Wage hike at American sends airline stocks lower

|By:, SA News Editor

A decision by American Airlines Group (AAL -6.9%) to raise wages is creating a ripple of worry in the airline sector.

JPMorgan lowers its rating on AAL to Neutral from Overweight amid a shift in mindset on its bullish view of the sector.

'We do feel as if the first credible blow to our thesis can potentially be made by naysayers and skeptics. Establishing a precedent that labor contracts are seemingly temporary in nature, and subject to change at the request of one party, represents a potential step back in regards to what we felt was an increasingly time-tested thesis," explains analyst Jamie Baker.

"Hopefully, this serves merely as a glance instead of a true body blow for the sector, one that in coming years we will not look back on with the same level of clarity as the numerous positive events we’ve witnessed over the last several years," he adds.

Cowen and Raymond James also say they were caught off-guard by American's pay hike.

Sector movers: United Continental (UAL -3%), Delta Air Lines (DAL -2.7%), Spirit Airlines (SAVE -1.7%), Alaska Air Group (ALK -4.4%), Allegiant Travel (ALGT -2.7%) and Southwest Airlines (LUV -3.2%), which also reported earnings today.