It seems the airline industry simply can’t catch a break. After nearly two years of declining demand, travel prospects were finally up as Covid-19 restrictions began to loosen. Unfortunately, airline stocks are facing more headwinds as rising jet fuel costs eat into profit margins.
So, what’s going on with these high-fliers lately?
Well, as a consequence of Russia’s invasion of Ukraine, oil, gas and other forms of energy have seen a steep supply shock. Reasonably so, as Russia is the second-largest producer of natural gas in the world. Russia’s conflict in Ukraine, in addition to brutal sanctions levied against the country, have lifted the price of oil to decade highs.
As the cost of oil increases, jet fuel costs have expectedly skyrocketed to more than 13-year highs. Despite expectations of a resurgence this quarter in the airline industry as the demand for travel returns with waning Covid-19 cases, higher fuel costs will likely wash away any expected gains.
So, what’s going on with airline stocks amid rising fuel costs?
Airline Stocks Face Volatility
The NYSE Arca Airline Index, which tracks a number of major airlines, suffered a major pullback Monday, losing more than 13%. Today, however, it is up 4% at the time of writing. The past several days have seen many airlines see brutal losses amid sweeping selloffs. American Airlines (NASDAQ:AAL) saw its value dwindle from more than $19 earlier this year to yesterday’s closing price of $12.77. At the time of writing, AAL stock is up about 3%.
This morning most airline stocks have been trading roughly flat, with United (NASDAQ:UAL), Delta (NYSE:DAL) and Spirit (NYSE:SAVE) each up between 1% and 2% at the time of writing. With that said, at the time of writing JetBlue (NASDAQ:JBLU) is up a little more, currently enjoying a 3.5% gain.
Airlines will likely continuing experiencing turbulence as the price of oil remains in flux. However, investors will surely have their eyes on the skies as market forces continue to unfold.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
