Airline stocks drop to 4 month lows as Stella grounds thousands of flights

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How low can they go?

Airline stocks fell for a second straight day on Tuesday as investors weigh the potential fallout that winter storm Stella – and the thousands of cancelled flights it has caused – on the sector’s bottom line.

United Continental, which counts Newark, one of three New York-area airports, as one of its regional hubs, led the decline, dropping by as much as 4.2 per cent to a four month low of $66.90. The loss comes after the stock closed 3.4 per cent lower on Monday.

Other major airlines also saw their shares briefly drop to November lows, with American Airlines trading as low as $40.84 after dropping another 3.6 per cent and Delta Air Lines, the country’s largest carrier by market value, down 2.5 per cent to $46.18.

Southwest Airlines fell 2.5 per cent to $53.16, a one month low.

The sell-off comes as a late winter storm barreled down the US mid-Atlantic and northeast coast. FlightAware, which tracks flight cancellations, said that 5,515 flights within, into or out of the US have been called off for today while another 2,022 are experiencing delays.

While the airlines are no strangers to revenues lost from flight cancellations and disruptions, the sector has less wiggle room to offset the sales decline with lower fuel costs.

“More than 5,000 flights are cancelled today and that will have an impact on the business,” said Helane Becker, analyst at Cowen. “A lot of business trips were canceled. Some were rescheduled but some will not be. Again, it’s an impact on the business.”

Indeed, carriers have been cautioning about tougher trading conditions for this year as the rebound in oil pushed fuel prices back up. Delta unexpectedly cut its guidance on a number of key metrics earlier this month after it said fare hikes have been unable to keep up with the pace of fuel price and wage increase.

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