Business Update

Click the below link for musings about the Delta – Northwest airline merger.

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Having destroyed the steel and auto industries, labor unions for all practical purposes have eviscerated the domestic airline industry.

With two exceptions the airlines simply can’t get their acts together — regardless of consumer demand and regardless of public subsidies. Combine heavily-unionized workforces with persistently-high costs of raw materials (jet fuel) and you’ve got a recipe for a business train wreck.

Not until we have two and only two national “hub-and-spoke” carriers plus Southwest and JetBlue (for point-to-point travel) will the airline industry attain a measure of sustainable health. Along those lines it goes without saying the Delta – Northwest merger will spur additional consolidation. United and Continental would be a logical pair.

On the investment front I wouldn’t touch the common stock of an airline with a 10-foot pole. Cheap companies in non-union industries (e.g., banking, pharmaceutical) are the tickets to make money in stocks over the long term.

Happy Tax Day!
The Knucklehead of the Day award