You don’t have to be an investor to know this simple fact: Stay far away from anything that flies if you want to make money. It hasn’t always been that way but for quite a while that has been a reality.
Let’s take a look at airlines. They simply can’t find a way to make money. There was mass consolidation in the industry when oil prices spiked last summer and all of the other costs of operating an aviation business have eroded any profits they have tried to make. I have some first hand experience in this. If airlines operate anything like my friend who is a general aviation pilot, the amount of money that is invested in to the basics is immense.
The fuel that he uses in his plane is expensive, the cost of repair parts, the maintenance schedule, all of these add up to a huge expense. As he says, “this is not a poor man’s hobby.”
So the airlines might not be the best idea but how about companies that build planes? Northop Grumman, Airbus, and Boeing? This is looking a little bit better right now. As of today, the Paris air show is starting and it’s largely speculated that Boeing is going to be demonstrating the new Dreamliner.
Aerospace is said to operate on a very specific economic cycle and many say that we are near a large upturn in this sector so investing might just be a good idea.
Still, the jury says this: Stay away from aviation for a little while longer.