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Stock Strategist Industry Reports

The State of the Airline Industry

Let's examine the state of the airline industry and our predictions for its outlook.

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The domestic airline industry has been arguably one of the worst-performing industries in history, cumulatively losing money from its inception while bearing witness to more than 183 airline bankruptcies since 1978. This abysmal historical performance substantiates our claim that all industry participants lack an economic moat. In fact, Warren Buffett observed that the world airline industry has not made a dime for investors in a century of manned flight. Ironically, however, Buffett conceded this point after acknowledging his mistake in buying stock in  US Airways (LCC), yet he managed to escape his investment profitably. Given recent developments, we will explore the economic climate that forced the domestic airline industry to change, the current challenges facing the industry, and our take on the industry's outlook.

Fundamental Shift in the Airline Industry
Due to minimal barriers to entry, the airline industry has always faced the threat of new competitors. However, we believe the entire airline industry changed dramatically after the 2001 recession, as low-cost carriers used the downturn to expand aggressively.

Basili Alukos does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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