Lusthansa (LHA.DE)?

That’s what a friend used to call “Lufthansa”. Currently EUR 6, the last 10 years pre pandemic usually EUR 10-15, with a top of EUR 30.

No more existential danger. Actually there never was, the state took care for that. All state loans and silent ownership paid back. At year Airlines should be back to pre pandemic working capacity - at higher ticket prices now.

So much for the spontaneous and superficial, for the surface.

Any Comments?

Not sure what this anecdote says about this investment but…

I am sending my teenage daughter to San Sebastian, Spain this summer. Booked her flight on United Airlines and had confirmed seats, except on their partner airline Lufthansa’s leg of the trip. Multiple calls to United and then to upper managers at United - none of whom were able to get a confirmed seat from Lufthansa. Called Lufthansa directly several times and received a message that said they were too busy and overwhelmed to take my call - “click” - end of call.
Finally, days later, I managed to get through to Lufthansa. They were able to confirm a seat for my daughter, but charged an additional $45 to do so.
It is an understatement to say that my impression of Lufthansa is not good, although I was also disappointed United did not have a means of handling this situation already worked out with their partner.
If I am reluctant to give them ticket money again in the future, then I am definitely not investing in them.

Smufty

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Don’t worry about the Lufthansa issues. Just tell your daughter to enjoy her summer. San Sebastian is a beautiful city and I’m sure she’ll have a wonderful time.

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I don’t know the specifics of Lufthansa’s ownership, so maybe it is different for them. But they still have to compete with many other government supported “national flag” carriers, including very rich Gulf countries. Even a poor country like India, subsidized Air India for decades, and only privatized it this year.

I avoid government supported companies/industries. The government might prop up the company in hard times and ensure company stays in business. But it will insist that there be no redundancies or other cost cutting.

And in good times, other stakeholders like unionized employees and management will grab what they can, and shareholders won’t get much. And if government has equity stake or golden share it will block takeovers.

So it will forever be a bloated, complacent company run for the benefit of the employees. Customers will be tolerated and shareholders ignored.

What has been the total return of a company like Airbus, one of a very powerful global duopoly? Compare with returns of UPS, one of an oligopoly of package delivery companies, which even has to compete against government subsidized postal services in many countries.

UPS is relatively cheap now, even if not as cheap as Lufthansa. I predict that over the next decade the total return from UPS will be higher than from any major/legacy airline.

Any Comments?

A philosophical response: (no offence intended!)

What’s the average return from the average airline in the average year?
Terrible. The aggregate return of the entire industry in the last century is negative.
They have the occasional good year, suck people in, then have another crisis. Repeat.

So, to believe that a given airline represents a good prospect today, you need evidence of
exceptionality in proportion to the degree that your return expectation is not the typical outcome in that situation.
Expecting a slightly unusual outcome requires little more than an informed hunch as evidence.
A wildly different return expectation requires wildly strong evidence of something unusual about the opportunity.

I’m not saying it wouldn’t be a good pick. Maybe it is, by luck or by insight. I have neither to offer.
But a big recent share price drop might not be sufficient evidence for expecting an atypical outcome.

A speculation:
A bad pick in a long-run-good industry is sometimes better than a good pick in a long-run-bad industry.
The medical supplies industry (the two categories covered by Value Line, avg 60 stocks), equally weighted,
has beat the S&P 500 by 10.2%/year since the turn of the century, and beat the index 82.6% of rolling years.
The speculation: a monkey with a dartboard in that industry would probably outperform the world’s best airline fund manager.

Jim

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A speculation:
A bad pick in a long-run-good industry is sometimes better than a good pick in a long-run-bad industry.
The medical supplies industry (the two categories covered by Value Line, avg 60 stocks), equally weighted,
has beat the S&P 500 by 10.2%/year since the turn of the century, and beat the index 82.6% of rolling years.
The speculation: a monkey with a dartboard in that industry would probably outperform the world’s best airline fund manager.

PS
I looked it up: in the same time frame, calculated the same way, an equally weighted airline portfolio with an average of 14 stocks lagged the S&P by -4.03%/year.
So, that’s the reasonable expectation from a random pick in a random year before you get good evidence of something unusual about the situation.

Jim

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