Airline Industry Flying High Financially This Summer

By Leckey, Andrew A. | THE JOURNAL RECORD, August 7, 1987 | Go to article overview

Airline Industry Flying High Financially This Summer


Leckey, Andrew A., THE JOURNAL RECORD


Despite a passenger revolt against poor service and various regulatory probes of safety problems, the airline industry is flying high financially in this summer of 1987.

Passenger traffic is up. Earnings reports are good. By hiking fares 10 to 12 percent over last year, carriers haven't had their bottom line ravaged by increased fuel costs either. The once-erratic pricing system seems to have settled into a basic philosophy for the future, with higher fares likely in summer and lower fares in winter.

Deregulation finally appears to have been digested. The helter-skelter consolidation of carriers due to the Transportation Department's liberal attitude on mergers has pretty much run its course, and few surprises seem likely near-term.

The overall dissatisfaction of the consumer, of course, is the fly in the ointment. With so many planes in the air, there's increasing concern over safety, punctuality and overall service. But, at last, it seems carriers are responding, believes Mark Daugherty, analyst with Dean Witter Reynolds Inc.

``There has been consumer, congressional and industry outrage concerning deterioration of service, and carriers are now putting together programs to address it,'' said Daugherty, who pointed out that many airlines recently beefed up hiring. ``I think you'll soon see more advertising focusing on service, and service will improve within the constraints of this congested air-control system.''

Despite their apparent outrage, average Americans are flying in greater numbers.

``The airlines are now less dependent upon the business traveler and that means the business will be less cyclical,'' said Julius Maldutis, analyst with Salomon Brothers, who believes some discounts will always be needed to lure vacation fliers. ``In addition, the aging of the U.S. population means there will be more people over 45 years of age, which is the group with the greatest bent toward traveling.''

In terms of stock investment, Maldutis currently recommends Tiger International (around $15 a share, New York Stock Exchange) because of its turnaround to profitability under new leadership. …

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