Back to top

Real Time Insight

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

Easily one of the most hated sectors by investors is the airline industry. The segment has experienced bankruptcies, low profit margins, and heavy competition, all of which have led to big losses for investors in the space.

The sector is even the punch-line of a famous Warren Buffett quote which sums up what many investors feel about the space; ‘How do you become a millionaire? Make a billion dollars and then buy an airline’.

Changing Times?

The space has come a long way in the past few years though, and many have seen solid returns thanks to airline investments. This has largely been thanks to low oil prices, though mergers and the rise of hubs have drastically cut down on competition and allowed for bigger profits.

Consider some of the recent performances out of the airline space by the top players. United Continental (UAL - Analyst Report) and Southwest (LUV - Analyst Report) have both added more than 90% in the past 52 weeks, while Delta (DAL - Analyst Report) has flown to a 136% return in just the past 12 months.



(S&P 500 return over same time period:  26%)

Meanwhile, the smaller regional players have also done quite well in this environment, suggesting that the space is really booming. Firms like Hawaiian Airlines (HA), JetBlue (JBLU), and Alaska Air Group (ALK) and Spirit (SAVE - Snapshot Report) have all more than doubled the market in the past year, with SAVE surging more than 160%.

And with very impressive December traffic for the industry, many are optimistic for earnings season and the near term. This has already started to take place as DAL reported before the bell today, beat estimates and hiked its operating margin estimate, helping to send the entire space higher once again.

Still Not Convinced?

Thanks to these huge gains in such a short time period, some investors might be worried about these airlines staying at their lofty levels. Though, the airline space does have a Zacks Industry Rank in the top third, and with huge oil supplies coming online seemingly every day, pressure could remain on one of the sector’s top costs.

Given this, I think that the airline space still looks favorable here in 2014. Reduced competition seems likely to boost fares (and profits) for the remaining group, and macroeconomic factors still appear to favor cyclicals, and those that benefit from reduced fuel costs.

But what about you?

So are you finally willing to admit that airline stocks might not be so bad after all, or are you still holding out against this competitive (and razor thin profit margin) sector?

Let us know in the comments section below!

Want more insights from Zacks? See our latest free report 5 Stocks to Double. Click here to receive this free report now >>>

Author is long LUV

5 Stocks to Double in 2014

Today, you are invited to receive a free Special Report from Zacks Investment Research. It reveals five companies that could gain +100% and more in the next 12 months.

One is set to ride a little-known All-American energy boom. Another is a chip maker looking for big gains through Google Glass. Another could be the next alternative energy "Tesla."

Close This Panel X

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GRP IN DXYN 15.84 +7.90%
BOFI HLDG IN BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%