I am personally long, so I am based on continued oil in the 40s, capacity discipline, buybacks, and a strong upcoming quarter with record profits. However, I can also see continued market pressure, FX pressure from the strong dollar, Brazil weakness, and headline risk from DOJ/DOT investigations, and the possible other risks associated with airlines such as disruptive weather and geo-political events. I am long because I see the events as being more transitory, while the cost savings, management discipline and gradual debt payment and refinance, buybacks will tampen the cyclical of the business. More aggressive debt repayment, a better product and customer service, as well as a low oil price could really help the long term thesis. A market crash or prolonged market would bring this down, as it would most stocks.
Range bound for now, I think you can buy in the 30s and sell into the 40s for the time being. My plan is to buy around 37-39 and sell at 43 -44 before or after the ER this coming October. A break above 45 on high could see a push to 47.80 and fill the gap. I will keep a core position on to see this happen into November.
The underperformance of AAL vs DAL, UAL , JBLU and other airlines shows the bias towards the short side from short term trading perspective. These gains (and I have sold calls on occasion) and very quick and seem to show that bears are in control, but I think longs are starting to reassert themselves by pushing the range a little higher each time.
For now, trading long around core long, hedging with short calls at range tops (43-44).