Airlines' Insiders Shedding Shares

[HenryTo]

Like I have said before, the total demise of one or two of the major legacy airlines is inevitable, especially given the current oil prices. Will be interesting to see their earnings report during the next several weeks:
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INSIDE TRACK

Airlines' Insiders Shedding Shares

By TONY COOKE
DOW JONES NEWSWIRES
July 6, 2005; Page C12

Company insiders are known for finding value among beaten-down stocks, but airline insiders are offering little evidence that their depressed industry is on the verge of a turnaround.

Whether a carrier is a higher-cost airline, such as Northwest Airlines, or a discounter such as JetBlue Airways, airline insiders have been selling millions of dollars' worth of shares, while seldom buying.

George Muzea, the president of Muzea Insider Consulting Services, counts 40 publicly traded airlines. "Of the 40 stocks, they don't have any positive insider patterns," Mr. Muzea said. "It seems like there's been very little interest in airlines for a long time."

In fact, Mr. Muzea said, the last time he was able to recommend an airline stock based on insider buying was AMR Corp. in the wake of the terrorist attacks of Sept. 11, 2001. That insider-buying pattern quickly changed, he said, and he reversed his positive recommendation in April 2002. "There's been nothing since," he said.

Northwest Airlines Corp. has experienced more insider selling than any airline in 2005, said Jaseem Hasib, a research analyst at Thomson Financial. According to Thomson's data, Northwest insiders have sold $46 million worth of company stock so far this year, compared with about $4 million throughout last year. Northwest insiders haven't reported any open-market purchases in 2005.

The biggest seller at Northwest has been Chairman Gary Wilson, who sold more than three million company shares for $18.7 million since the beginning of May, according to Thomson data.

Northwest spokesman Bill Mellon said Mr. Wilson told shareholders last week at the company's annual meeting that the sales were made to diversify his holdings. Mr. Mellon said that other insiders' stock transactions were "for personal reasons, and we're not commenting beyond that."

Northwest, like the other so-called legacy airlines that existed before deregulation, has struggled with high labor costs. Company executives have openly speculated about the possibility that the airline may file for bankruptcy, and on Friday, Northwest disclosed in a regulatory filing that its viability may depend on its success at gaining labor concessions.

Northwest shares, which ended 2004 at $10.93, fell 5.4% yesterday to $4.19. Mr. Wilson sold his shares this year for an average price of about $6 a share, according to Thomson data.

The rise of discount airlines, whose lower labor costs give them a competitive advantage, has further added to the malaise of the legacy airlines. Those discounters are viewed more favorably by analysts and investors, but they are also dealt some of the same problems as the older airlines, such as high fuel costs.

Insiders at discount airlines seem to share the wariness of their counterparts at the legacy airlines.

At JetBlue Airways Corp., for example, insiders have sold $27 million worth of stock in the past two years, said Mr. Hasib. JetBlue representatives didn't return calls seeking comment.

Write to Tony Cooke at tony.cooke@dowjones.com