US: Airlines’ 2016 dive deepens to worst in five years

US airline stocks moved closer to their biggest annual decline in five years after Credit Suisse Group AG said a critical financial gauge won’t turn positive until the end of next year and trimmed earnings estimates for the largest carriers through 2018. Rising fuel prices, an unwillingness to reduce capacity growth and increased labour costs are adding to a gloomy outlook for carriers that are already contending with sustained declines in passenger revenue for each seat flown a mile, Julie Yates, an analyst at Credit Suisse, said in a note to clients Wednesday. She cut her recommendation on American Airlines to sell from buy, while dropping United Continental to hold from buy. The Bloomberg U.S. Airlines Index has tumbled about 26% in 2016, putting it on track for the largest annual decline since 2011. The drop has been fueled by stepped-up concerns that carriers haven’t acted to curb growth of available seats that’s expanding faster than gross domestic product, a proxy for travel demand. Revenue for each seat flown a mile at the largest carriers has declined on an annual basis for more than a year. “Since January, we are less optimistic overall on the industry’s ability to recapture pricing in a rising fuel environment, particularly outside the US,” Yates said. “Capacity growth continues to outpace GDP in all regions and the industry’s willingness to trim growth with oil still in a historically inexpensive range of $50 a barrel is low.”<br/>