Airlines?
Hey everyone,
What do you think of investing in airlines right now? Most of the American airlines have taken a huge tumbling over the past year or so.. A lot of airlines have P/E ratios of under 5. Is it the bottom? I mean people are still gonna fly no matter what right?
What are your ideas?
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Heck No!
The prices are tumbling because there is no bright future for these companies. Flights have been full for years and still no results. Why would they suddenly change, especially as they get slammed with rising fuel costs and the need to raise ticket prices (which most are doing across the board now)? Even Southwest who hedged their fuel costs very well years ago is already beginning to feel the effects. I wouldn't touch the airlines with a 10-ft pole.
Don't try to catch a falling
Don't try to catch a falling knife
Airlines are a terrible business
Airlines are consistently unprofitable and have poor returns on assets/equity. I have no idea why anybody would invest in them. There is a HBS case about the industry which details its numerous problems. Anybody that thinks the problems will be solved via mergers is kidding themselves.