Could this time be different for airline stocks?
Alaska Air, Continental Airlines, and US Airways soared to new 52-week highs yesterday, lifting the XAL Airline Index.
High oil? Forget about it. Lousy economy? Tell me something I don't know. These stocks are cleared for take off, and that's why my "Call-to-Action" is to get on board, and here's why:
In the past, whether in good times or bad, the legacy carriers couldn't resist engaging in brutal price wars to gain market share. That crushed margins and hurt stock prices.
But that's not the case now. A reduction in capacity has given the airlines pricing power, and that means airfares should continue to stay elevated.
That's bad for travelers, good for shareholders. The big question now? Which airline will be the first to blink and slash rates?
To be clear, playing the airlines remains a trade and not a long-term investment. But things are different this time, and for the near-term, watch for airline stocks and the XAL Airline Index to outperform much of the market into the next quarter.