When you’re starting out in online trading or have reached a significant level, it is important to identify industries you need to stay away from. That comes with deep observance of the market plus the wisdom of stock market experts and analysts. One industry which you would want to look away from would be airlines. Here’s why:
Technology Glitches Affect Revenue
Airlines are investing in technology for improved efficiency, but they need to ensure it is technology which they can handle and operate without causing unnecessary delays or hassles to passengers. That probably requires more investment, but that is essential if customers must be satisfied and passengers are not to lose trust in their airline. If they lose trust, there is a significant loss of revenue to be expected, not to mention the resultant effect on the airline’s stocks too.
Recently, a computer outage at British Airways was reported that resulted in long delays and even cancellations all over the world, because of a newly introduced check-in system. Such outages have been quite common recently. Even American airlines need to make significant technological investments to prevent such inconveniences to passengers which could hamper the airline industry.
Southwest and Delta
Southwest Airlines ($LUV) and Delta Air Lines ($DAL) also experienced similar technology outages recently. As a result of these issues, Delta had to cancel 2,100 flights in three days. The revenue lost equaled $100 million. The airline’s traffic fell 2.8% while load factor declined 2.9% since technology glitches aggravated the pressure it was already under on account of more intense competition from rival airlines in the American industry. Southwest Airlines experienced computer outage that cost it nearly $80 million. It contributed to further lowering the company’s Q3 outlook by a drop in revenue of 3.5-4.5% from 3-4% earlier.
Volatility of Airline Industry Cause for Concern
Seasoned investors would know that the significant volatility of the airline industry makes it quite a poor choice for investment. It is elastic in nature. While boom times encourage investment into new aircraft and routes, the times of economic downturn can hit the industry pretty hard, aggravated by the high fixed costs generated by the investments. The risky nature is present even in this time of low prices for jet fuel. You can only imagine how tougher things would get when the prices rise again.
The aforementioned technology glitches exacerbate the problems. Airlines are dependent day in and day out on computers. Investors were in a state of shock when Delta’s computer outage occurred, since the company had invested significantly in technology updates. More investment needs to be made to ensure technology delivery is smooth and reliable, and also to ensure there is a backup in place.
Such industry insight comes with experience. Online stock trading requires such invaluable insight plus technology in the form of user-friendly but advanced software. TradeZero offers efficient trading platforms for successful trading right from your home. Call us at +1 954-944-3885, or email support@tradezero.co.
DISCLAIMER
The content provided here is solely for informational and educational purposes and does not constitute an offer to sell or a solicitation to buy any security or instrument which may be referenced upon the site, or an offer to provide advisory or other services by TradeZero in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. Investors are advised not to rely on the information contained in this writing to make an informed investment or financial decision. TradeZero explicitly disclaims all liability for any action taken based on any information contained in this writing.