Monday, November 07, 2005


Airline Stocks: Market jitters, oil knock airline stocks - Airlines - Transportation - Markets/Exchanges - Market News

The misleading headline to the linked article was:


It is hard for the novice to do well in the market because he trusts the news. Reading this news on airline stocks, the novice might assume that oil stocks were up and that airline stocks took a drubbing.

The reality is that airlines were down slightly. The index was off .65%. On the other hand, the energy sector was off 2.83%; more than 4 times as much!

Small caps were off 2.28% and broader indices such as the NASD and the S&P were off 1.63 and 1.05% respectively.

CNBC made a big deal over the fact that one airplane is now flying business class seats to an airpoint on the outer edge of London. The reporter implied that AMR and CAL will have to offer fewer seats at lower prices on international flights.

The implication is true in a round about way. Business executive are not willing to fly in small seats all the way to London just to save a few hundred bucks. They demand better accomodations and they expect their companies to pay for them.

Small seats are being replaced with large seats because during the economic expansion that is under way, business executives will be flying more and more. Planes will have fewer seats but the charge per seat will be more than double the price consumers pay. Consumers who fly a few times a year make their plans based on price. Businesses cannot affort to have employees sitting around in airports all day. Businesses want employees to fly hub and spoke routes to cut the total flight time. The business and the employee typically want the trip to be as quick and pleasant as possible.

The news media is all over the story of the bankrupt and nearly bankrupted airlines without seeing the major turn underway. CAL, AMR and LCC are my favorites. My family owns them and we expect to buy more. One plane flying to an airport 45 minutes away from London is not a big deal. Major carriers flying at nearly full capacity on long-haul profitable flights thousands of times each day is the real story.