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What had been a strong two-week rally that had seen the Dow Jones U.S. Airlines Index (DJUSAR) rise more than 5% may be coming to an end.
On Friday, shares of United Continental Holdings (NYSE: UAL) fell more than 10% in intraday trading after the airline disclosed disappointing second-quarter revenue expectations and a $110 million charge related to its Mileage Plus program. AMR Corp. (NYSE: AMR), parent company of American Airlines, fell more than 6% the same day.
Investors didn't like what United and American had to say about growth. Both carriers have suffered from weird weather in recent months, resulting in canceled flights and lower revenue. UAL, in particular, said June revenue per seat mile increased 3% to 4% -- well off what analysts say was a 15% increase in May, Bloomberg reports.
Both AMR and UAL are recovering slightly this morning, but not of their own accord. Delta (NYSE: DAL) is lifting shares of both carriers and US Airways (NYSE: LCC) after reporting a projected 10% increase in revenue per seat mile (RASM) for the second quarter, MarketWatch says.
Looking beyond Q2, falling oil prices combined with jam-packed aircraft could conspire to push RASM higher even as costs per mile decline. No wonder airline stocks are rallying today. There's no better equation for transportation investors.
But what looks good today could just as easily go bad tomorrow. How would you trade airline stocks right now? Please vote in the poll below and then leave a comment to tell us what you think about airline stocks right now.
