I still believe that there's money to be had from investing in the airline industry. Just don't expect it to come from AMR's (NYSE:AMR) American Airlines.

There are several reasons why. Let's start with the obvious: American doesn't know how to consistently make money. Witness yesterday's earnings report. Even though revenue was up a very respectable 15% year over year -- driven in part by a record passenger load factor (the percentage of seats filled) of 81.2% -- losses remained. Big losses. Even after you toss out one-time items, the airline still lost $0.58 per stub, which was higher than consensus Street estimates.

Then, of course, there's service. I've heard from several sources that American's rapport with customers has declined mightily in recent years, but I chalked up the comments to a few disgruntled outsiders. Till, that is, I saw this from fellow Fool Paul Elliott. I'm not sure American is, as he says, the worst company in America -- especially when you consider the value destruction wrought by General Motors (NYSE:GM) -- but it is a bad business. A hold-your-nose-till-it-goes-away kind of business.

That's partly because of competition. American has too much of it. It isn't sufficiently well-positioned to raise prices when it needs to, like this past quarter, when fuel costs were up roughly 50% over last year. Had oil prices remained stable, or had American asked for more from passengers, it could have turned a profit. But it seems it couldn't. Well, I'd conjecture that American wouldn't be able do that and keep the same volume/percentage of seats filled -- which really says it all.

Don't just take my word for it. Check out this statement from American CEO Gerard Arpey:

"The fact that we were unable to sustain profitability despite robust customer volumes says a lot about our inability to pass on fuel-price increases to consumers."

In other words: We can profit only when times are good. Times aren't good. Sorry.

Do you really need to hear anything else?

Don't fly away yet! We've got related Foolishness for you:

  • Maybe part of the problem is that American wants its brand to be everywhere.
  • Please tell me you didn't just buy shares in Delta.
  • Yeah, I know US Airways (NYSE:LCC) is back. It's still too flighty.
  • Northwest wants to impose benefit cuts. Yeah, that'll work.

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Fool contributor Tim Beyers didn't own shares in any of the companies mentioned in this story at the time of publication, but he has relatives who are retired from United Airlines. You can find out what's in his portfolio by checking Tim's Fool profile. The Motley Fool has an ironclad disclosure policy.