Airlines Can't Survive Oil at $120

Here's a revelation. The airline industry is disappearing right before our eyes. And it doesn't even matter. They can merge all they want, they can try to cut costs through synergy, but the business can't survive $120 oil. The variable cost is 35% of their expense. That's not tenable and it is going higher. Fares have to double to make it up. That's just not tenable. The Dreamliner's a nice savings, but this American industry won't get there in time to be saved by it.

Last week we saw the big give-up, the departure of even the longest-term investors. The stocks are signaling that most of them will have to restructure through bankruptcy. They have done it before, but this time it doesn't matter. The fare increases have to occur, and they are such that the airline structures can't be profitable. It is one of those industries that can't stay afloat without massive federal subsidies, and that can't happen.

I have hated the airline stocks ever since 1985 when I recommended Delta (DAL - commentary - Cramer's Take) and my clients promptly dropped 50%. I reiterate that after the tremendous declines these stocks have, they are still worth avoiding. Don't be tempted to pick up these stocks if oil "swoons" down to $115. The airlines will rally, but they will need to do every bit of financing possible if a rally occurs.

This group has held an endless fascination on Wall Street from the first days it traded, yet the industry itself has done nothing but accumulated losses since it started. Find another industry to invest in! This one is not investible!

Random musings: I continue to believe that Apple (AAPL - commentary - Cramer's Take) can go MUCH higher. It is a very strong story in a group without many good stories. ... I prefer industrial "techs" like Eaton (ETN - commentary - Cramer's Take) to any of these techs. ... I firmly believe that Goldman's (GS - commentary - Cramer's Take) having a moment where it might be taking huge share and that's why it is up nicely. ... People really are buying retail off the tax rebate checks. ... The McMahons got the bum rush in yesterday's New York Times. It said that the CEO and chairman of World Wrestling Entertainment (WWE - commentary - Cramer's Take) enriched themselves with a big dividend boost. WRONG! They boosted the dividend for the other shareholders only, not themselves. That's why I said they are so pro shareholder on the show! Ouch!

At the time of publication, Cramer was long Goldman Sachs.

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