Midday Report: Airline Stocks Soar, in Spite of Sequestration

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Airline stocks have been soaring over the past year, and the latest round of earnings reports from the industry could add to the momentum.

All of the major carriers beat Wall Street expectations, even though some are still struggling to post consistent profits.

And then there's the budget sequestration, which is angering airline executives, members of Congress and the flying public. That's because the mandated spending cuts have forced the FAA to reduce staffing levels in air traffic control towers, which has caused major flight delays this week, mostly in the East and the Midwest.

Airlines and air traffic controllers - Getty Images
Getty Images
The FAA reports significant travel delays today at Chicago's O'Hare Airport, as well as the three New York area airports – JFK, LaGuardia and Newark. There have also been problems this week in Los Angeles, Dallas, Las Vegas, Denver, Miami and Tampa.

The airlines are worried that travelers will blame them for the delays. Some airlines are warning the bottlenecks could reduce bookings heading into the summer travel season.

Thousands of flights have been delayed or cancelled since the rolling staff furloughs began last Sunday. That's forcing air traffic controllers to put more distance between planes in the air, as well as those taking off and landing, in order to maintain safety.

That adds to the normal problems created by bad weather, because air traffic controllers have fewer options to re-route flights. An airline industry trade group wants the FAA to waive restrictions on how long passengers can be kept on the runway to accommodate the flight delays, and to avoid worsening the disruptions.

All of this angst is leading to new calls for Congress to act. Some want to allow the FAA to reallocate its funds to stop the furloughs, while others want to use this mini-crisis as the impetus to strike a broad budget agreement.

Now let's go back the good news for the airlines and for investors.

Over the past year, shares of US Airways (LCC) have soared 73 percent. It's in the midst of merging with AMR (AAMRQ), the parent of American Airlines.

Southwest (LUV) is up 69 percent from a year ago. Delta's (DAL) up 59 percent, and United Continental (UAL) 36 percent.

And all beat analysts' estimates for the first quarter, which is traditionally the weakest period for the industry. In addition, they all report that some key measures of growth and profitability improved in the quarter.

–Produced by Drew Trachtenberg


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6 Comments

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barryaclarke

Sure, the airlines are making money. They find any and every why to screw you out of a buck or two that's possible. Lets see, United, $200 for a ticket change, others that have the biggest fees that are so ridiculous that I am sick of laughing. paying for food that was once free. Can you imagine $8.00 for two pieces of bread with an ounce of meat and some mayo? What's next? Maybe a board fee for boarding first. Oh wait, someone already has that.....................

April 26 2013 at 1:10 AM Report abuse rate up rate down Reply
pb185

clyogi has to turn off the Fox News and read what the real situation is. The sequestration mandates that every department make an 8.5% cut in their "accounts" . The FAA has an account under "operations" or under "Air Controllers" They are mandated to make an 8.5% cut in those departments. If they had an account in their budget called "Janitors" they'd be mandated to cut that as well. They have no leeway to move money between departments. If anybody is playing politics with this issue it is the GOP/Tea Party which forced this on the American people in the first place. And let's not forget you conservatives this is what you have wanted all along. What do you think the end result of the drastic meat ax cuts contained in the Paul Ryan budget, that every GOP member of the House voted for , would have been ?

April 26 2013 at 12:32 AM Report abuse rate up rate down Reply
browse62

The FAA is offering our local airport at least $80,000,000.00 to expand its runways. This is a non commercial county airport. They need to get their priorities right and take money out of what they have allocated to these wasteful airport projects and put it where it will do the most good, i.e. facilitating commercial air travel, not wasting money on big runway expansions for airports serving a very small number of private citizens.

April 25 2013 at 10:48 PM Report abuse rate up rate down Reply
lacabrera

If they are making that much money ,then why are the tax payers have to pay for Air traffic controllers ,why can't the Airline pay out of their profits !

April 25 2013 at 9:07 PM Report abuse rate up rate down Reply
clyogi

Why is the FAA being allowed to play politics? The clown-in-chief has chosen the path of doing everything possible to make the public angry with Republicans. Instead, he should have ordered all government departments to look for cuts which would have the least possible impact on the public. That is what leadership is all about.

April 25 2013 at 8:00 PM Report abuse -1 rate up rate down Reply
chuckhalper

Since each airline ticket has fees for funding FAA activities, including controller staffiing, how is it, that a budget that is funded by charging us airline users, somehow gets cut? Maybe the boys in Washington have had their hands in this till too, or the Fed is playing games for political reasons. BTW, if airlines begin cuttting some flights because of controller shortages, and some passengers either cancel or use other modes ( e.g. rail), the the tax collected goes down even more.

April 25 2013 at 7:50 PM Report abuse rate up rate down Reply