Airline stocks slump as jet fuel surge overshadows travel rebound

Airlines trying to claw their way out of two bruising pandemic years are now facing the most expensive jet fuel costs in more than 13 years, overshadowing a recent jump in travel demand and sending shares spiraling. Russia’s invasion of Ukraine last month has set off a global panic around fuel supplies. Now, some analysts expect US carriers to trim first-quarter profit and revenue estimates in the coming weeks after fuel costs rose 32% last week alone. The expense is generally airlines’ second biggest, behind labor. “The higher fuel will more than wipe out better revenue near-term resulting in modest reductions to 1Q22 estimates,” wrote MKM Partners airline analyst Conor Cunningham in a note. The surge in fuel prices — more than 50% so far this year — is the latest challenge for carriers that expect travelers to come back in droves this year as Covid-19 cases fall. Airline stocks have been among the hardest-hit industries in recent weeks as Russia’s invasion threw markets into turmoil. The NYSE Arca Airline Index, which tracks 18 airlines, dropped more than 13% on Monday. Shares of United Airlines fell 15% on Monday to finish the day at $31.20, the lowest since July 2020. Delta Air Lines dropped nearly 13% to $30.11, while American Airlines fell 12% to $12.84, those stocks’ lowest closing prices since October 2020 and November 2020, respectively. Airlines are limited in how much they can trim capacity to raise fares as they chase passengers returning to the skies. For the second quarter, U.S. domestic schedules are flat compared with 2019 “and we doubt much capacity will be cut given the increased competition for the leisure customer,” Andrew Didora, Bank of America airline analyst, said in a Monday research note. Didora said travel demand should outpace supply, particularly during peak leisure times, “but it will not create nearly enough pricing to offset the fuel move.” Story has more.<br/>