US: Airline shares fall again as investors worry about capacity, price wars
US airline shares sunk further Thursday as quarterly reports from American Airlines and Southwest did nothing to quell investors’ fears that carriers’ plans to expand capacity will lead to lower fares just as the industry faces rising costs. Fears about the resulting hit to bottom lines sent the NYSE Arca Airline Index .XAL down 2.4%. It is down more than 5% since Tuesday, when United Continental surprised the market with unexpectedly aggressive expansion plans through 2020. “The planned elevated capacity growth in 2019/20 will raise concerns about supply and destructive competitive response,” said Raymond James analyst Savanthi Syth in a research note. More competition and cheaper fares are a boon for travelers, but represent a worst-case-scenario for airlines and their shareholders as carriers have only recently begun improving unit revenues after a two-year decline. Fuel prices are at nearly a three-year high and relatively rich labour contracts agreed with pilots and flight attendants have dramatically increased airlines’ unit costs. The three largest US carriers - American, Delta and United - have all shelled out for pricey pay increases to employees after fractious and public negotiations.<br/>
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US: Airline shares fall again as investors worry about capacity, price wars
US airline shares sunk further Thursday as quarterly reports from American Airlines and Southwest did nothing to quell investors’ fears that carriers’ plans to expand capacity will lead to lower fares just as the industry faces rising costs. Fears about the resulting hit to bottom lines sent the NYSE Arca Airline Index .XAL down 2.4%. It is down more than 5% since Tuesday, when United Continental surprised the market with unexpectedly aggressive expansion plans through 2020. “The planned elevated capacity growth in 2019/20 will raise concerns about supply and destructive competitive response,” said Raymond James analyst Savanthi Syth in a research note. More competition and cheaper fares are a boon for travelers, but represent a worst-case-scenario for airlines and their shareholders as carriers have only recently begun improving unit revenues after a two-year decline. Fuel prices are at nearly a three-year high and relatively rich labour contracts agreed with pilots and flight attendants have dramatically increased airlines’ unit costs. The three largest US carriers - American, Delta and United - have all shelled out for pricey pay increases to employees after fractious and public negotiations.<br/>
