Investing in the Airlines: Still a "death trap for investors"?

So far I have eschewed investing in the airlines. I've followed the sage advice, since changed, of Warren Buffett who famously said (2002):

"It's been a death trap for investors ... If a capitalist had been present at Kitty Hawk back in the early 1900s, he should have shot Orville Wright. He would have saved his progeny money. But seriously, the airline business has been extraordinary. It has eaten up capital over the past century like almost no other business because people seem to keep coming back to it and putting fresh money in. You've got huge fixed costs, you've got strong labor unions and you've got commodity pricing. That is not a great recipe for success. I have an 800 (free call) number now that I call if I get the urge to buy an airline stock. I call at two in the morning and I say: 'My name is Warren and I'm an aeroholic.' And then they talk me down.”

He since has changed his mind ... at least a bit (2017):

These aren't last century's airline companies, and that's why legendary investor Warren Buffett is spending money on them. "It's true that the airlines had a bad 20th century. They're like the Chicago Cubs. And they got that bad century out of the way, I hope," Buffett said Monday on CNBC's "Squawk Box." "The hope is they will keep orders in reasonable relationship to potential demand." Buffett's Berkshire Hathaway revealed late last year in an SEC filing it had taken a stake in American Airlines, United Continental Holdings and Delta Air Lines. CNBC also reported that Berkshire had taken another stake in Southwest Airlines. Ironically, Buffett implied he had not taken a commercial flight in several years. "We'll save that (conversation) for after the show," he said. The Oracle of Omaha also revealed why his holding firm previously hesitated to take significant positions in the industry. "I think there have been almost 100 airline bankruptcies. I mean, that is a lot," he said. "It's been a disaster for capital."

So I am thinking of dipping my toe into the airlines ... just 10 shares of each. Thoughts? Advice?

Top image: Biplane crash, East Boston Airport, 1928-05-31


Updated: Passengers may hate airlines, but investors love them (even United)

Flying: "it's just a ... bus with wings"

Ryanair CEO: 'Seat belts don't matter'

 Excerpts:

Seat belts don't matter,” Michael O’Leary told The Telegraph. “If there ever was a crash on an aircraft, God forbid, a seat belt won’t save you.”

O’Leary is reportedly on a quest to take out the back ten rows of seats on planes so that Ryanair could offer tickets for one pound (about $1.60) to budget travelers willing to spend a flight on their feet in a “standing cabin.”

The Irish airline is already known for its rock-bottom fares and extensive menu of fees for everything from early boarding to excess baggage. What about the safety of passengers not buckled in? O’Leary told the paper they could just “hang on to the handle” when necessary and would be “fine,” adding that there’s little turbulence in Europe to worry about.

People traveling by subway or train don’t wear seat belts, he pointed out. "The problem with aviation is that for 50 years it's been populated by people who think it's this wondrous sexual experience; that it's like James Bond and wonderful and we'll all be flying first class when really it's just a ... bus with wings,” O’Leary told The Telegraph. "If you say to passengers it's £25 for the seat and £1 for the standing cabin, I guarantee we will sell the standing cabin first.”

Comment: Image:: BOAC De Havilland Comet 1 First Class early 1950s

Improving Airplane Boarding Time

The Cattle Call at Gate 15 Is Taking Longer and Longer

Excerpt:

So it should be no surprise that boarding has become one more frustrating step in airline travel. Or, as Mark DuPont, the vice president for airport planning at American Airlines, put it: “Boarding can be like driving behind a slow-moving truck that you can’t overtake.”

Boarding time has doubled over the last decades, according to research by Boeing. It now takes 30 to 40 minutes to board about 140 passengers on a domestic flight, up from around 15 minutes in the 1970s.

Comment: Some pretty cool interactive features associated with the article.

• Comparing Airplane Boarding Methods
  
• A New Variation in Boarding an Airplane
  

A minor example of Federal Government largesse (waste)

Three outstate airports to lose Delta service

Excerpt:

For the cities losing Delta service, there's a small chance they could lose all commercial air service, Hedrick said, if no one bids on them and U.S. legislators cut subsidies that help airlines serve less viable markets.

On Friday, House Transportation Chairman John Mica, R-Fla., added a provision to a must-pass bill to keep the Federal Aviation Administration in business that includes eliminating subsidized air service to 13 small cities and caps subsidies at $1,000 per passenger.

...

Thief River Falls isn't so lucky. The northwestern airport about five hours north of the Twin Cities has planes departing on average with only 12 percent of seats filled. Last year the airport served about 2,500 people,

Comment: Note the phrase .... a proposal to "cap[] subsidies at $1,000 per passengers". That means the current subsidy is North of that! Let them take buses! Image above


Meanwhile another view of the debt crisis with the view of turning it into a de facto Balanced Budget Amendment.

Instant Balanced Budget Amendment: Maintain the Present Borrowing Limit

Excerpt:

There is a very simple way to balance the budget without passing a Balanced Budget Amendment: refuse to raise the federal borrowing limit. Treasury would be forced to do what any business or family would do: live within its means and stop mortgaging the American dream to the Chinese. Instant Balanced Budget Amendment.

Comment: About the above. Not sure if it would work but indeed that is what everyday Americans do ... prioritize spending. And cutting the subsidy for small airports is a good way to start!

Plane Stupid ad

http://www.planestupid.com/


Comment: Provocative, graphic, stupid! See comments here

The Fonz is Vindicated

Yet another airline passenger nightmare scenario

47 trapped on 'nightmare' flight to the Twin Cities

Excerpt:

When Link Christin boarded a Continental Airlines flight from Houston to the Twin Cities on Friday night, he expected to be on the ground in about three hours and ready for a comfy bed.

Instead, he was among 47 passengers who spent the night trapped inside a small airplane, parked at the Rochester airport, complete with crying babies and the aroma of over-used toilets.

The ExpressJet Airlines that operated the plane says the flight was diverted to Rochester because of Twin Cities thunderstorms, and that airline regulations prevented passengers from getting off the plane.

Christin is incredulous that the airline couldn't figure out an option besides trapping passengers on the plane for nine hours.

"It's not like you're on a [Boeing] 747 and you can walk around,'' said Christin, a professor at William Mitchell College of Law. "This was a sardine can, with a single row of seats on one side of the plane and two rows of seats on the other. And they've got about 50 people inside, including babies, for the whole night. It was a nightmare.''

Continental Airlines, which issued the tickets for Flight 2816, referred inquiries to ExpressJet Airlines. ExpressJet spokesperson Kristy Nicholas said the flight ran into several problems.

The airline crew on the plane reached their maximum work hours in the air, so another crew had to be flown in. The alternative of chartering a bus didn't work out. And letting the passengers into the Rochester airport was not possible because they would have to go through security screening again, and the screeners had gone home for the day.

What about just letting the passengers sleep in the airport terminal? "That was not provided as an option by ground services personnel at the airport,'' said Nicholas

Comment: Why people hate flying!

United broke his guitar

Singer's airline tune YouTube hit

Excerpt:

A strung-out musician who blames United Airlines for breaking his prize guitar has taken revenge by writing a song that has become a YouTube hit.

Dave Carroll composed "United Breaks Guitars" after his Taylor acoustic was damaged at Chicago's O'Hare airport.

The fretting Canadian said he wrote the tune after months of trying to get the carrier to pay compensation.

United Airlines said the 41-year-old musician's song would be used for internal customer service training.

Mr Carroll says his instrument was wrecked by clumsy ground staff as he switched planes last year in Chicago, en route between Halifax and Nebraska.

Comment: My favorite Sis works for American

A Titantic moment (airline style)

Comment: From an airline executive to me: "an airline joke, but pretty true to fact"

The Delta - Northwest merger ... what it means

Where Airline Mergers Would Hurt Travelers Most

Intro (view chart for details):

If several of the nation's big airlines merge, as industry executives have been advocating for months, airfares would probably rise, some cities might get a bit of additional service, and other cities would see flights scaled back significantly. With help from the trade publication Airline Weekly, we've examined the top 50 airports to determine the likely effects of two possible megamergers: a Delta-Northwest alliance and a United-Continental hookup. Here are the cities that would be most deeply affected:


Comment: You basically have 2 failed airlines that will become one failed airline. Flying will be less fun (is that even possible?) and more costly.

Close call on landing

Comment: CNN reports

Delta / NWA merger?

Airport seen as a prized piece in any NWA merger

Excerpt:

A merger between Delta Air Lines and Northwest Airlines could begin a dramatic reshaping of the aviation industry but lead to only small changes in the importance of Minneapolis-St. Paul International Airport to the combined carrier.

Comment: A possible Delta - Northwest merger has been long rumored. Delta possibly will choose United as its partner. This could be good for fliers out of MSP! More from MPR below:

If NWA merges, what can travellers expect?

Excerpt:

When Northwest emerged from bankruptcy last May, airline CEO Doug Steenland affirmed the carrier's commitment to keep its corporate headquarters -- and a major hub -- in the Twin Cities.

"We're committed. We sort of re-said our vows at the time of the renegotiation of the Minneapolis lease," said Steenland.

That lease and other agreements with the Metropolitan Airports Commission require Northwest to keep its headquarters and a hub in the Twin Cities. Airport commission spokesman Patrick Hogan says nothing is guaranteed. But he's confident a Northwest merger won't mean service cuts for Twin Cities travelers.

"The airline has stated and restated its commitment to its hub and headquarters here in Minnesota. Obviously, whenever you have mergers or acquisitions, there are so many different variables, it certainly is enough to make anybody nervous. But we do think we are in pretty good shape in terms of having some leverage to encourage them to keep that hub and headquarters here."

That leverage includes Northwest's obligation to lease about 100 airport gates through 2020. The airport commission says Northwest can't avoid paying for those gates. And then there's $260 million Northwest owes the commission. If Northwest tries to wiggle out of its commitments, the commission could seek immediate repayment of the loan. Minneapolis-based travel expert Terry Trippler says it's possible a merger could lead to fewer international flights out of the Twin Cites. But Trippler doesn't see Northwest and a merger partner cutting domestic flights, given the location and profitability of the Twin Cities airport.

"I can't see the domestic routes being reduced. If you reduce the Minneapolis-St. Paul hub, who is going to fly from Pierre to Chicago? Or Watertown to Chicago? Or Rapid City to Chicago, for that matter. This hub has to remain here. And this has consistently been Northwest's most profitable hub," says Trippler.

Paganism intersects technology

Airline sacrifices goats to appease sky god

Excerpt:

KATHMANDU (Reuters) - Officials at Nepal's state-run airline have sacrificed two goats to appease Akash Bhairab, the Hindu sky god, following technical problems with one of its Boeing 757 aircraft, the carrier said Tuesday.

Nepal Airlines, which has two Boeing aircraft, has had to suspend some services in recent weeks due the problem.

The goats were sacrificed in front of the troublesome aircraft Sunday at Nepal's only international airport in Kathmandu in accordance with Hindu traditions, an official said.

"The snag in the plane has now been fixed and the aircraft has resumed its flights," said Raju K.C., a senior airline official, without explaining what the problem had been.