Airlines Jump as Spirit Air Boosts Industry Comeback Optimism

(Bloomberg) -- Airline stocks extended this month’s rebound, outperforming the broader market Tuesday after Spirit Airlines Inc.’s upbeat outlook suggested the industry’s turnaround may be gaining momentum.

Spirit surged as much as 22 percent, the most on record, and the S&P Supercomposite Airlines Industry Index was up nearly 2 percent. The S&P 500 Index was little changed. The airline index, which does not include Spirit, has risen more than 8 percent in November, while the S&P 500 heads for a second consecutive monthly decline. The top performers Tuesday were Delta Air Lines Inc., United Continental Holdings and Southwest Airlines Co.

Airlines are rebounding after a tumultuous year. It started off with a scare about capacity expansion that typically weighs on carriers’ pricing power and was followed by a surge in fuel costs, prompting many companies to warn about thinning margins. With oil prices starting to retreat over the past couple months, investors have been moving back into the stocks. Spirit’s commentary about a strengthening industry environment is another vote of confidence.

“Much of Spirit’s revenue improvement is company-specific, but the better-than-expected off-peak yield management suggests revenue upside across the board,” Buckingham Research analyst Daniel McKenzie wrote in a note.

Spirit’s outlook also lessened the blow from Southwest’s warning about cost pressures lingering after 2019. The airline index dipped lower on the news, but revived quickly.

To contact the reporter on this story: Esha Dey in New York at edey@bloomberg.net

To contact the editors responsible for this story: Courtney Dentch at cdentch1@bloomberg.net, Richard Richtmyer, Will Daley

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