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Airline Stocks- The Easy Days Were Yesterdays

While the major equity indices scrape new highs, airline stocks remain distinct laggards. Most are trailing by substantial margins.  The industry continues to work on managing through the post-consolidation era, as evidenced by the recent efforts by UAL and AAL to firm up their management teams.  The bonanza of lower fuel prices provided a huge tailwind during the later stages of this process.  It gave the carriers the cash profits to fund integration tasks and appease a restless labor force. But that gift does not seem inclined to keep on giving.  While the broader economy is still in recovery mode, it is delivering subpar growth and employment numbers.  The retail sector is closing stores and downsizing – never a good sign for a cyclical industry like air transportation.  Many investors question the buoyancy of the current stock market, observing that, despite all the talk about interest rates rising in response to the “strong” economy, rates have actually been dropping.  How will aviation stocks in the post-consolidation era perform if a real recession comes along? That is the big question!

airline-stocks-aug-2016

 


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