Airline stocks experience volatility, leading to year-to-date losses

In recent times, the airline world has seen some ups and downs. Big names like American Airlines (AAL), United (UAL), JetBlue (JBLU), and Delta (DAL) have hit a rough patch in the latter part of the year. This comes after making good progress in the first half of the year, thanks to an increase in trips known as “revenge trips”. Surprisingly, Delta is the only major airline that still has the green light for the year, although it is down from its peak in the summer.

Something interesting is happening here. U.S. airlines that fly internationally fare better compared to those that fly primarily domestically. Chris Raite, an expert in this field, says: “Things are changing. International travel makes more money, which means it can be more competitive.”

One way to track airline performance is through something called the US Global Jets ETF (JETS). This measures the performance of different airlines. But here’s the thing: it’s down 30% in the last three months. This is a big drop from the 30% increase it experienced in the first part of the year.

The third quarter results show that the industry is going through a rough patch. There are talks about labor and the cost of jet fuel has gone up. Recently, United’s stock price fell 9%. This came after they said their future profits might not be as high due to problems with flights to Tel Aviv due to the conflict between Israel and Hamas and rising fuel costs.

It’s no surprise to those watching the stock market that jet fuel has become more expensive. Airlines had already warned last month that this could affect the amount of money they make.

Delta CEO Ed Bastian reminded everyone in October that while the outlook for how much money they will make has improved, they are still spending more due to higher fuel and maintenance costs.

American’s stock price rose after a three-month low. They made more profits than Wall Street expected. But they also said they expect to spend more on fuel and that people might not travel as much.

Another big challenge for airlines this year is that it is more expensive to pay the people who work for them. This is because there are not enough pilots and airlines have had to talk to their workers about how much they should be paid.

All airlines are dealing with higher costs, but those that fly primarily domestically and are low-cost appear to be the hardest hit. If you look at how their stock prices have changed from the beginning of the year to now, companies like Frontier (ULCC), Mesa Air (MESA), JetBlue, Southwest (LUV), Alaska Air (ALK), and Spirit (SAVE) have lost a lot. Most of them were doing better in mid-July, but have been declining since then.

By comparison, American’s stock price is 8% lower, United’s is down 2%, and Delta’s is up nearly 2%.

The number of people traveling has a great impact on the performance of these airlines. In 2021 and 2022, people in the US took shorter trips due to the pandemic. But this year, more people want to go places outside the country. This helps airlines that fly internationally, but makes things harder for airlines that are cheaper in the US.

Big airlines have changed what they do to respond to this. United, for example, plans to have more seats on its flights within the United States.

American CEO Robert Isom recently said they want to offer flights to smaller places in the United States. This is part of your plan to make more money.

There don’t seem to be enough pilots, and this seems to be affecting the low-cost airlines that fly primarily domestically more than the larger airlines.

Although things are a little shaky right now, the people who run these airlines don’t seem to think there’s going to be a recession. They have made changes to their planes to make them more attractive to people who can spend more money. United, for example, will have more first class seats by 2027.

So while there are some problems, big airlines like United, American, Delta, and Southwest are better positioned to handle them compared to smaller, low-cost airlines. It’s like flying in rough air, but they are prepared for it.