Posted by fung9815 > 2016-02-17 09:29 | Report Abuse

Mr Koon, thank you for your comment. I believe that for airline business to eventually become viable, the cost of producing aircrafts has to come down first. Currently, the aircraft manufacturing business is dominated by 2 giants, i.e. Boeing and Airbus, who enjoy high returns on equity (partly because they borrowed so much money!) and have no incentive to reduce production costs. Will there be a third force out to disrupt them (somebody like Elon Musk)? We shall wait and see, hopefully in my lifetime.

Posted by youlee > 2016-02-17 10:04 | Report Abuse

Some airlines are profitable throughout their life ie Singapore, cathay pacific,...

Posted by princehero > 2016-02-17 21:56 | Report Abuse

warren buffett stated never invest in airline....even peter lynch lost money in airline company... never touch airline company... as simple as that...

Posted by i4investor > 2016-02-17 22:05 | Report Abuse

Don't know talk so much for what

Posted by princehero > 2016-02-17 22:10 | Report Abuse

singapore is a different story... a different league....

Posted by youlee > 2016-02-17 22:31 | Report Abuse

So is British Airways and Virgin.

Posted by JT Yeo > 2016-02-18 07:36 | Report Abuse

Some economic structure of airline industry:

1. Sensitive customers
Price sensitive, little brand loyalty, goes for lowest fare

2. High fixed cost
Airline has high fixed cost from purchasing aircraft to maintenance & capex.

3. Perishable product
An empty seat in the air is a lost in revenue. Airlines are inclined to cut price in order to fill the seat to cover their high fixed cost, which leads to price war.

3. Government/Politics
Airline industry employ large workforce and most have union. When an airline decided to layoff it normally face a strong resistance from union and government. Slow down in layoff means industry is bloated with supply which fuel even more price war.

4. Low barrier of entry
An aircraft has a life span of 20-30 years. It is relatively easy for a new company to lease a plane and begin operation. Any profitable route will soon be filled with competitors enough to erode profitability.

Posted by growthinvestor > 2016-02-18 08:00 | Report Abuse

dont bs jtyeo!barrier to entry for airlines is high.high opex,capex and government regulations deter new entrants.dont remarks economic structure with your own thought compiled from internet.

Posted by piggybank > 2016-02-18 08:14 | Report Abuse

Mr Koon, Would buying the Airports operators like Malaysia Airports be a better option instead of buying Airlines?

Posted by soojinhou > 2016-02-18 08:18 | Report Abuse

2 stocks. China aviation oil listed in sgx, the largest fuel jet trader in Asia Pacific, and Sam engineering, which should benefit from Pratt and Whitney's expansion in Singapore.

Posted by Icon8 > 2016-02-18 13:26 | Report Abuse

Overweight AirAsia.

Posted by JT Yeo > 2016-02-18 13:54 | Report Abuse

Well too bad if you dont believe. It is written on metric called ROE