the current climate few would even consider takeovers. Merger with KLM could be easy to push at the moment though!

[ 21 September 2001: Message edited by: Lucifer ]

Desk Driver
21st Sep 2001, 18:58

No it does'nt suprise me at all about high street retail getting 0% commision For the sales agent. I was'nt getting at that. What I was talking about was the commision payed to the company, which was replaced in April by flat sector fees. Most Business Houses and nearly all cosolidators are switch selling away from BA.

They need all agents onside ASAP.

Thomas Cooks German masters would prefer 7 - 9% commission of a club class fare to NYC instead of the flat 40 sector fee. Let's face it all the High street agents sell what they're told to more or less. BA are admitting they have Cashflow problems at the moment but I agree they will survive.....The sky with no Speedbird in it?
........Unthinkable. :eek:

21st Sep 2001, 20:21
Thing is Guv, a little bit of knowledge can be a dangerous thing. :D

What exactly were the arbs arbing BA stock against in order to create the dead cat bounce when closing their positions?

Seems the Guv can't confine his display of ignorance to aircraft alone :eek:

Plus ca change...

(edited for finger trouble)

[ 21 September 2001: Message edited by: ANOpax ]

The Guvnor
21st Sep 2001, 20:26
ANOPax - I hear that there's a differential on the price of ADRs vs the UK shares (why I have no idea; this is outside my area of expertise) plus also there were whispers promted by a Reuters report last Friday that BA may be in play shortly.

21st Sep 2001, 20:37

Even if arbs were active in the ADR/underlying, the whole point of abritrage is that the trade should be riskless. Therefore, the is no position to 'cover' or 'close out' - geddit. Now if speculators/hedge funds were closing out short positions in BA stock, then that could very well cause a 'covering rally'.

have a good weekend ;)