Airlines in the United States, shunned by the legendary investor Warren Buffett for almost 25 years, are now rewarding investors with the biggest returns in more than a decade.
The Bloomberg US Airlines Index of 10 carriers surged 35 per cent in the first quarter, the best start to a year since at least 1999.
Wall Street projects that gains are just beginning for Delta Air Lines and US Airways, both rated higher on average by analysts than 92 per cent of US firms.
After making more than US$58 billion in losses from 2001 to 2009 amid two recessions and rising fuel bills, carriers are heading for a fourth consecutive annual profit as they match seat supply to demand and fly planes fuller than at any time since 1945.
That's drawing new investors, such as Snow Capital Management, while hedge funds are adding to their holdings.
"The same factors that made airlines uninvestable for years - too much capacity, too much debt - are the opposite now and make them attractive," said Simon Rosenberg, a co-portfolio manager at Snow Capital.
"I'm not going to shy away from an industry just because it has a bad history."
Founded in 2001, Snow Capital did not make its first airline investment until last year, when the Pennsylvania-based firm began buying a Southwest Airlines stake.
Airlines cemented their reputation of being a "terrible business", as Buffett dubbed them last month, with equity-erasing bankruptcies at four major carriers during the last decade.
The Berkshire Hathaway chairman has sworn off them since a 1989 US Airways investment he called a "mistake".
"The cyclicality was stomach-churning at best," said Mark Luschini, the chief investment strategist at Philadelphia-based Janney Montgomery Scott, which holds Delta and Southwest.
"With what's taken place in the industry over the last couple years, that gives us a reason to take another look."
Planes flew with a record 83 per cent of seats filled on average last year, US Bureau of Transportation Statistics figures show. A decade earlier, the figure was 72 per cent.
By shedding their old habits of piling on flights and then having to discount ticket prices, airlines have been able to bolster fares and post profits even with jet fuel, their largest expense, soaring almost threefold since a 2009 low.
The US$460.50 average US domestic fare in February was an 18 per cent jump over the same month three years earlier.
Consolidation has accelerated the culling of money-losing routes.
The merger announced on Valentine's Day between US Airways and bankrupt American Airlines will shrink the number of full-service carriers with international networks to three, down from seven in 2000.