(U.S. airline stocks rose, heading for the longest rally in a month, as analysts from JPMorgan Chase & Co. and Cowen & Co. said pessimism about revenue growth may be easing.
Wall Street is approaching a “sentiment inflection point” with the industry, as carriers begin to curb growth in seating capacity in 2015 and “airlines attempt to regain investor confidence,” Cowen’s Helane Becker said in a note to clients. JPMorgan’s Jamie Baker said fares are climbing this month.
“Nearly every major airline stated they have a downward bias towards capacity growth for the second half as growth in the U.S. economy slowed from initial expectations,” Baker said in a note.
The Bloomberg U.S. Airlines Index gained 2 percent at 11:03 a.m. in New York, with 10 of the 11 carriers advancing. An increase for the gauge on Monday would be the fourth in a row, the most since May 11.
Investors have been concerned that airlines’ capacity expansion will erode passenger revenue for each seat flown a mile, a benchmark for the industry. So-called unit revenue has been falling this year as U.S. carriers such as Southwest Airlines Co. and Spirit Airlines Inc. add seats faster than growth in U.S. gross domestic product.
Minor price increases are succeeding in domestic markets, and the U.S. fare structure is “$3 to $8 one-way higher than two weeks ago,” Baker wrote. Delta Air Lines Inc.’s bid for a $2 one-way boost fell apart over the weekend, but “we aren’t uniquely surprised” after carriers’ recent increases succeeded, he wrote.
This article was written by Lauren Thomas from Bloomberg and was legally licensed through the NewsCred publisher network.