Airlines were the unusual declining group in a session of mostly ebullient gainers, as investor concerns over rising oil prices overshadowed positive pricing trends.
American Airlines (AAL -4.7%) posted the second worst drop on the entire S&P 500, while the likes of United Continental (UAL -1.4%), Southwest (LUV -1.3%), Delta (DAL -0.4%), JetBlue (JBLU -0.7%) and Spirit Airlines (SAVE -1.4%) finished with milder losses.
American and United have stopped buying hedging contracts that lock in fuel costs and reduce volatility, making them vulnerable if crude prices continue to climb, and there is added risk for Delta even though it owns an oil refinery, Bloomberg reports.
“It’s still far too early in the year to make a call on how fuel shapes up for the balance of 2018, but we believe investors will closely monitor fuel developments to assess the achievability of American’s and others’ guidance,” says J.P. Morgan's Jamie Baker.
While carriers usually can boost fares to cope with higher fuel costs, there is typically a six-month lag in raising ticket prices, according to Macquarie analyst Susan Donofrio.
ETFs: JETS
