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Strategies & Market Trends : A.I.M Users Group Bulletin Board
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To: OldAIMGuy who wrote (6372)12/7/1998 1:09:00 AM
From: D VanSwol  Read Replies (2) of 18928
 
>>I'd love to own stock in one of the only major airline companies<<

Tom,

Be careful with the airlines. I used to be in the business as a pilot (corporate, charter & airline at various times) and the glamour and cash flow is attractive to investors and corp. raiders, but the competition is cut-throat. Very significant labor and fuel costs which can change a rosey balance sheet to dismal practically overnight. (I was at Braniff #1 in 1979).

Peter Lynch once said to own businesses you are familiar with. Well, I'm familiar with the avaition business (20 yrs) and know its a good way to lose your shirt.

That said, maybe the boom bust might be good for AIM to manage. If I were to invest in an airline, I would choose Southwest (LUV). I've talked with their pilots and they rarely get laid off. But why should you care about their jobs? The reason they rarely get laid off is Southwest is always busy in both up and down economies. When times are good, the recreational traveler travels more ( on the lowest fares of course), and when times are bad, the business traveler saves money by booking on Southwest rather than a premium airline.

A more basic financial reason to own Southwest is they have low (relatively speaking) overhead (through maximum standardization - only one type of airplane, B737) and high usage factors (20 minute turn-arounds keep airplanes in the air making money rather than sitting on the ground using up valuable gate space).

Hope this is helpful. --Dennis--
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