The skies are looking a little friendlier for the industry many investors love to hate. Airlines reported their June operating metrics earlier this week, and the numbers were as unexpected as a pleasant customer service experience.
The key factor to understanding the airlines' profitability is pretty straightforward, but some reporters still managed to miss it by a wide mark. Here's the real scoop on the latest announcements: When the airlines have excess capacity in the form of empty seats, this lowers margins on flights and kills pricing power on ticket sales. Things are looking good in part because legacy carriers slashed capacity while avoiding an equal decline in passenger traffic.
Personally, I want to reach for the little white bag in the seatback pocket when I think about investing real dollars in an airline. However, I did muster up enough enthusiasm to place an outperform rating on small leisure player Allegiant Travel
Whether you're eyeing a perky upstart or a lumbering legacy carrier, be prepared for turbulence ahead. One month's data does not make a trend, but I'll be watching to see if these stocks are truly headed for cruising altitude.
Got some thoughts on airline stocks? Bring them to CAPS!