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Business Update

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

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.


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