US airlines and their tiny market cap

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The US airline industry just isn’t worth a great deal. Look at the market cap of the US network carriers and compare it with just about any other segment of the world industry, and you’ll see what we mean. Or least you’ll see what Mark Schulte of Taurus Corporate Finance Group means. The US network carriers – Alaska, US Airways, Continental, Northwest, American, Delta, and United- are worth about $7 billion, based on valuations in mid-June, while the low-cost sector is worth about $11.6 billion, he says.

Combine them, and you’re still not worth as much as the European network carriers ($26.5 billion) or the Asian network carriers ($26.2 billion). But all these estimates of what an airline group is worth fade when compared with the two big package and express carriers, FedEx and UPS. FedEx comes in at just under $25 billion, but (drum roll) consider UPS. Schulte says it’s got a market cap of about $67.6 billion. (At the left above is our idea of a market cap, ideal for wearing on a rainy day when you’re going to market.)

Market capitalization is essentially how much it would cost to buy an airline if you could afford to buy all of its shares, but the US at least, these have tanked. Their share prices have fallen and “eliminated any value created in 2006, in anticipation of consolidation,” Schulte told Washington‘s International Aviation Club.

Talking about the fuel crisis, Schulte was joined by the Air Transport Association’s in-house think tank, chief economist John Heimlich. John estimated that the US majors’ fuel bill would leap from $41.2 million in 2007 (based on a $2.10 a gallon price of fuel) to $61.2 billion this year (based on a $3.40 per-gallon prices). The difference: enough to buy 286 narrow-body jets or employ 267,000 people. Heimlich quipped: “they say the greenest flight is the one that never takes off. The market may be able to do what policy could not.”

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