Sector snap: Airline shares rise

AP News
Posted: Dec 02, 2009 1:26 PM

Airline shares rose on Wednesday after not-so-bad November results from Continental, and a Delta executive suggested the carrier would be disciplined about not growing faster than demand as the economy recovers.

Late Tuesday, Continental said a key measure of how much passengers paid to fly each mile fell by 7 percent to 9 percent for November compared with November 2008. While such a revenue drop-off might usually be alarming, it was smaller than the monthly drops Continental has reported earlier this year. Continental's November traffic rose 2.9 percent.

Then on Wednesday morning, Hank Halter, the chief financial officer at Delta Air Lines Inc., told analysts the world's biggest carrier might eventually increase capacity by 1 percent to 2 percent if demand shows strong signs of coming back. And he urged other airlines not to increase their flying too quickly.

Investors have been hoping that airlines will keep capacity tightly matched to demand so they'll have more power to raise ticket prices.

Also, Morgan Stanley analyst William Greene upgraded his view of the airline industry to "attractive," and upgraded shares of American parent AMR Corp. and United parent UAL Corp. to "overweight" from "equal-weight." Those two airlines stand to benefit as airline revenue improves in 2010, he wrote.

Besides all that, airline investors got falling oil prices, too, with benchmark crude for January delivery down $1.72, or more than 2 percent, to $76.65 on the New York Mercantile Exchange.

UBS analyst Kevin Crissey wrote in a note after Continental's results that demand is picking up because of holiday travel. "Corporate revenue, while showing some signs of progress, remains the biggest opportunity" for revenue improvement, he wrote.

The Amex Airline Index rose 2.8 percent.

Delta shares rose 62 cents, or 7.2 percent, to $9.24, and Continental Airlines Inc. shares were up 67 cents, or 4.5 percent,t o $15.63. AMR rose 39 cents, or 6.2 percent, to $6.68, and UAL rose 87 cents, or 10.5 percent, to $9.13. US Airways Group Inc. rose 20 cents, or 5.4 percent, to $3.89.

AirTran reported that November traffic rose 10.5 percent, and shares of AirTran Holdings Inc. rose 40 cents, or 9 percent, to $4.86. Southwest Airlines Co. rose 6 cents to $9.41, while JetBlue Airways Corp. rose 2 cents to $5.66.