LiberalAspergers t1_j29czuq wrote
Reply to comment by bythepowerofboobs in Why the F is Southwest mooning when the entire market is down? They literally lost like 2 billion dollars or more in the past 8 days. by OhNoNoNoAveMaria
No airline has EVER been undervalued. 0 is overvalued. They entire industry has consistently lost money and destroyed capital for a century now.
bythepowerofboobs t1_j29dli0 wrote
LiberalAspergers t1_j29eop2 wrote
If you bought every airline at IPO for the past century and held, your portfolio would be showing a loss. Not an inflation adjusted loss, but an actual loss. This industry destroys shareholder value consistently. That during the longest economic bull run in the US's modern history, they managed not to loose money is hardly a ringing endorsement.
bythepowerofboobs t1_j29euxg wrote
Okay? We're talking about Southwest, not the entire industry. Southwest is profitable.
LiberalAspergers t1_j29fggp wrote
And they have over the past few decades been one of the least bad companies in the industry. But, inevitably competitors will go bankrupt, and continue operating without the full cost of their capital, and launch a fare war, which is what always destroys this industry. Even the best company in the worst industry in the world is still a bad investment. If the P/E drops to 2 or less, it could possibly be called overvalued. Until then, nope. There is no value in that industry.
bythepowerofboobs t1_j29fmrz wrote
Southwest is historically extremely profitable, and they will continue to be.
LiberalAspergers t1_j29gifk wrote
Long run, looks like their return on Capital is around 5.5%. That is not extremely profitable by any standards other than the. airline industry. It is AMAZING for an airline, but that is kind of like getting the best grades in a special education class.
bythepowerofboobs t1_j29hf6h wrote
We have different standards I guess. Averaging ~15 billion EBITDA is pretty fucking amazing to me no matter what industry it is.
LiberalAspergers t1_j29i6oi wrote
Depends how much capital you use to make those profits.
Same as investing. Making an annual return of 100,000 is amazing if.you only have 400,000 in capital. If you have 40,000,000 in capital it is terrible.
And given that interest and depreciation are two of the major expenses airlines face, EIBTDA is a terrible.measure for that industry. But, good luck.
[deleted] t1_j29ivdu wrote
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