This Day On The Street
Continue to site right-arrow
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!

3 Horrible Facts About the Airline Industry

Stocks in this article: JBLU LCC LUV UAL

CHARLOTTE, N.C. ( TheStreet) -- Things are so bad for the airline industry that even good weather causes problems.

In February, mild weather enabled several carriers to post extremely high completion rates. JetBlue (JBLU) and US Airways (LCC), for instance, completed 99.8% and 99.7%, respectively, of their scheduled flights.

At any airline, the principal pursuit of most employees is to provide on-time operations. At US Airways last year, on-time performance was spectacular. Just not as spectacular as the rise in oil prices.

Their reward? Because more flights mean less revenue than expected for each flight operated, the carriers failed to meet expectations for revenue per available seat mile, an industry metric that measures the amount of revenue associated with each seat flown one mile.

But isn't that always the way in this cursed industry, which has been unprofitable for investors since the days of the Wright brothers? For all of its efforts to restructure, U.S. airlines squeezed out marginal profits last year and in 2010, after losing $50 billion in the previous decade.

Yes, the dramatic reshaping of the industry, which now charges fees for services and restrains capacity, was long needed. No, this sector is not fixed. Last year, U.S. airlines made just $390 million -- less than half a penny per dollar of revenue.

Three events this month have underscored the deep-seated problems of an industry whose fate is almost entirely dependent on external factors:

Airline profits are slaves to oil prices
On March 14, US Airways CEO Doug Parker sent an ironic letter to employees.

"We did everything right last year: record revenue performance, seven first-place finishes in the Department of Transportation rankings and we kept our costs competitive," Parker said. "However, the reality of this business is we made less in profit in 2011 because the price of fuel was $1.2 billion higher than it was in 2010; therefore our profit-sharing checks are smaller."

At any airline, the principal pursuit of most employees is to provide on-time operations. At US Airways last year, on-time performance was spectacular. Just not as spectacular as the rise in oil prices.

1 of 2

Select the service that is right for you!

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 17,356.87 +288.00 1.69%
S&P 500 2,012.89 +40.15 2.04%
NASDAQ 4,644.3120 +96.4780 2.12%

Brokerage Partners

Rates from

  • 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