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Can Airlines Make a Comeback?

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Airlines -- debt-riddled and commonly rumored to be entering bankruptcy -- are frequently highlighted as terrible investments. Companies such as U.S. Airways (NYSE: LCC  ) and AMR (NYSE: AMR  ) are generally tough sells to investors. In addition, airlines have an extraordinarily high elasticity of demand. For example, for every 1% that income drops, demand for airline travel drops by nearly 6%. In recessions, this sector is hit especially hard. 

However, The Wall Street Journal recently reported that the industry may be headed for a recovery. Last month, passenger miles and unit revenue increased by as much as 12% on a year-over-year basis for Southwest Airlines (NYSE: LUV  ) . Although discount airlines like JetBlue (Nasdaq: JBLU  ) performed better, the legacy carriers have also seen an increase in traffic. According to the Journal: "After a difficult year battling the recession, the airline industry appears to be headed toward a recovery as fuller planes, fewer discounted fares, lower fuel prices and revenue from a variety of formerly free services start to pay off."

However, Delta Air Lines (NYSE: DAL  ) remains wary, noting it doesn’t expect the unit revenue comparisons to turn positive until mid-2010.

What do Fools think? Is it time to start looking at airlines again or is this industry down for the count? If you've got an opinion on any of these stocks, drop a comment in the box below, or come join us on CAPS, absolutely free, to learn more about these and countless other interesting stock ideas. 

Fool Contributor Jordan DiPietro doesn’t own any shares of the stocks mentioned above. The Fool has a disclosure policy.

Read/Post Comments (4) | Recommend This Article (6)

Comments from our Foolish Readers

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  • Report this Comment On December 08, 2009, at 3:37 PM, waveonshore wrote:

    I am a firm believer that airline stocks are poised to rebound in a very big manner. The more leveraged the bigger the percentage move in stock values. I see U.S. Airways, United, American and Continental making the biggest moves... an those moves will double today's price by the end of February!

  • Report this Comment On December 08, 2009, at 8:07 PM, rajreddy999 wrote:

    I strongly feel that this insdustry including the mainline carriers like AMR, DAL will rise to profits in mid 2010 all the way upto 2014. To lot of people's surprise AMR will rise very fast as they are moving their focus towards operation more small planes, point to point service with more trips to destinations. This was evident in this months(Dec 2009) traffic report. This report states that its american eagle division traffic rose way high than bigger planes. It is cheaper to operate these planes (revenues vs expenses = more profit). I think this is a step in the right direction to achieve profitability in the shorter duration for AMR.

  • Report this Comment On December 09, 2009, at 12:52 AM, Averyhappyfool wrote:

    I live in Canada, and have watched our major airline "Air Canada", go from $20 down to $1.25. The Government has bailed Air Canada out before because it does not want the Biggest National air carrier to fail. Our prime Minister just made a deal with China this week that assures Chinese can come to Canada on Travel Visas. With 2010 Olympics in Vancouver, Chinese people will flock here and Air Canada with carry most of them here. I believe Air Canada is a fabulous Buy at $1.25 If anyone can give me any reason not to invest, please do.

  • Report this Comment On January 07, 2010, at 1:22 AM, Fool wrote:

    Traveling Relics That Might Make A Comeback Due To The Rising Cost of Oil.


    Melinda storer

    <a href = "" "dofollow">flights to Melbourne<a>

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