Why Airline Stocks Have Underperformed Broader Markets in 2019


Jun. 14 2019, Updated 8:06 a.m. ET

Airline stocks underperformed

The majority of the airline stocks have underperformed the broader market returns this year so far. The US Global Jets ETF (JETS), which invests in cargo and passenger airlines, is up 9.6% YTD. The ETF has underperformed the major US indexes, including the Dow Jones, the NASDAQ, and the S&P 500, which have gained 11.9%, 18.1%, and 15.3%, respectively, YTD.

Among the major US air carriers, Spirit Airlines (SAVE) is the worst performer. The stock has lost 11.3% of its value this year so far. United Airlines (UAL), American Airlines (AAL), Hawaiian Holdings (HA), and Alaska Air Group (ALK) have increased in the low-single-digit range of 4%, 3.1%, 2.5%, and 2.3%, respectively. Delta Air Lines (DAL) and Southwest Airlines (LUV) were the few carriers that recorded a double-digit gain in their share prices of 13.3% and 12.7%, respectively.

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Bumpy ride in 2019

Multiple headwinds have been responsible for airline stocks’ dismal performance this year so far. Uncertainty about the US-China trade negotiations and rising concerns of a global slowdown kept the entire market highly volatile throughout this year.

Also, investors turned cautious after the majority of airlines reported sluggish top-line growth in the first quarter of 2019. The carriers noted that business disruptions due to severe winter conditions, the partial government shutdown, and the worldwide grounding of Boeing 737 MAX planes hurt their overall performance in the first quarter.

American Airlines reported over 2,140 cancelations in the first quarter due to government shutdowns and the grounding of its 24 Boeing 737 MAX planes. Southwest Airlines (LUV) faced 9,400 cancelations due to unscheduled maintenance disruptions, unfavorable weather, and ongoing troubles with MAX jets.

Boeing 737 MAX jets are unlikely to resume flight before September. American, Southwest, and United Airlines, which together own 72 of the aircraft, have extended their MAX 737 flight cancelations through August. The longer the MAX series planes remain grounded, the longer it will continue to hurt these airlines’ top-line performance.


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