Downgrades of airline stocks due to natural disaster and fuel price hike

Published on : Friday, September 15, 2017

Boeing 737 Southwest Airlines takes off from McCarran International AirportJP Morgan has emerged as one of the latest brokerage firm to turn a handful of negative stocks.



JP Morgan singled out the airline industry leaders like American Airlines (AAL), and United Continental Holdings (UAL) together with a budget carrier Spirit Airlines as biggest victims of the aviation industry.



The stock market Analyst Jamie Baker and his colleagues noted that the current consensus hints that fourth quarter Revenue per Available Seat Mile (RASM) metrics could be set to improve.



The passenger revenues are predictable to come under the further pressure from the ongoing pricing wars between major airlines of USA and discount carriers. It is now a conundrum that has already triggered a sell-off across the sector.



Aside from being forced into lowering prices to remain competitive, the airlines authorities will also have to challenge with surging costs, owing to the recent rise in the price of jet fuel.



The Hurricane Irma and Harvey have driven up the cost of jet fuel, which causes the major disaster in the aviation industry.



Given that airlines buy millions of gallons of the stuff to power their planes, this situation is expected to impact profits across the sector.



This stock share company has also upgraded the Southwest Airlines from neutral to overweight, arguing that  it is the largest low-cost carrier offers, with an attractive valuation and better risk-reward profile compared to rival companies of aviation industry.




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