About Owning Airline Stocks

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Owning airline stocks is often troublesome due to downturns in the economy and rising gas prices that affect airline costs. Consider long-haul airlines that will have fewer problems in the stock market with advice from a personal financial adviser in this free video on stocks and investments.

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Video Transcript

Hi, I'm Roger Groh. Today we're here to talk about maybe the most glamorous business of them all, the airline businesses. Repeatedly when things are terrific and folks get money, the allure of investing in airlines never fails to attract folks. Well that's changed. Today, the airline business is pretty rough and tumble. The days of being able to charge large fees for short trips is over and the companies which are doing well today generally are not the companies that are going in short lengths with a couple of exceptions and we'll come back and talk about them in a minute. But long distance is really where the bulk of the revenue is today. Today as I start to think about individual companies which would be attractive for the long haul, if I had to pick two I'd say Singapore Airlines out of Singapore and also British Air. Both are heavily invested by their own countries and their governments so the likelihood that they're going to fail is low. The likelihood that they are going to get first preference for service into their own countries is high and yet in many cases they're the lowest cost provider of service. So it seems to be a win, win, win. Now they have all the problems that come with being in the airlines. During recessions fewer people travel, revenue go down, they have losses. Gas prices go up, boy they get killed by fuel prices. So that's not to say that they don't have the problems that come with being in cyclical business. Also within the United States, 12, 20 years ago, Southwest Airlines really came into it's own as the first significant major discounter across all states. Southwest really became the innovator in that space and should continue to be the innovator. They do a lot of short haul, they're the exception to the rule in terms of profitability. And they're a wonderful company. Now granted they have all the problems with owning a cyclical business and you have to time your entrance and exit carefully. Outside the US, there might be another airline, Ryanair which does the same thing out of Ireland through Europe. They were the initial company, airline company, operating in Europe that drove discount fares, the development of discount fares throughout Europe and they have changed the entire fee landscape in Europe. So those are some names, it is a glamor business, be really careful because it's a very hard place to make money. Interestingly, I don't know really too many people that have made money in the airline business over long periods of time. You have to be very careful. I'm Roger Groh and that's a little bit about airline stocks.


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