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Anyone like the airlines?


Guest kawikaho
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Guest kawikaho

Anyone looking at the airlines?  UAUA, LLC, SouthWest, etc...  man, some of their balance sheets look god awful, and nearly insolvent, but I'm hearing lots of contrarians turning positive on the sector, and the downright negative Jim Rogers likes the sector too.  I just can't see anything but a substantial technical bounce coming ahead.  Anyone have any diamonds in the rough in this industry?

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About 10 years ago I took a bit of a flyer on Air Canada.  I then spent the next 3 or 4 months trying to figure out how anyone could ever make any money in the airline industry.....  I came to the conclusion that there really was no sustained prospects for profits and I sold for a profit of perhaps $200!  A couple of years later, AC went broke, so it was a good decision to sell!

 

I have not bought an airline stock since.  IMO, they belong on the "too hard" pile or "industry too tough" pile.

 

SJ

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I think that was a good lesson to learn when you did Stubble.  There are alot of people who throw good money after bad on these types of capital-intensive businesses.  I'm sure there is money to be made in the airline industry...just ask Richard Branson...but it isn't easy. 

 

The auto industry falls into this same pile, as do many other capital-intensive businesses such as energy, construction...even to a certain degree the railroad business belonged here.  Buffett talks about a change in the economics of the railroad business due to double-stacked railcars, but that happens only once in a while.  But when you do get a clear change in the economics of an industry, it can sometimes be sustained for a while.  Or perhaps a legal precedent which allows a monopoly to form.  Yet even those aren't fail-safe.  Cheers!   

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From a quick look of the airline financial statements a while back, only Southwest and WestJet were interesting. I've read a lot about Southwest's culture, at least what was written in Fortune (maybe 10 years ago). WestJet has the commercials about their workers being owners. That's a pretty good message.

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ALGT is an interesting airline.  airlines are bad businesses because its a commodity product, there are low barriers to entry and high barriers to exit.  ALGT is intersting because they focus on small towns where they have no competition.

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From a quick look of the airline financial statements a while back, only Southwest and WestJet were interesting. I've read a lot about Southwest's culture, at least what was written in Fortune (maybe 10 years ago). WestJet has the commercials about their workers being owners. That's a pretty good message.

 

The culture matters. I have flown West Jet recently and it is now my first choice I actually would pay more (not much more) to fly them in the future if you put a gun to my head and said you have to buy an airline my first response would be pull the trigger however if you said I will shoot your dog I would probably pick West Jet thinking long term I will loose less. I actually think Aeroplan which is the affinity program spun off from Air Canada an interesting proposition I think of it in the same bucket as Warrens investment in the Savings stamps company if Air Canada remains solvent it is worth owning but I am not sure of Air Canadas solvency.

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