Can This Airline Survive on Its Own?

Recently released September airline traffic data shows that AMR, parent company of American Airlines, continues to struggle. American had a terrible month, experiencing problems with seats coming loose on some flights, and experiencing more delayed and canceled flights with more pilots calling in sick. Not surprisingly, AMR's total traffic dropped 2.8% in September, with domestic traffic falling 7.1%. One bright spot for the struggling airline was a 4% uptick in passenger revenue per available seat mile, which rose due to more effective international joint ventures.

Still, this has been a terrible month or so for AMR, which is trying to exit bankruptcy as an independent airline. One of its biggest obstacles to doing that, the reluctance of its pilots' union to agree to a deal, is showing no signs of changing despite the fact that the two sides have resumed talks. In the video below, analyst Brendan Byrnes explains why he believes that the most likely outcome is AMR merging with US Airways, and why most long-term investors should stay away from legacy airline stocks. 

The unpredictable and rising price of jet fuel is one reason to avoid airlines -- it can account for over 30% of operating expenses -- but there are companies that are poised to take advantage of the move away from petroleum and towards cheaper forms of energy like natural gas. We've picked one incredible natural gas company that presents a rare "double-play" investment opportunity today. We're calling it "The One Energy Stock You Must Own Before 2014," and you can uncover it today, totally free, in our premium research report. Click here to read more.

Brendan Byrnes has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Southwest Airlines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (1) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 10, 2012, at 8:47 PM, neamakri wrote:

    First I think AMR has all the resources it needs to become a good profitable airline. Second they need to completely revamp their business model; predatory money-losing practices.

    Here's what I mean. Suppose Southwest Airline decides to run a new route to Enid Oklahoma. They figure to carry a hundred passengers daily and make a profit. They schedule planes leaving at 8:00am. So, AMR scedules two predatory routes leaving at 7:50am and 8:10am. Now all three flights lose money; AMR more than Southwest. This story is fictional but mirrors what AMR does in reality.

    So the solution is simple. Just do what makes good profitable business sense.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2051461, ~/Articles/ArticleHandler.aspx, 10/23/2016 4:36:17 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/31/1969 7:00 PM
AAMRQ.DL $0.00 Down +0.00 +0.00%
BA $135.63 Down -0.21 -0.15%
Boeing CAPS Rating: ****
LCC.DL $0.00 Down +0.00 +0.00%
US Airways Group CAPS Rating: *
LUV $42.43 Up +0.14 +0.33%
Southwest Airlines CAPS Rating: ****
UAL $55.60 Down -0.97 -1.71%
United Continental… CAPS Rating: **