The transports were absolutely clubbed on Wednesday, which is good news as a traveler because that means cheaper fares. But as an investor this means nothing but bad news, and Jim Cramer is worried.
When Cramer took a closer look at the transports group, he was able to pinpoint the source of the problem down to the airlines.
"Sometimes though, this kind of action is a sign not of weakening trade, but of potentially ruinous, cutthroat competition. And that's what is driving the group down at this very moment," Cramer said.
Cramer considers competition to be the absolute worst thing that could linger in the market. On Tuesday, the "Mad Money" host spoke with Doug Parker, the CEO of American Airlines. Parker confirmed that his competitors in the industry have decided to take advantage of the strong travel market right now by ramping up capacity.
"Some capacity is being added not by us but by some of our competitors, and we will obviously respond to that," Parker said. "That's going to have a negative impact," he added.
Cramer was taken aback when he heard this. When Parker said he would respond, that means they will lower fares which translates to a negative impact on revenues per flier—the key metric for airlines.
However, Cramer's concern is about more than just American Airlines. He is worried about the entire airline industry. The reason why he has been bullish on the airlines is because the recent consolidations had brought an end to the vicious competition of the past.
"Apparently those days are now over. I'm not saying that you can't buy the airlines when they reach a certain level. I'm just saying, wow, flying may be safer than ever, but those earnings estimates sure aren't!"
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