Airline Stocks Soar Into the Weekend on New Fees and Cheap Oil
To wear down a tired pun, airline stocks took off on Friday afternoon. United Air Lines (NYSE:UAL) led the rally with nearly 6 percent gains, followed by Delta (NYSE:DAL) at plus 2.23 percent, and Southwest (NYSE:LUV) at plus 1.36 percent. Outside of broad success in cutting costs and increasing revenues, a stronger dollar and generally lower oil prices, catalyzed by Friday’s better-than-expected jobs report, have investors showing the industry affection.
What was particularly interesting about United’s price movement on Friday was that it punctuated ostensibly poor operational performance results for February, which were released on Thursday. Revenue passenger miles — a function of the number of miles traveled by paying passengers — declined 3.4 percent for the month compared to the same period last year, while available seat miles — a measure of capacity — dropped 8.4 percent for the same period. However, consolidated passenger revenue per available seat mile increased between 6.5 and 7.5 percent, year over year.
A new fee structure, based on providing more services for more money, could also be helping things. Looking for ways to increase revenues, charging extra fees for extra amenities is nothing new; on the back of an average decline of 15 percent for airfares since 2000, fees for optional services has helped keep the industry afloat…