This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Are Airlines at Last Getting Smart?

On the American Airlines (AMR) call, CEO Gerard Arpey noted that the carrier has arranged about $5 billion of new financing in recent weeks. "These are good developments to protect all of our stakeholders, but we are under no illusions that this represents a long term solution for our business," Arpey said. "Ultimately success will be measured by our ability to drive profits."

Like American, most carriers raised capital during the quarter, another positive sign showing an industry that, having learned the harsh lessons of the past decade, is now conditioned to prepare in advance for whatever crisis may occur.

In the years following the Sept. 11 terrorist attacks, which contributed to a falloff in traffic that began early in 2001, airlines addressed their high costs through a series of bankruptcies, cutting both capacity and costs.

For decades, the airline industry had been a place where everybody -- aircraft makers, airports, consultants, employees, executives, investment bankers and other vendors -- got rich. Everybody, that is, except for investors. How can it be that airport bonds generally have high ratings, while junk ratings accrue to the airlines ensuring that the bonds get paid off?

Following the bankruptcies, airlines reported two consecutive years of profits, earning about $8.6 billion in 2006 and 2007. This was an immensely positive achievement only by the standards of an industry that preceded it with losses of $36 billion over five years, according to Air Transport Association figures.

The profits might have continued for a third year, were it not for an extraordinary run-up in fuel prices. The resulting losses totaled $9.5 billion in 2008, leading to the capacity cuts and new fees. And today, the industry seems prepared for the next crisis, which could well be a return of high fuel prices.

2 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,919.59 +80.85 0.48%
S&P 500 1,981.60 +9.86 0.50%
NASDAQ 4,527.5140 +19.2020 0.43%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs