The beleaguered airline industry may finally be seeing a shift in tides after a couple of positive fourth-quarter earnings reports. The exchange traded fund (ETF) that targets the sector has enjoyed a 6.3% gain year-to-date.
A few U.S. airliners posted modest gains in the fourth quarter, aided by lower-than-expected fuel costs, reports Ann Keeton for The Wall Street Journal. Companies like Southwest Airlines (NYSE: LUV) are using a combination of financial tools to hedge against rising fuel prices. Southwest expects average fuel costs to rise around $2.35 a gallon, or up into the $100- to $120-a-barrel range, this year. [Why the airline ETF may be ready to take off.]
However, companies that were hedging against rising oil prices lost millions last year after they locked in above-market prices. Southwest says that’s the industry’s greatest risk this year, too.
Both Southwest and Continental (NYSE: CAL) reported profits in the fourth quarter, thanks to lower-than-expected fuel costs.
AMR Corp. (NYSE: AMR), parent company of American Airlines, posted a $1.5 billion loss for 2009, according to Portland Business Journal. The good news is that the company’s percentage of total seats filled reached 81.1% in the fourth quarter, up from 78.3% a year earlier. AMR Corp. stated that it has $4.9 billion in cash and short-term investments and a restricted balance of $460 million.
Airline stocks were caught up in the wider market selloff on Thursday after posting fourth-quarter gains, writes Christopher Hinton for MarketWatch. The NYSE Arca Airline Index surged more than 32% in the last three months on increased demand for flights. However, the potential liquidity issues in the industry and cautious outlook on January revenue growth has cooled investor exuberance. [Increases in passenger traffic.]
For more information on airliners, visit our airlines category.
- Claymore/NYSE Arca Airline ETF (NYSE: FAA): AMR is 15.7%, LUV is 14.8%
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.