Airlines are terrible businesses. In some industries, like the railroads, you have only a few competitors and they kind of play nice with each other. That may result in the occasional lawsuit, but it keeps the economics of the railroad industry lucrative. With airlines however, the few competitors just beat the living snot out of each other. They compete strictly on price. There’s no differentiation. It’s awful.
Think about it. When you go on Orbitz to buy a plane ticket, what do you care about? The destination. The dates and times. Is there a layover? That sort of thing. Who cares whether they’re flying United or American? I swear, half the times I’ve flown I’ve had to check my ticket to see which carrier I was using that day. They’re all the same.
Edit: Except Spirit. Never fly Spirit.
But I’d generally beware of trying to find diamonds in a lousy industry. There are exceptions, notably Berkshire Hathaway’s insurance operations in what’s an extremely tough business or Disney in media, but generally you want to invest in companies that are in lucrative industries. Look for tailwinds.
Written in 2015