If Only You Could Short Your American Airlines Miles – Angry Flight Attendants Ahead

Let us first remind ourselves that investing in airlines is a bad idea. The market timer will occasionally make some money. And more often lose some. But these are mostly crummy companies – Southwest (LUV) being the exception – in a horrible industry that destroys capital.

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But if one could short frequent flyer miles, we’d be recommending that move on AMR’s (AAMRQ.PK) American Airlines. (That symbol is for the bankrupt shares and they’ll likely be wiped out.)

Why? Because the pay cuts, pension plan terminations and other moves the airline plans to take to cut costs in bankruptcy are going to seriously piss off its seniority-based, union workforce. And if experience at the United half of United Continental (UAL), at US Airways (LCC) and at the Northwest half of Delta (DAL) is any indication, customers will bear the brunt of it.

When an airline shrinks – American wants to shed 13,000 workers, or 15% of its employees – its labor force, due to seniority rights (last hired, first fired) gets older. And closer to retirement. That means the pension gutting freaks out the remaining, sooner-to-retire workers more. And job protection being what it is, they can get surly.

That’s among the reasons United and US Airways are at the bottom of customer satisfaction rankings by J.D. Power. American has ranked higher, thanks in part to the fact that it hasn’t previously been through bankruptcy, and exacted far smaller compensation cuts than its competitors to avoid bankruptcy a decade ago.

At Chicago’s O’Hare, where American and United both operate huge hubs, the wise frequent flyer has long chosen American. United’s workers and management spent years loathing one another and customers were the losers. Going forward, it will be a Herculean task for American’s new CEO, Tom Horton, to maintain any advantage.

Jeff Bailey is an editor for the YCharts Pro Investor Service which includes professional stock charts, stock ratings and portfolio strategies.