Warren Buffett said a decade ago that he'd sworn off putting money in airline stocks after his $358 million “mistake” in US Airways Group Inc. Investors in Asian carriers would do well to heed his advice.

Six of the 10 initial public offerings by airlines in Asia during the past five years are trading below their sale prices, according to data compiled by Bloomberg. The 10 airlines have fallen an average 12 percent from their offer levels, as the region’s publicly traded carriers racked up a combined $1.8 billion in losses last year.

Asia’s airlines have failed to capitalize on a surge in passenger numbers as the start of a dozen new carriers in the past decade has pushed the industry toward overcapacity and made it unprofitable. Investors will today get one more chance to test the region’s appetite for airline stocks as Bangkok Airways Co. starts trading in the Thai capital after a $494 million IPO.

“There’s too much competition in the airline industry,” said Alan Richardson, an investment manager at Samsung Asset Management Co. in Hong Kong who previously lost money buying shares in Thailand’s Nok Airlines Pcl. He didn’t invest in the Bangkok Air IPO. “Until you get a shift in the demand-supply, you won’t get any meaningful leverage in these asset-heavy companies.”

Asia’s increasing urbanization and growing middle class are fueling a surge in travel demand. New airlines have popped up all over the continent, from Vanilla Air Inc. and Peach Aviation Ltd. in Japan to budget carriers in India started by a property tycoon, cookie maker and owner of a travel agency.

That contrasts with the mature markets of the U.S. and Europe, where overcapacity has led to consolidation and fewer carriers for planemakers to sell to.

Surging Growth

Close to half the world’s air-traffic growth will involve Asian routes over the next 20 years, according to Boeing Co. marketing chief Randy Tinseth. Carriers from the region will require 12,820 more aircraft, or 36 percent of the global total, Tinseth said in February. Competitor Airbus Group NV puts the figure at 11,000 planes.

“Airlines are not good investments,” said Shukor Yusof, founder of industry consultant Endau Analytics. “It never was even at the best of times. That’s why Warren Buffett has stayed away from it. It’s a very cyclical industry.”

Trying to take advantage of the upcycle in traffic is Bangkok Air, Thailand’s oldest private carrier. The company received orders for more than 1.5 times the amount of stock it offered in its IPO. The airline set the sale price at 25 baht, the midpoint of the marketed range of 23 to 27 baht per share.

Plane Orders

Bangkok Air plans to use the money to buy 18 new planes, mounting competition for regional rivals like Thai Airways International Pcl and Singapore Airlines Ltd.

The last airline share sale in Thailand lost money for investors. Nok Air, a budget carrier controlled by Thai Airways, is trading 44 percent lower than its offer price of 26 baht last year.

“There’s always risks investing in airlines,” said Richardson of Samsung Asset. He bought the carrier’s shares, which he said ended up being “a value trap” and “a mistake.”

Richardson didn’t participate in the Bangkok Air IPO as “I can probably buy cheaper six months later when all the euphoria would have faded,” he said.

Buffett, the billionaire chairman of Berkshire Hathaway Inc., said in March 2001 that he’s off investing in airline stocks after the “mistake” in US Airways.

“Now if I get the urge to invest in airlines, I call an 800 number, and I say: ‘Hello, my name is Warren, and I’m an air-o-holic,’” he said then. “Sometimes, it takes them 10 minutes to talk me out of it, sometimes more.”