The NYSE Arca Airline Index hit a six-year high yesterday after crude oil prices fell again.
JPMorgan sees clear skies ahead for Delta Air Lines (DAL) and US Airways (LCC), upgrading the pair to Overweight.
Despite consumer spending restraint in the U.S., demand for air travel has held up. Carriers such as JetBlue (JBLU) and United Continental (UAL) are showing improvement in load revenue and passenger revenue per available seat miles.
A drop in oil prices has helped lift airline stocks on the day.
All in all, it's been a week of good news for the sector with Delta Air Lines being tagged for inclusion in the S&P 500 Index and the latest outlook on the American-US Airways merger leaning favorable again.
Airline stocks start the day off strong after the DOJ indicates a willingness to settle its suit with American Airlines (AAMRQ.PK) and US Airways if certain concessions are met.
A combination of American and US Airways is viewed as positive for the sector due to the capacity discipline that fewer carriers would most likely present as opposed to a freestanding post-bankruptcy American.
A good portion of the confusion over the airline industry is the change in direction by the Justice Department after it backed mega-mergers in the past - but became defiant in the face of a American Airlines (AAMRQ.PK) - US Airways combination.
Despite the jolt to the sector delivered by the DOJ, some enthusiasm is starting to build back up again as more analysts see capacity discipline surviving either way the merger battle goes.
The wiring fault on fire extinguishers for engines of All Nippon Airways Boeing (BA) 787 aircraft was due to improper assembly of bottles at the supplier, Boeing says.
The problems, which were discovered on Wednesday, wouldn't have presented a flight-safety issue, as the jet has other means of putting out engine fires, the company says.
United Continental Holdings (UAL) has also reportedly found at least one instance of the improperly assembled extinguishers.
Meanwhile, Canada has belatedly ordered an inspection of Honeywell (HON) made emergency beacons on most Boeing and Airbus (EADSF.PK) jets after one of the devices was linked to a fire on an Ethiopian Airways 787. The order comes over two weeks after Boeing recommended such checks on a number of its models.
Execs with United Continental (UAL -4.9%) and Southwest Airlines (LUV -2.2%) blame in part the lingering impact of government sequestration and higher tax rates for the soft demand in the sector. Investors seem to have expected a bit more out of today's numbers reported by the carriers as both stocks trade lower. The slip in Southwest could also be attributed to a comment from CEO Gary Kelly that the company isn't looking to add baggage fees anytime soon while United set a cautious tone during its conference call. (Earnings: LUV, UAL)