Could it be that airlines are finally going to be making money?
Ever since deregulation, airlines have only lost money. Investors keep lining up to be slaughtered in the belief that this time is different.
Is that the case now though? In trying to book fares on Virgin Atlantic and JetBlue, I noticed that they were charging more in the future for seats than the traditional full fare airlines, and sometimes by quite a lot more. I soon learned that they were anticipating that they would be flying full loads, so there was no point in pre-selling seats at low prices. If they were going to be flying full, what led them to that conclusion?
Could it be that the economic conditions have reduced demand to such a level that there are no longer enough planes, routes or gates to accommodate an increase in demand? If this is the case, how much longer would it take to catch up? Today’s announcement of a merger between AirTran and Southwest is compelling as to its timing. The market capitalization of airlines is very low. AMR is $2 billion. Delta is $9 billion and Continental is $3 billion. UAL is $4 billion, Southwest is $10 billion and JetBlue is $2 billion.
This could be a great entry opportunity for buying airlines, assuming that we don’t crash and burn again.