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Airline stocks dive as Iran tensions spark oil price surge, fuel-cost concerns

American Airlines shares lead all 6 of the Dow transports’ air carrier components lower

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By Tomi Kilgore, MarketWatch


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Shares of airline companies were broadly lower Friday, as a surge in crude oil prices, fueled by concerns over rising U.S.-Iran tensions, sparked fears of rising fuel costs.

The NYSE Arca Airline Index /zigman2/quotes/210598447/delayed XX:XAL -8.44%  slid 2.1% in afternoon trading, but pared earlier losses of as much as 3.2%. The Dow Jones Transportation Average /zigman2/quotes/210598063/realtime DJT -4.24%  , which includes six airline companies, slumped 1.1% with all 20 components losing ground.

Leading the sector lower was American Airlines Group Inc.’s stock /zigman2/quotes/209207041/lastsale AAL -10.02%  , which tumbled as much as 6.0% intraday before recovering slightly to be down 4.4%.

Among the other Dow transports components, shares of United Airlines Holdings Inc. /zigman2/quotes/205037281/lastsale UAL -12.60%  fell 2.3%, Delta Air Lines Inc. /zigman2/quotes/200327741/lastsale DAL -13.92%  shed 2.1%, Alaska Air Group Inc. /zigman2/quotes/200972303/lastsale ALK -9.41%  gave up 1.9%, JetBlue Airways Corp. /zigman2/quotes/207639051/lastsale JBLU -9.33%  lost 1.9% and Southwest Airlines Co. /zigman2/quotes/201071949/lastsale LUV -7.53%  fell 1.2%.

Cowen analyst Helane Becker had said she expects 2020 to be a “good year” for airlines, despite concerns that a return to service of Boeing Co.’s /zigman2/quotes/208579720/lastsale BA -7.34%  737 MAX aircraft could lead to a potential spike in supply, and some worries that business travel could be curtailed as some companies brace for slower economic growth.

However, her view of a “good year for earnings and [free cash flow] generation for the industry” was based on fuel and non-fuel costs remaining “relatively stable.”

Continuous crude oil futures /zigman2/quotes/209723049/delayed CL00 +0.54%  climbed 3.1%, pulling back from earlier gains of as much as 4.8% to trade above $64 intraday for the first time since April 2019. The rally came in the wake of a U.S. drone airstrike that killed Qassem Soleimani, leader of the foreign wing of Iran’s Islamic Revolutionary Guard Corps.

Don’t miss : Who was Qassem Soleimani, and why is his death a major development in U.S.-Middle East relations?

Rob Thummel, portfolio manager at Tortoise Capital, which manages $22 billion worth of energy assets, suggested investors shouldn’t be too concerned about crude prices, as history suggests any reactionary rally on worries that Iran could retaliate “would likely only be temporary,” and given that U.S. reliance on Middle East oil is at a multi-decade low.

“[Iran’s] drone attack on one of the most critical oil infrastructure assets in the world in September resulted in oil prices rising by 14% over a few days, but 30 days later, oil prices were trading at lower levels than before the attack,” Thummel said. See Futures Movers.

Also read : Why the oil market rally on elevated U.S.-Iran tensions may be short lived.

Elsewhere, Spirit Airlines Inc.’s stock /zigman2/quotes/205782179/lastsale SAVE -7.10%  declined 2.2% and Ryanair Holdings PLC shares /zigman2/quotes/204098489/lastsale RYAAY -3.24%   /zigman2/quotes/202851567/delayed UK:RYA -2.32%  dropped 1.5%.

The U.S.-listed shares of Air Canada /zigman2/quotes/207443554/delayed ACDVF -6.67%   /zigman2/quotes/208264916/delayed CA:AC -5.21%  gave up 3.3%, a day after closing at a record high, after Cowen’s Becker downgraded the Quebec-based carrier to market perform from outperform, citing valuation and concerns that the acquisition of Transat A.T. Inc. /zigman2/quotes/208135931/delayed CA:TRZ -8.21%  may not close until the second half of this year. The stock has doubled (up 101%) over the past 12 months.

The NYSE Arca Airline Index has run up 13.0% over the past three months and the Dow transports has climbed 9.6%, while the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -3.18%  has advanced 9.4%.

/zigman2/quotes/210598447/delayed
XX : ICE Gib Ind
41.44
-3.82 -8.44%
Volume: 0.00
April 1, 2020 11:44a
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/zigman2/quotes/210598063/realtime
US : Dow Jones Indices
7,404.73
-327.59 -4.24%
Volume: 87.69M
April 1, 2020 11:59a
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/zigman2/quotes/209207041/lastsale
US : U.S.: Nasdaq
$ 10.97
-1.22 -10.02%
Volume: 25.82M
April 1, 2020 11:59a
P/E Ratio
2.90
Dividend Yield
3.62%
Market Cap
$5.19 billion
Rev. per Employee
$345,547
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/zigman2/quotes/205037281/lastsale
US : U.S.: Nasdaq
$ 27.57
-3.98 -12.60%
Volume: 10.20M
April 1, 2020 11:59a
P/E Ratio
2.39
Dividend Yield
N/A
Market Cap
$7.82 billion
Rev. per Employee
$448,946
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/zigman2/quotes/200327741/lastsale
US : U.S.: NYSE
$ 24.56
-3.97 -13.92%
Volume: 29.71M
April 1, 2020 11:59a
P/E Ratio
3.37
Dividend Yield
0.00%
Market Cap
$18.26 billion
Rev. per Employee
$499,337
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/zigman2/quotes/200972303/lastsale
US : U.S.: NYSE
$ 25.79
-2.68 -9.41%
Volume: 1.06M
April 1, 2020 11:59a
P/E Ratio
4.16
Dividend Yield
5.82%
Market Cap
$3.49 billion
Rev. per Employee
$353,525
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/zigman2/quotes/207639051/lastsale
US : U.S.: Nasdaq
$ 8.12
-0.84 -9.33%
Volume: 4.29M
April 1, 2020 11:59a
P/E Ratio
4.27
Dividend Yield
N/A
Market Cap
$2.53 billion
Rev. per Employee
N/A
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/zigman2/quotes/201071949/lastsale
US : U.S.: NYSE
$ 32.93
-2.68 -7.53%
Volume: 2.81M
April 1, 2020 11:59a
P/E Ratio
7.75
Dividend Yield
2.17%
Market Cap
$18.42 billion
Rev. per Employee
$373,554
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/zigman2/quotes/208579720/lastsale
US : U.S.: NYSE
$ 138.19
-10.95 -7.34%
Volume: 15.62M
April 1, 2020 11:59a
P/E Ratio
N/A
Dividend Yield
5.94%
Market Cap
$84.15 billion
Rev. per Employee
$660,961
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/zigman2/quotes/209723049/delayed
US : U.S.: Nymex
$ 20.59
+0.11 +0.54%
Volume: 431,596
April 1, 2020 11:49a
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/zigman2/quotes/205782179/lastsale
US : U.S.: NYSE
$ 11.98
-0.91 -7.10%
Volume: 2.21M
April 1, 2020 11:59a
P/E Ratio
2.43
Dividend Yield
N/A
Market Cap
$882.39 million
Rev. per Employee
$431,115
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/zigman2/quotes/204098489/lastsale
US : U.S.: Nasdaq
$ 51.37
-1.72 -3.24%
Volume: 527,047
April 1, 2020 11:59a
P/E Ratio
10.04
Dividend Yield
N/A
Market Cap
$11.57 billion
Rev. per Employee
$624,883
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/zigman2/quotes/202851567/delayed
UK : U.K.: London
9.00
-0.21 -2.32%
Volume: 1.80M
April 1, 2020 4:35p
P/E Ratio
9.71
Dividend Yield
N/A
Market Cap
€10.04 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/207443554/delayed
US : U.S.: OTC
$ 10.56
-0.76 -6.67%
Volume: 48,225
April 1, 2020 11:42a
P/E Ratio
2.58
Dividend Yield
N/A
Market Cap
$2.96 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/208264916/delayed
CA : Canada: Toronto
$ 14.93
-0.82 -5.21%
Volume: 2.91M
April 1, 2020 11:44a
P/E Ratio
2.75
Dividend Yield
N/A
Market Cap
$4.12 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/208135931/delayed
CA : Canada: Toronto
$ 7.83
-0.70 -8.21%
Volume: 93,507
April 1, 2020 11:42a
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$321.98 million
Rev. per Employee
$582,873
loading...
/zigman2/quotes/210598065/realtime
US : Dow Jones Global
21,220.32
-696.84 -3.18%
Volume: 191.17M
April 1, 2020 11:59a
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Tomi Kilgore is MarketWatch's deputy investing and corporate news editor and is based in New York. You can follow him on Twitter @TomiKilgore.

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