Packed planes. Sky-high airfare. An end to Covid testing for international arrivals. So much is going in airlines’ favor these days — except their share prices.
The sector’s latest drop is surpassing a broad market swoon as investors weigh the chances of a recession and just how aggressive the Fed will get to tamp down the sharpest increase in consumer prices since the early 1980s.
American Airlines was off nearly 10% on Thursday afternoon, touching the lowest price since November 2020. Southwest Airlines was down close to 6%, hitting a nearly two-year low. Delta Air Lines and United Airlines were each down 8%, while the NYSE Arca Airline Index, which tracks 18 carriers, dropped more than 7%
On Wednesday, the Federal Reserve lifted interest rates by three-quarters of percentage point, the biggest increase since 1994, in an effort to tame inflation.
“If you’ve flown on a plane lately, planes are very full and plane tickets are very expensive,” Federal Reserve Chairman Jay Powell said Wednesday.
Strong travel demand following more than two years of the Covid-19 pandemic has been a boon to airlines, with Delta, United and American recently forecasting a return to profitability. Carriers’ executives have said travelers have been digesting higher fares.
Airlines have been supply constrained. Delta, JetBlue Airways, Spirit Airlines, Alaska Airlines and others have cut summer flying plans to give themselves more wiggle room for routine disruptions and in some cases to address labor shortfalls.
Airline CEOs will meet virtually with Transportation Secretary Pete Buttigieg late Thursday to discuss how prepared they are after a surge in delays and cancellations this year, according to people familiar with matter.
There are some signs that the travel boom could begin to cool, albeit from high levels. Fare-tracker Hopper on Wednesday said domestic airfare fell for the first time this year, with round trips going for $390, down from $410 in mid-May. It said…