Presto, chango: The year of the "simplified" four-tiered airline fare structure magically became the year of the wild and crazy travel rush.
As travelers waited hours to get tickets and travel agent computers blew out from overwork, summer 1992 was shaping up as the greatest crush of Americans in airports and airplanes in years.
That's great for travelers -- at least for now. There is, however, no denying that increased likelihood of fewer carriers in the future means big carriers are aiming for a world in which cut-rate fares are a distant memory.
Investors in airline stocks, who saw their shares go up 25 percent early in the year and fall 25 percent shortly thereafter, are morose. They know they can kiss goodbye any likelihood of a 1992 recovery by the industry from its massive losses of the past two-and-a-half years.
Carriers will be running on red ink for yet another year.
"We expect 1992 to be another major loss year for the entire airline industry, since it can't make money with such reduced fares," said Daniel Hersh, analyst for Kemper Securities. "In addition, oil prices have been creeping up about 15 percent and may go up another 15 percent before the year is over."
Only the strong likely will survive the price battles long-term.
"The industry's fate is sealed for 1992 and, unfortunately, earnings aren't likely to get better in 1993 unless some weak or bankrupt carriers go out of business," said Arthur Calavritinos, research officer for the John Hancock mutual funds. "Only then can the strong carriers worry more about servicing the customer than luring the customer."
Some analysts, disgusted by promises the airlines don't keep, aren't touching these stocks.
"We don't have any major airline stock on our buy list at this time, because earnings have been so poor and aren't going to improve soon because of reduced fares," said Steve Sanborn, airline analyst for the Value Line Investment Survey. "Besides the fact that no airline can make money with rock-bottom rates, there are also plenty of worries about economic factors."
If you like their current stock prices and don't need Dramamine to survive their volatility and cycles, some airlines offer potential.
Southwest Airlines is worth buying if its price slips a bit lower, Mr. Hersh and Mr. Calavritinos said. It's a great no-frills, point-to-point airline with the lowest cost structure in the industry.
UAL Corp., parent of United Airlines, is Mr. Calavritinos' top stock pick because it dominates a lot of markets and should gain from its Pacific travel routes. The stock offers an investor a lot of value, and will benefit immeasurably if the bankrupt carriers go out of business next year.
Mesa Airlines, a regional carrier with half its operations under the United Express banner and half in commuter business, is recommended by Mr. Hersh because it has operating costs 25 percent below bigger airlines. Besides its attractive stock price, Mesa has solid earnings and growth momentum.
AMR Corp., parent of American Airlines, is suggested by Mr. Calavritinos, though not as aggressively as UAL and Southwest. It's difficult to keep its four-tiered price structure in effect amid fare wars, though it's trying.
Delta Air Lines, according to Mr. Hersh, will be worthy of purchase perhaps in three years, because it still has a lot of cost containment to do. Its recovery will lag significantly behind other carriers. Mr. Calavritinos said Delta has a "full plate" following the purchase of so many routes.
USAir Group, attempting a turnaround by cutting some flights and building up its stronghold in the East, merits just a "wait and see," Mr. Calavritinos said.
"Most importantly, avoid the stocks of bankrupt carriers because of the debt burden they'll have should they survive Chapter 11," Mr. Hersh said.