Some Airlines Are Losing It

The U.S. airline industry just can't catch a break. Not that it's helping itself much. Witness Monday's report from industry consultant SITA, which concluded that world airlines mishandled or lost 30 million bags last year. Ouch.

The study follows a February report from the U.S. Department of Transportation that says domestic carriers lost roughly 10,000 bags per day during 2005. That marks the worst one-year performance since 1990, according to the DOT.

The worst offenders, in order, were the pre-merger US Airways (NYSE: LCC), Delta, and AMR's (NYSE: AMR) American Airlines.

The three best, also in order, were Continental Airlines (NYSE: CAL), Southwest Airlines (NYSE: LUV), and UAL's (Nasdaq: UAUA) United Airlines.

Here's why this matters to the Foolish investor: Airlines have had a difficult time booking earnings lately. That makes measuring performance, and scouting for potential investments, exceedingly difficult. The easy answer in such situations is to avoid the industry altogether. Certainly, that's been sage advice in recent years.

Yet the days of ignoring U.S. carriers may be coming to an end. Load factors are high. Notable legacy airlines, including US Airways and United, have finished restructuring. And new aircraft from the likes of Motley Fool Stock Advisor pick Embraer (NYSE: ERJ) are creating opportunities to deliver interesting and profitable services.

Which legacy carrier survives to become a wonderful investment? It's anyone's guess at this point. In lieu of profits, service metrics can provide clues. Few service metrics matter more than baggage handling. That's why, today at least, Continental, Southwest, and United are looking very interesting to me.

Please replace your tray tables and move your seat backs to an upright, locked position. We're taxiing to related Foolishness:

• I wasn't buying United in February, and I'm still not. Still, the stock is more appealing today than it was at IPO.
• When will Southwest finally land?
• Northwest narrowly escaped disaster earlier this month.

Embraer is a Motley Fool Stock Advisor pick. Take the newsletter dedicated to the best of David and Tom Gardner's picks for a30-day free spin.

Fool contributor Tim Beyers thinks it's hardly surprising that the overhead bins are filled to the brim for every flight he's on. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what's in his portfolio by checking Tim's Fool profile . The Motley Fool has an ironclad disclosure policy .