Riddle me this, frequent flyer: Why would anyone invest in a legacy airline?
The industry is notoriously volatile, after all, subject to the vagaries of fuel prices as well as the pricing pressure brought to bear by such lean-and-mean low-cost carriers as Motley Fool Stock Advisor pick JetBlue
Like me, investors seem to be scratching their heads over the airline industry these days. Bankrupt flyer UAL is hovering near penny-stock status, while Northwest Airlines
Not so Delta Air Lines
That number is better than analysts had forecast, and the company did show improvement in a couple of key metrics. Operating revenues, for example, ticked up nearly 6% over the comparable 2004 figure, and revenue per passenger showed an increase as well.
Nonetheless, investors still grounded the stock, sending it to the tarmac with a 9.2% loss on the day.
It's hard to blame them: Delta's future is -- pardon the pun -- up in the air.
In addition to fuel costs -- which rose nearly 60% over the year-ago period -- and intense industry-wide competition, pension expenses are a major concern for the once high-flying airline. Indeed, one of the special items charges the firm reported was the result of a lump-sum payout of $104 million to some 350 pilots who left under the company's Pilot Plan retirement program.
In short, it looks as though Delta needs to hit a cost-control trifecta to remain viable. And with that in mind, investors considering a takeoff with the airline should probably consider an alternative flight.
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