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US Airline Stocks Gain Altitude Post Trump's Re-Election: Here's Why
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Donald Trump's victory in the U.S. presidential election over Kamala Harris had a substantial positive impact on the US stock market. The three major US indexes — the Nasdaq Composite, the S&P 500 and the Dow Jones Industrial Average — hit record highs on Nov. 6, 2024. Sharing the buoyancy displayed by the broader market, U.S. airline stocks made hay following Trump's comeback four years after being voted out of the White House.
Notably, shares of legacy carriers like United Airlines (UAL - Free Report) , Delta Air Lines (DAL - Free Report) and American Airlines (AAL - Free Report) shot up 9.4%, 6.9% and 6.1%, respectively. Low-cost carriers like JetBlue Airways (JBLU - Free Report) , Frontier Group Holdings (ULCC - Free Report) and Spirit Airlines ended Nov. 6 in the green with shares moving 4.4%, 12.2% and 8.8% north, respectively. The handsome gains led to the 5.8% uptick in the NYSE ARCA Airline index yesterday.
Expectation of Less Regulatory Scrutiny Sends Stocks Skywards
Investors interested in the Zacks Airline industry expect Trump's re-election to lead to a return to the pro-business stance that characterized his first term. The anticipation of a more relaxed regulatory environment under Trump's leadership is likely to lead to a reduced oversight of the airline industry. Lesser scrutiny is expected to boost mergers and acquisitions in the industry.
We note that during Trump’s first tenure as the U.S. President, the Department of Justice was less aggressive in challenging airline mergers and consolidations compared with the Biden administration. The deregulation policies evident during Trump’s first shot at the U.S. presidency were in line with the demands made by airline executives for reduced oversight and greater business flexibility.
Owing to Trump’s business-friendly stance, the Northeast Alliance between American Airlines, currently carrying a Zacks Rank #2 (Buy), and JetBlue, with a Zacks Rank #3 (Hold), might return. We remind investors that in 2023, a federal judge agreed with the U.S. Justice Department that the alliance resulted in higher prices for consumers. Consequently, both companies were ordered to part ways and end the alliance.
Frontier Airlines, owned by Frontier Group Holdings, is reportedly in talks with Spirit Airlines regarding a merger. The talks are likely to proceed further with chances of a merger, with less regulatory scrutiny expected following Trump’s return to the White House.
We remind investors that ULCC was close to acquiring Spirit in 2022. Ultimately, JBLU won the bidding war for SAVE. However, JetBlue announced earlier this year that it would not go forward with its decision to buy Spirit Airlines for $3.8 billion after a federal judge blocked JetBlue’s $3.8-billion acquisition of Spirit Airlines on antitrust grounds, highlighting the tough stance taken by the Biden administration against mergers.
Likely Rollback of Consumer Protections Lift Airline Stocks
Under the Trump administration, regulatory burdens related to customer service and passenger protection are anticipated to ease. Investors expect some consumer protections introduced under the Biden administration to be rolled back during Trump’s second stint as President of the United States.
The recently passed law by the U.S. Department of Transportation requires airline companies to reimburse travelers for delayed or canceled flights. This policy significantly increases the cost burden on airlines. However, such protections may be diminished or eliminated following Trump’s return to the White House.
Price Performance
Driven by the positives like upbeat air-travel demand and low fuel costs, the Airline industry has outperformed the S&P 500 index year to date.
YTD Price Comparison
Image Source: Zacks Investment Research
The optimism highlighted throughout the write-up following Trump’s victory will likely propel airline stocks.
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US Airline Stocks Gain Altitude Post Trump's Re-Election: Here's Why
Donald Trump's victory in the U.S. presidential election over Kamala Harris had a substantial positive impact on the US stock market. The three major US indexes — the Nasdaq Composite, the S&P 500 and the Dow Jones Industrial Average — hit record highs on Nov. 6, 2024. Sharing the buoyancy displayed by the broader market, U.S. airline stocks made hay following Trump's comeback four years after being voted out of the White House.
Notably, shares of legacy carriers like United Airlines (UAL - Free Report) , Delta Air Lines (DAL - Free Report) and American Airlines (AAL - Free Report) shot up 9.4%, 6.9% and 6.1%, respectively. Low-cost carriers like JetBlue Airways (JBLU - Free Report) , Frontier Group Holdings (ULCC - Free Report) and Spirit Airlines ended Nov. 6 in the green with shares moving 4.4%, 12.2% and 8.8% north, respectively. The handsome gains led to the 5.8% uptick in the NYSE ARCA Airline index yesterday.
Expectation of Less Regulatory Scrutiny Sends Stocks Skywards
Investors interested in the Zacks Airline industry expect Trump's re-election to lead to a return to the pro-business stance that characterized his first term. The anticipation of a more relaxed regulatory environment under Trump's leadership is likely to lead to a reduced oversight of the airline industry. Lesser scrutiny is expected to boost mergers and acquisitions in the industry.
We note that during Trump’s first tenure as the U.S. President, the Department of Justice was less aggressive in challenging airline mergers and consolidations compared with the Biden administration. The deregulation policies evident during Trump’s first shot at the U.S. presidency were in line with the demands made by airline executives for reduced oversight and greater business flexibility.
Owing to Trump’s business-friendly stance, the Northeast Alliance between American Airlines, currently carrying a Zacks Rank #2 (Buy), and JetBlue, with a Zacks Rank #3 (Hold), might return. We remind investors that in 2023, a federal judge agreed with the U.S. Justice Department that the alliance resulted in higher prices for consumers. Consequently, both companies were ordered to part ways and end the alliance.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Frontier Airlines, owned by Frontier Group Holdings, is reportedly in talks with Spirit Airlines regarding a merger. The talks are likely to proceed further with chances of a merger, with less regulatory scrutiny expected following Trump’s return to the White House.
We remind investors that ULCC was close to acquiring Spirit in 2022. Ultimately, JBLU won the bidding war for SAVE. However, JetBlue announced earlier this year that it would not go forward with its decision to buy Spirit Airlines for $3.8 billion after a federal judge blocked JetBlue’s $3.8-billion acquisition of Spirit Airlines on antitrust grounds, highlighting the tough stance taken by the Biden administration against mergers.
Likely Rollback of Consumer Protections Lift Airline Stocks
Under the Trump administration, regulatory burdens related to customer service and passenger protection are anticipated to ease. Investors expect some consumer protections introduced under the Biden administration to be rolled back during Trump’s second stint as President of the United States.
The recently passed law by the U.S. Department of Transportation requires airline companies to reimburse travelers for delayed or canceled flights. This policy significantly increases the cost burden on airlines. However, such protections may be diminished or eliminated following Trump’s return to the White House.
Price Performance
Driven by the positives like upbeat air-travel demand and low fuel costs, the Airline industry has outperformed the S&P 500 index year to date.
YTD Price Comparison
The optimism highlighted throughout the write-up following Trump’s victory will likely propel airline stocks.