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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.