$150 Oil = Another Wave of Airline Bankruptcies

The low cost London-based airline easyJet (LSE: EZJ) has not had a good year. Yesterday Deutsche Bank slammed the barn door after the horse had gone, downgrading easyJet from Buy to HOLD due largely to concerns regarding high oil prices (Where were they when oil went from $25 to $120?). Meanwhile, easyJet CEO Andrew Harrison says the fear should be directed at other airlines (from The Guardian):

If the oil price stays high we will see a number of weaker airlines disappear over the next 12 to 24 months.

Regardless of easyJet’s fate, Harrison is right. Why? Because the airline business is one of the worst businesses in history. Catch the stocks at the bottom of the cycle, when the carriers have emerged from their latest bankruptcy, and you might do OK. Catch them mid- or late-cycle, and you’re begging to crash and burn. American, United, Delta, and Continental investors beware.

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