American, United Jump as Airline Investors Bet Worst Is Behind Them
(Bloomberg) -- American Airlines Group Inc. led a surge in U.S. airline stocks as investors bet that strong travel demand and lower fuel prices will help carriers extend a rebound following the industry’s first-half rout.
Jet fuel prices have settled below $2.20 a gallon in recent weeks after climbing as high as $2.28 in May. Scheduled talks between China and the U.S. hold out the prospect of easing trade tensions and therefore a better outlook for business trips. And airlines have vowed to slow expansion plans in an effort to raise prices by paring growth in the seat supply.
“The stocks have been under so much pressure and have performed so badly all year long,” Helane Becker, a Cowen & Co. analyst, said in an interview. “They may have bottomed.”
American jumped 5.8 percent to $39.99 at the close, its best gain in 10 months. United Continental Holdings Inc. advanced 3.9 percent, the second-largest gain on a Standard & Poor’s index of the five biggest U.S. airlines. The industry gauge has climbed 16 percent since hitting a 2018 low on June 27, more than twice the increase in the S&P 500 Index.
In an interview Monday, American’s president, Robert Isom, said the company is already seeing “great signs” of progress in its efforts to increase sales, cut costs and improve product offerings.
“We know we can do better and we’re doing everything we can to accelerate the initiatives we have out there,” Isom said. “We are seeing great signs that they are taking root.”
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