Jim Cramer, who said he hasn't recommended buying an airline stock in years, is bullish on US Airways stock.
In fact, he's bullish on the entire airline sector because consolidation in the industry has made it possible for airlines to make a profit. He spent eight minutes on his Mad Money show Tuesday night extolling the virtues of owning an airline stock.
"Why am I so confident that this situation is going to play out like this? Even when I hated the industry before but look the last airline mergers, I mean wow, we have even seen it before with US Airways, as Deutsche Bank points out in a terrific piece of research. Back in 2005, US Airways merged with America West and the deal was very similar to the current AMR transaction. You had a small airline, America West, pursuing a larger airline, US Airways, that was operating under Chapter 11 bankruptcy protection, just like AMR is right now. When the deal was formally announced, America West popped 7 percent. But for the next month during the Justice Department 30 day waiting period, the stock did nothing. Hey, sound familiar? They waited to find out if the DOJ had any issues with the deal. That's where we are right now with the US Airways-AMR merger. Now once the waiting period ended and it turned out that the Justice Department was fine with that transaction in late June of that year, America West surged an astounding 54 percent over the following three months. I want you in something like that. Until the transaction closed on Sept. 26, 2005. The next day US Airways came out of bankruptcy and merged with America West and from then on it was off to the races still as the stock of the combined company soared more than 200 percent over the next year. This time around I think US Airways could perform just like America West did back in 2005. And once the AMR deal closes, hey, I think the sky is the limit," Cramer said.
Here is the link to the full video.