AMR shareholders take massive hit, but experts see a less volatile future

Airlines are no place for conservative investors, as the dramatic rise and fall of AMR Corp. shares in recent years illustrates.

Oil prices, economic trends, and fare wars are among the issues that have taken the stock of American Airlines' parent company, and other carriers, on a wild ride.

For AMR shareholders, the journey is almost certain to end at zero now that the company has filed for federal bankruptcy protection. The shares lost 84 percent of their value with Tuesday's announcement. They fell to a mere 26 cents each and are expected to be worthless when the company emerges from Chapter 11.

American Airlines owned the title of world's largest airline for much of the past decade, yet overall, it was a bad time to own shares. That was true even before this final descent into bankruptcy.

Priced at $21 a decade ago, AMR shares plummeted to $1.25 in the wake of 9/11. Momentum shifted in 2003, and shares climbed all the way to $41 by January 2007. The economy was booming, demand was soaring, oil was comparatively cheap and the industry had stabilized after a series of bankruptcies from 2001-05.

Then crude oil rocketed from $55 a barrel to $145 by mid-July 2008, sending AMR shares from $41 to $4 in just 18 months. Most other airline stocks crumbled too: Delta Air Lines Inc. fell from $22 to $4, United Airlines' then-parent UAL Corp. sank from $51 to under $3, US Airways Group Inc. from $62 to under $2.

The stocks of top-performing low-cost carriers also have had a poor decade. Southwest Airlines Co. was relatively stable during the run-up in oil prices but its shares have shed 62 percent in 10 years.

Some experts see a less volatile future for airline stocks as the slimmed-down industry settles down again. "Planes are getting fuller, the pricing model is changing, the industry's getting rational and our capacity to put planes in the air is getting maxed out," says Sterne Agee analyst Jeff Kauffman. "These are the types of things that lead to higher profit margins -- and higher stock prices."

The takeaway for investors based on the past decade-plus is clear, however: Airline stocks are much riskier than those of other industries. High fixed expenses, heavy labor costs and a vulnerability to soaring jet fuel prices as well as various calamities leave their shares prone to surges that can wreck an investment if they're in the wrong direction.