March 12, 2019, 3:10 p.m. EDT

Airline stocks fall, even those without 737 Max exposure

NYSE Arca Airline index heads for 10th decline in 11 sessions

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By Tomi Kilgore, MarketWatch


Reuters
A Boeing 737 MAX at a Paris air show

Airline stocks were broadly lower Tuesday, as regulatory authorities around the world grounded the 737 Max aircraft, made by Boeing Co., following a second deadly crash over the weekend.

The NYSE Arca Airline Index /zigman2/quotes/210598447/delayed XX:XAL -0.48% fell 0.2% in afternoon trade. On Monday, the index had gained 1.2% to snap a 9-session losing streak. The Dow Jones Transportation Average /zigman2/quotes/210598063/realtime DJT +0.72%  eased 0.2%, with the index’s four biggest decliners all air carrier shares. That compares with the S&P 500 index’s /zigman2/quotes/210599714/realtime SPX +0.45%  0.5% gain.

Boeing’s stock /zigman2/quotes/208579720/composite BA -4.28%  tumbled 6.0%, after shedding 5.3% on Monday. The combined drop of 11.0% is the biggest two-day selloff in nearly 10 years. The extended selloff comes despite the U.S. Federal Aviation Association saying it had no plan to ground the jet, as more than a dozen aviation regulators and air carriers from overseas have banned the 737 Max 8 and a number of congressional leaders have called for a grounding.

Don’t miss : Boeing 737 Max’s world is getting smaller: These countries have grounded the jet.

Also read : Here’s how to find out whether your next flight is on a Boeing 737 Max.

Analyst Helane Becker at Cowen & Co. said it is “impossible to handicap” how regulators, politicians, airlines and customers will react to the tragedies and grounding. However, she said if bookings were to weaken, “it would likely be temporary” given the relatively small size of the Max aircraft relative to overall aircraft in the U.S.

Among some of the more active airline stocks, shares of American Airlines Group Inc. /zigman2/quotes/209207041/composite AAL +0.76%  gave up 2.1%, Southwest Airlines Co. /zigman2/quotes/201071949/composite LUV +0.79% dropped 2.3%, United Continental Holdings Inc. /zigman2/quotes/205037281/composite UAL +0.68% slid 2.6% and Alaska Air Group Inc. /zigman2/quotes/200972303/composite ALK +1.47% shed 2.3%. Read more about Southwest’s stock selloff.

See also : Flight attendants union requests FAA investigation into Boeing 737 Max.

See related : Warren calls for Congress to question if Trump is protecting Boeing.

Elsewhere, the Canada-listed stocks of Air Canada /zigman2/quotes/208264916/delayed CA:AC -0.61% fell 2.7% and of WestJet Airlines Ltd. /zigman2/quotes/200287836/delayed CA:WJA +0.07% lost 1.9%.

“Our major concern is related to changes in future bookings as a result of the tragedy,” Becker wrote in a note to clients. “This is an important time for the airlines as we head into the peak travel season, given the importance of 2Q and 3Qs in terms of overall profitability.”

The following are the companies that Becker covers with the exposure to the 737 Max family of jets, according to data from data firm Diio Mi, company reports and Cowen:

Airline 737 Max jets Total fleet count 737 Max jets as % of capacity in 2018
WestJet 11 177 5.8%
Air Canada 18 391 3.7%
Southwest Airlines 31 750 3.4%
American Airlines 20 1,551 0.9%
United Continental 9 1,329 0.4%
Copa Airlines 4 105 N/A
Alaska Air 0 330 0.0%
Diio Mi, Cowen & Co., company reports

“The cause of the Ethiopian [Airlines] crash is not yet known, and we do not expect any firm conclusions until after a comprehensive investigation, which could take several weeks,” Canaccord Genuity analyst Ken Herbert wrote in a research note.

Meanwhile, shares of Delta Air Lines Inc. /zigman2/quotes/200327741/composite DAL +0.58%  slipped 0.2% and JetBlue Airways Corp. /zigman2/quotes/207639051/composite JBLU +1.00%  tacked on 0.1%, while Spirit Airlines Inc. /zigman2/quotes/205782179/composite SAVE +1.48% eased 0.3%.

Becker said Delta, JetBlue and Spirit had no exposure to the 737 Max. Others with no exposure included Hawaiian Holdings Inc. /zigman2/quotes/203188135/composite HA +2.36% , Allegiant Travel Co. /zigman2/quotes/208507686/composite ALGT +0.89% , Mesa Air Group Inc. /zigman2/quotes/201991362/composite MESA +1.56%  and SkyWest Inc. /zigman2/quotes/205631497/composite SKYW +0.71%

Click to Play

Ethiopian Airlines’ Boeing 737 MAX 8 Crash: Three Things to Know

An investigation has been launched after an Ethiopian Airlines Boeing 737 MAX 8 crashed shortly after takeoff on Sunday, killing all on board. WSJ aerospace reporter Robert Wall discusses the possible focus of the investigation, and more. Photo: Getty Images

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103.23
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Dividend Yield
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Market Cap
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Rev. per Employee
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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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