Airline stocks jump as American, United hike 3Q forecasts
Posted October 10
NEW YORK — Airline stocks surged Tuesday after American and United slightly sweetened their outlook for third-quarter revenue.
Those two carriers were the biggest gainers among the Standard & Poor's 500.
Investors have grown concerned about slower growth in revenue from tickets and fees, partly due to a fare war between United and discounters such as Spirit Airlines. Heavy discounting threatened to halt a rally in revenue that has helped airlines post strong profits in recent years.
American said that revenue for every seat flown one mile would rise about 1 percent compared with a year earlier, and by an even bigger margin in the fourth quarter. The per mile figure is a closely watched indicator of pricing power in the airline business, and even raising the third-quarter range by a half-point was enough to push American's shares higher.
American credited stronger than expected pricing, which J.P. Morgan said "may prove an important turning point" in investor sentiment.
However, American also noted that hurricanes Harvey, Irma and Maria had led to 8,000 canceled flights and cut pretax income by $75 million.
United still expects third-quarter revenue per seat each mile to fall from 2016, but by 3.75 percent instead of 4 percent, as it forecast a month ago. United also said its profit margin would likely be at least 1 point more than previously forecast because of higher revenue and lower fuel expenses.
Shares of American Airlines Group Inc. jumped $2.43, or 4.8 percent, to close at $53.03; and United Continental Holdings Inc. climbed $3.02, or 4.7 percent, to $67.72. Delta, Southwest, JetBlue and Alaska rose by smaller percentages, but Spirit Airlines Inc. dipped 2 cents to $35.