Investing in Cebu Pacific's Dancing Flight Attendants

"These days no one can make money on the goddamn airline business. The economics represent sheer hell."

— C. R. Smith, President of American Airlines from 1934 to 1968 and from 1973 to 1974

After 37 years from leaving American Airlines (AA), C. R. Smith's point was clearly made when news of what was once the largest U.S. airline carrier, is now filing for bankruptcy protection. Since learning of AA's demise, questions like, how the hell are companies in this industry going to make money and remain competitive with rising fuel costs and a declining economy, have been popping through my mind while I surf for cheap airline seats online. To make it more geographically relevant, how are private Philippine airline carriers, like Cebu Pacific (CEB), able to maintain a healthy profit margin while pegging itself as the country’s largest budget carrier?

With today being Bonifacio Day and I have no Bonifacio party to attend to, I decided to do something productive and research on whether or not I should put my money in the company now that it’s relatively (will get into that later) cheap. 

To start off, I motivated myself by watching a YouTube clip of their dancing flight attendants. 

Enticing but not compelling, enough. Hence, I had to watch some more. 

Agreement entered into by AAI stockholders re: sale of AAI shares to Prime Metroline Transit Corporation 23-Nov-2011 Disclosure No:8183-2011

A day after Active Alliance, Inc. (AAI) voluntarily suspended the trading of their shares on Nov. 22, five of AAI's major shareholders agreed to sell 60,000,000 shares (75% of AAI's outstanding shares) to Prime Metroline Transit Corporation for Php 200,000,000 (roughly Php 3.33 a share).

Much to my surprise, well not really, Prime Metroline Transit Corporation happens to be owned and controlled by Enrique K. Razon, Jr. (also the owner of Bloomsbury Investment). In light of this, we can safely draw an end to the week long speculation that Razon's new company Bloomsbury Investments, which is constructing a $1 billion integrated casino resort complex, will most likely use AAI as a vehicle to go public.

The question now is, will the Exchange or the SEC accuse and charge anyone for insider trading? Just to make sure we understand what insider trading is, Investopedia.com defines it as "the buying or selling of a security by someone who has access to material, nonpublic information about the security".

Active Alliance, Incorporated (AAI): Reply to unusual price movement (PART TWO)

Six trading days, five immaterial corporate disclosures, and one unconfirmed rumor later, AAI’s share prices rallied to an all time high of Php 102.80 before closing at Php 76.00 today. That’s a mind-boggling, astounding, shocking (and I shall further add, envious) 730% increase from Php 9.15/share!

To illustrate this non-sense, I’ve included a chart of AAI’s closing prices below to visually demonstrate how steep a line could go up in one week.

 

Since I last wrote on AAI’s unusual price movement, news - or as to properly re-classify - rumors have emerged indicating that there is a possible backdoor listing play on AAI’s somewhat dormant stock.

Active Alliance, Incorporated (AAI): Reply to unusual price movement 11-Nov-2011 Disclosure No:7966-2011

One of the things I love about the Online Philippine Stock Exchange (PSE) Disclosure System is how listed corporations are compelled to give an explanation to why their stock prices are doing so well (or not so well) during a short period of trading days.

In as much as we want to find answers to these "unusual price movements", the corporation themselves, like you and I and perhaps 98% of the investing public (with the other 2% as the market manipulators), almost always have no clue either. If ever their is anything that they might know of, they probably wont disclose anything to discourage speculation.

Therefore, my job here is to post all the "reply to unusual price movement" by the corporations, their responses, and a follow up post to confirm and validate if the movement was indeed, just unusual, or whether or not there was something else to it.