Remember why Buffett says you always lose money with airline stocks [hint, make money shorting them] because expert investors know airline stocks have a reputation for destroying shareholder value because of volatile fuel costs and grueling competition, so investment pros sell the sector early & often. With American Airlines (US:AAMRQ) moving closer to exiting bankruptcy with a merger with US Airways Group Inc., strong new competition is coming for RJET. The sluggish economy will no doubt weigh heavily on the near-term outlook for U.S. carriers, thus fund managers and analysts are feeling more bearish on the sector. The sector could be staging a fake turnaround similar to railroad stocks, which were shunned for decades as they worked through heavy restructuring, only to get one short-lived bounce. By betting early on the beaten-down airlines, its just a matter of time till you lose big-time when the next spike in fuel prices always comes.
Competition and rising costs will destroy airlines’ pricing power, pare back capacity and charge extra for luggage, wireless Internet and other services can lift prospects for carriers only for so long.
There’s never a real renaissance in the airline industry, only illusions of one till next starts and stops with fuel costs and the economy. But the industry as a whole is always irrational, and has always been for ~100 years. During recent days they are very over-owned and very over-loved because a new inexperienced fool is born every day, & also one to catch him.