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US airline stocks rise, capacity growth slows in November

Teresa Cederholm

November US airline stocks rise, volume and capacity growth slow (Part 1 of 12)

Share price movement in November

Stock prices of major US airlines increased at an average rate of ~15.8% during November 2014. The rate of increase in the NYSE ARCA Airline Index (8.2%) was more than triple the S&P 500 index (2.5). The airline index increased by ~42% on a year-to-date basis from 69.45 in the beginning of the year to 98.44 at the end of November. The fall in crude oil prices created the driving factor for the share price rise of airline stocks in the past few months.

Share price growth

During November, the highest share price growth of 24.6% was recorded by JetBlue Airways (JBLU), followed by Southwest Airlines’s (LUV) 18.4%, American Airlines’s (AAL) 15.5%, Delta Air Lines’s (DAL) 14.9%, United Continental’s (UAL) 12.8%, and Alaska Air Group’s (ALK) 8.5%. ETFs such as the SPDR S&P Transportation Index (XTN) and the iShares Transportation Average ETF (IYT) that have a major holdings in the airline stocks have benefited from rising stock prices.

During the month, there was a downward revision to GDP estimates, reflecting a slowdown in economic growth. Demand and capacity growth is positive, although the rate of growth was slower in November than in October. However, margins will be positively impacted by lower input costs and higher yields.

Profits and growth

The increase in corporate profits will support growth in business travel. Employment in the airline industry has been increasing over the last few months. Improving earnings and profitability enabled airline companies to increase investment, reduce debt, and provide good returns to shareholders.

The discussion of important indicators of airline performance covered in this series is intended to provide investors with a consolidated overview of trends in the airline industry.

Continue to Part 2

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