Some Airlines Will Remain Profitable Regardless of Oil Prices

6/4 - "The airlines will make profits no matter what happens to the cost of fuel...Analysts have fallen into the trap of believing what the majority believes, but, as Keynes told us, in economic matters, the majority is always wrong. Once everyone believes oil prices are going higher, everyone acts in ways to prevent the prices from going higher."

"It is likely that GEO Metros will burn more fuel this year than ever before, because they will be purchased by drivers who travel a lot, and it is likely that the amount of fuel burned by SUVs this year will be dramatically lower than the amount of fuel burned by SUV's last year. It is also likely that small jets will see a similar huge drop in the amount of fuel burned."

"The people staying home are mostly the leisure travelers; the ones who shop for the extra low price. The business traveler is flying long haul at prices that are approaching the prices reached in 2000. Capacity cuts are pushing up the price on many routes. Capacity cuts have been a close match to demand reductions on other routes. In April, CAL enjoyed a small increase in international load factors and a small decrease in its mainline load factors...but the real story was a 6 to 7% increase in yield! Any business that is able to increase its top line by 6 or 7% during the worst of times should do quite well when times get better."

"Everyone knows about the airline problems. As the problems subside, the story will be told time and time again by virtually every media outlet. It will not take much of an upturn in profits to send airline shares soaring."