It's axiomatic that airlines make terrible investments. Here's an example of why. JetBlue has been one of the bright stars in the industry for investors. Along with Southwest, it's one of the few airlines that actually seems to turn a profit. But this quarter may change that:
JetBlue's string of 18 consecutive quarterly profits since its inception "is in jeopardy" as concern about Hurricane Rita boosts oil prices, CEO David Neeleman said yesterday.
JetBlue's profits have been declining for a while, and the company blames the rising costs of fuel, which is the second biggest expense for the airline after labor costs. Jet fuel prices have risen 24% this quarter alone, and all the airlines -not just JetBlue, say the cost is killing profits.
Now the solution seems stunningly obvious: raise prices. But the industry seems determined to keep airfares artificially low. I don't know the source of this obsession with cut-rate fares. It's not like cars or trains or ships offer much of an alternative to the jet aircraft for long-distance travel in this big country of ours. But whether it's the effect of bankruptcy laws that lets weak, struggling players stay in business, or some kind of government interference that's distorting market pricing, something is very, very wrong in an industry when an expense like this can't be passed onto the customer. It's a sign to stay away. Far away.