12. Airline Stocks
Airline stocks include some of the most familiar names in the world, particularly for people who travel a lot. Delta, American, United, Southwest, JetBlue and others all have their own publicly traded stocks. As both the economy and the population grow, it seems like airline stocks should be a great investment, not a toxic one. So what gives?
Why Airline Stocks Are Toxic
Even the Oracle of Omaha himself, famed investor Warren Buffett, has said that airlines and airline manufacturers are a “death trap for investors.” In a 2013 interview with Forbes, Buffett said airlines are a commodity product with high fixed costs, meaning demand might be variable but airlines will always have huge expenses for aircraft, maintenance, hangar slots and so on.
The list of airlines that have gone bankrupt over the years (some more than once) reads like a “who’s who” of the industry. The list ranges from Delta and United to Northwest, US Airways, TWA and Pan Am. This should serve as a cautionary tale that while there may be periods of strong financial results, the potential for an airline bankruptcy is always out there.
Of course, stock markets are fickle things. Even Buffett has done an about-face with the airlines and now his Berkshire Hathaway is one of the largest shareholders in Delta, Southwest, United and American. So does this mean airline toxicity has worn off or has Buffett just found the right opportunity to make a return flight to a “death trap” of an industry?
