US Air (NYSE: LCC) is the latest airline to cut people and routes. It is a wonder it took so long.
The news that another carrier was trying to save itself by chopping expenses was bad enough. Worse was news from the government that airline traffic is falling. According to the AP, "The Transportation Department's Bureau of Transportation Statistics said Thursday that U.S. airlines carried 0.4 percent fewer passengers in March, compared with the year-ago period."
The one hope that U.S. airlines have is that, as expenses rush higher due to increasing oil prices, passengers will continue to fly and pay higher fairs to boot. No such luck.
The news pushed shares in AMR (NYSE: AMR) down over 14% to $4.79. That is against a 52-week high of $29.32. AMR is considered a special risk for Chapter 11 because of the size of its debt-load.
Airlines have continued to expand capacity over the last several years as passenger demand has continued to move up. That trend looks awfully stupid now.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
6-13-2008 @ 10:02AM
Chris said...
No, it doesn't look stupid. Historically, airline passenger traffic grows in line with GDP growth. Most airlines plan to grow at at-least that rate. Any faster requires gain in market share. Any slower and you are giving up market share.
Saying airlines were stupid for growing over the past few years is like saying you are stupid for not putting a huge portion of your portfolio into Gold since it has doubled in the past 3 years.
Past decisions are only stupid if you had enough information at the time of the decision that supports its stupidity. At least, that's how I roll...
6-13-2008 @ 10:12AM
Speculator said...
Jim Rogers thinks it is time to buy Airlines now. That the bankrupties are a sign of a bottom. airlines are cutting back on capacity and are not getting caught off guard with increase fuel and airlines are fuel. It might be time to buy.
Oil has hurt a lot of Airlines. The oil market is crazy. It is line Nasdaq 1998, I will tell you why @
www.theinvestingspeculator.com