Performance in the airline industry

Performance in the airline industry

by Pininvest Analysis

Airlines & Airport Services on

  • constituents
  • 37.3% 1y performance
  • 29.4% volatility
Check the investment theme exit_to_app

Performance in the airline industry, charting individual airlines (and services) in the pininvest theme, looks like a multi-facetted mirror of contradictions, with often little consistency within catchment areas

However, our indiscriminate stock list of airlines, collating regional contrarian trends, does have merit as an advance indicator of global markets – or so it seems in view of the negatively correlated (and collapsing) theme performance from early June ’18 as measured against the total market index, reflecting a mix of rising oil prices, weakening trade patterns and consumer uncertainty

Some market trends also stand out

  • Europe is, on average, doing poorly and the double whammy of higher oil prices and significant pressure on employee salaries puts every company under a cloud. To wit, Air France-KLM , Lufthansa , Ryanair

  • Performance of Asian airlines is uniformly disappointing; clearly, trade uncertainties have started to bite after good price runs through April with heady drawdowns reducing investor optimism to ashes
  • US airlines, enjoying a sizable internal market where air transport is often the only option, compete with much diversity, rewarding fine-tuned strategies across market niches, from major carriers to regional and budget airlines. For this reason, it also offers the most interesting range of business models

Major carrier United’s asset strategy of a dense hub-spoke network of connections covering mid-sized airports clearly appears to be paying off, leaving American Airlines struggling and Delta Airlines focusing on infotainment to regain momentum

With the hub-spoke networks of the major carriers dominating the market, regional and budget airlines could be expected to adopt the opposite approach of point-to-point service between the largest cities, or from bigger markets to popular vacation destinations in the United States and in Latin America

While Spirit Airlines asset has turned the strategy into a credible and successful business, it remains true that budget airlines are squeezed at both ends, by major carriers entering mid-tier markets and by competing regional airlines defending their turf…

And this is probably why companies like Spirit are intend on securing profitability by managing more of the revenue from ancillary fees (luggage, in-flight services, etc.)


In summary,

American Airlines is worth watching in its effort to address the negative trend of its operation income and heavy weight Southwest Airlines in pursuing continuously – and remarkably strong – growth in net income – Enter the ticker at Asset Infos on pininvest for detailed financial accounting information

Budget airlines Spirit, Allegiant   and Frontier, exposed in a shrinking market segment, tied in base fare wars without the client goodwill garnered over the years by companies like Southwest and lacking the breath of slots available to the legacy airlines in major cities, appear vulnerable – some will come out and stay on top by ‘skimming’ the market but maybe not all…


Airport services, worldwide, and the potential of Asian carriers will be discussed shortly in follow-up reports on pininfos