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3 Horrible Facts About the Airline Industry

Stocks in this article: JBLU LCC LUV UAL

Even good weather is bad
Everyone knows bad weather diminishes airline operational performance, but few realized good weather can diminish financial performance.

At the recent JPMorgan (JPM) transportation conference, executives from JetBlue, US Airways and Southwest (LUV) all mentioned that February's high completion factors led to lower revenue per available seat mile.

At JetBlue, passenger RASM was 6%, a point below guidance. At US Airways, RASM was 7%, three points below guidance. US Airways President Scott Kirby says 1.5 points of the RASM decline was due to the high completion factor.

In the two days since the release of US Airways' February traffic report, which included the RASM number, the airline's shares fell 6%.

U.S. government policy is anti-airline
Also at the conference, United (UAL) CEO Jeff Smisek discussed government policy toward airlines, which are among the country's most heavily taxed businesses. According to trade association Airlines for America, the cost of a $240 round-trip between Raleigh-Durham, N.C., and San Francisco soars to $300 because taxes add 25% to the fare.

A4A has said a national airline policy is needed to rationalize the regulatory and tax environment, force action on long-stalled improvement to an anachronistic air traffic control system and ensure U.S. airlines can compete globally. Smisek says Mideast carriers, such as Emirates Airlines, have the backing of their governments, which is "just the opposite of what we do here."

In the United Arab Emirates, it is safe to say the national airline is a widely respected symbol of the country's wealth and capabilities. In the U.S., by contrast, many residents, encouraged by negative media reports, suffer from anti-airline feelings -- which translate into antagonistic government policy.

"Having a national airline policy is important unless the policy is destroying airlines, which I believe is the policy here , because of the high level of taxation," Smisek says.

-- Written by Ted Reed in Charlotte, N.C.

>To contact the writer of this article, click here: Ted Reed

>To follow the writer on Twitter, go to

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