IYT - How to Invest in Airline Stocks
The U.S. airline industry has largely been a destroyer of capital in the years since the industry was deregulated in the late 1970s and companies were allowed to truly compete head-to-head for business. The federal rule changes created a boom/bust cycle of new competition squeezing profits when times were good and forcing bankruptcies and liquidations when the overall economy turned south. Storied companies like Eastern Airlines, TWA, Braniff, and PanAm disappeared from the skies during this era, costing airline stock investors billions of dollars in the process.
Fortunately, the shakeout from deregulation is now pretty much complete. A period of restructuring and consolidation in the early 2000s reduced the number of airlines competing and fortified the balance sheets of the survivors. Delta Air Lines bought Northwest, American Airlines Group merged with the combination of US Airways and America West, United Airlines Holdings combined with Continental, and Southwest Airlines bought AirTran.
The result is a domestic marketplace where four carriers control about 80% of the market, giving the companies greater wherewithal to make money in good times and weather downturns.