Jul 20, 2017
A Midsummer Night’s Dream! Time to travel to the lakes, the
beach, and the mountains. The Airline Transportation industry is
what caught my attention in July. Zacks Industry Rank System
put Airlines at #13 out of 265 industries we rank. That puts this
25-company strong group into the top 5%.YTD returns have been
+19.8%, while the S&P500 offered +10.8%. This spells out a nice
share price outperformance. But can it continue?
The airline industry shoulders a lot of significant risks.
Macro factors like sudden shifts in personal disposable income and
spending patterns, safety concerns like terrorist attacks, oil
price shocks, and covering analyst sentiment, all of these can turn
quickly. They weigh on airline profits.
In addition, the USA “welcome mat” has been selectively removed
from our airports, gratis the President’s Travel Ban. The world’s
tourists (more broadly) have taken notice. In March, Tourism
Economics forecasts had projected 4.3 million fewer visitors to the
USA in 2017, with $7.4 billion in lost revenue. Let’s see what
actually happens. The U.S. Supreme Court will hear arguments and
write its opinion on the travel ban later this year, or early next
As to longer-term risk management --going forward-- look for
order deferrals on large aircraft. This is not usually a good sign,
on future demand at that particular airline.