Show BUSINESS end tho STOCK MARKET I b by DABSON'S BABSON'S REPORTS INC 1971 AIRLINES REGAIN INVESTOR INTEREST The leading airline stocks stocks stocks-as as a group- group are once again basking in the warmth of or investor buying interest True prices of these issues have encountered encountered encountered occasional backtracking as ns well as periods of strength during the now waning wan ing lag year ear 1971 reflecting the volatility of the stock market as a whole Nevertheless Nevertheless Never Never- stocks of airlines have given a n good account of themselves during the course of this year Rude Awakening In the latter part of the the air transport rt industry had to pay a stiff price l success it had enjoyed in the two decades following World War II During During Dur Dur- ing that period of growth many unsound business practices made their way into the airlines field ultimately bringing the industry to the brink of disaster as the decade of the bowed out and the decade of the made its debut Among the problems were excess carrier capacities ridden debt capital structures uneconomical route patterns and flight frequencies Part of the trouble derived from the intense competition in both the domestic and the foreign arenas But the regulatory regulatory regula regula- tory climate also contributed to the gradual gradual gradual gra gra- gra- gra dual deterioration of the industry's fundamental fundamental funda funda- mental position with questionable ble route awards and inadequate fare rates eroding profitability The squeeze on profits was further intensified by the upsurge of labor la bor and other operating expenses Crushing Problems The most devastating blow actually came from the weighty fixed charges associated associated as as- with carrier equipment This came to a head when the credit crunch clobbered the entire economy in the late Borrowing rates reached their highest levels in a and tight credit j jeopardized equipment financing projects Other formidable difficulties surfaced at nt that crucial juncture Chief among them was airport congestion at many of the principal fa facilities The up stack of aircraft waiting both landing and takeoff take off plus the virtually unmanageable auto traffic pattern around the terminal areas complicated still further the indus try's task of attracting additional patron age Then came the acute public con com corn over the air carriers' carriers role in air I and noise pollution Retrenchment Revitalizes Industry Although a number of the troubles of the nations nation's airlines remain unsolved companies have faced up to plugging some serious profit drains Superfluous flights and routes have been abandoned personnel cuts have been instituted ex carrier facilities have been shed These moves moves nod and more equitable tariffs granted by the regulatory authorities authorities- have pulled d the airlines away from the dangerous dan erous pit that threatened to engulf them just a u short time ago aio Fortunately also the return of pf easier credit conditions enabled many of the carriers to establish lis needed much f inane ing lag programs and restore their capital nations to a healthier status At long lat last the need nC for mergers was cd ed as an essential circumstance stance for the renewed growth and even survival I of t the 9 industry The tact fact is b that mergers naw v under consideration could effect further savings on personnel eq equipment and support facilities s besides rendering more viable future financing efforts effort Emergence From the Overcast As the investing populace began to recognize ze the recovery being made by bythe bythe bythe the airline firms finns buying interest became more viable future financing efforts stocks in fact tact have regained substantial proportions of at their previous price de de- 4 4 dines cline although they are generally still well below their time all highs Currently Current Current- ly the Research Staff of Babson's ReP Reports Re- Re Ref f P II ports advises retention o of the shares of leading airline stocks and for risk orient ed cd investment accounts the purchase of Continental Air AirLines Lines Is s recommended |