Airlines stocks are flying high, leaving the global recession in their wake as the price of crude oil continues to tumble. The deteriorating economic outlook has made for a big build up in the crude inventories for which the U.S. Energy Information Administration reported an increase of 6.7 million barrels for week ending 1/12. Despite the curb in crude supplies from the Organization of Petroleum Exporting Countries, tensions in the Middle East, and energy disputes between Russia and Ukraine, crude for February delivery futures continue a downward spiral. NYMEX crude for February delivery traded down for 5 consecutive days as of Monday, only to settle slightly up 0.5% on Tuesday at $37.78/barrel.
Crude has fallen more than 73% from its summer peak of $147.27/barrel, inversely to the AMEX Airline Index (XAL), the benchmark tracker for airline stocks which has climbed more than 74% in the past six months, after it dropped to its 52-week low of $12.66 on 7/15/08.
Consequently, the unprecedented plunge in oil prices have led many of the airlines stocks higher, with 64% of the AMEX Airline Index components gaining above 15% in the past six months. Leading the way higher were shares of major U.S. carriers including US Airways , Alaska Air , and Delta Airlines whose shares have gained about 63%, 62%, and 47% respectively in the past six months on lower fuel prices. Delta, the world's largest airline carrier after its acquisition of Northwest, has also gained from its December plan to cut its domestic seat capacity in 2009 by 8% to 10% and international flying seats by 3% to 5%. Others with higher stock prices include Texas-based American Airlines whose shares have rallied 21% in the past six months, and are currently up 2.16% year to date.