Airline Stocks (and Airfares) Ready for Takeoff

 

Many domestic airlines saw their stock prices begin to rise late Friday after a turbulent first half of the year, according to a report by the Associated Press—a trend that has continued thus far into this week.

This news may end up being costly to passengers, however, as the rally began after several of the airlines started hiking their airfares. Delta tacked on $2 each way to many of their domestic routes, and those tracking ticket prices on Southwest saw a $5 hike on several flights. JetBlue and other U.S. based airlines have also raised ticket prices, typically between $1 and $4 each way. There’s no current indication as to whether further price bumps to other routes are in the works.

The increases spurred stocks to rise for Delta (DAL), United (UAL), Southwest (LUV), JetBlue (JBLU) and American Airlines (AAL) between 2.6 and 4.4 percent, and have continued to go up between 1.5 and 3 percent since trading opened Monday morning. Since the beginning of 2015, stock prices for airlines had been down 9 percent, according to the Arca index. Domestic airlines had been down between 16 and 25 percent since start of the year.

This came just as oil prices fell more than $1 per barrel, which could translate into lower fuel prices for the airlines. Passengers aren’t able to take advantage of the potential savings, as airlines are known to base their airfares on demand rather than operating costs.

This could be just the beginning of the rise of stocks (and airfares), as Barron’s reported on Saturday that airline stocks could go up as much as 50 percent over the course of the year.

Airlines made the move to increase airfares after stock prices dipped in May. Just a month ago, there was a selloff of U.S. airline stocks, as many announced expanded capacities, which investors feared would lead to decreases in ticket prices and profit margins.