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Hurricane Irma Follows Harvey: Airlines Continue to Suffer

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Stocks in the airline space are no doubt going through tough times. After being hurt by Harvey, the companies are likely to be negatively impacted by another natural calamity – Hurricane Irma – which is currently approaching the state of Florida.

Notably, Irma, which has already caused untold devastation in the Caribbean, is expected to hit the shores of Florida this weekend.

Airline Stocks Grounded

On Sep 7, key airline stocks lost value with multiple flights being cancelled due to Irma.JetBlue Airways Corporation (JBLU - Free Report) was the worst hit with the stock declining 3.2% to close the trading session at $18.25.

In fact, this Zacks Rank #3 (Hold) company has significant exposure to Florida, with two hubs in the state — Orlando and Fort Lauderdale. JetBlue also has a hub in Puerto Rico.  Moreover, this low-cost carrier has cancelled more than 860 flights on Sep 11. Hence, Irma is expected hit the stock severely. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Again, United Continental Holdings, Inc. (UAL - Free Report) , which has already cancelled many flights and likely to call off many more to and from southern Florida airports in the next few days, saw its stock price tumble 2.9% to $58.58. Markedly, the stock has taken a pounding lately, with it being hit the hardest by Harvey.  Consequently, the company unveiled a bearish forecast with respect to passenger revenue per available seat mile (PRASM) mainly due to Harvey.

Other major losers in the space included the likes of American Airlines Group Inc. (AAL - Free Report) , Hawaiian Holdings, Inc. (HA - Free Report) , Allegiant Travel Company (ALGT - Free Report) and Delta Air Lines, Inc. (DAL - Free Report) . With major sector participants declining, it was of little wonder that the NYSE ARCA Airline Index declined 0.3% on Sep 7 over the previous day’s closing price.

In fact, the likes of American Airlines and Delta have also cancelled many flights due to the approaching Irma. The spate of flight cancellations follows the multiple cancellations due to Harvey.

Issue Regarding Ticket Prices

Withresidents of the state trying their best to flee to safety in a bid to escape the havoc, which is likely to unleash on Florida, airline companies are apparently charging high prices for tickets on flights to and from therein. This has landed them in a controversy on ticket prices, even though the likes of JetBlue have capped flights out of Florida at $99.

Weather-related issues have hurt airlines previously too. In March 2017, operations at carriers were disrupted big time by winter storm Stella. Moreover, this January, an icy winter storm ravaged the Southeast U.S. cities. It also disrupted the flight schedules of airlines, thereby causing undue harassment. Last year, Hurricane Matthew had also caused extensive damage in the affected areas. Such acts of nature throw the schedules of carriers out of gear, causing multiple flight cancellations.

The stocks in the airline space have also been hit hard by other headwinds like high labor and fuel costs. The disastrous impact of Harvey has further complicated matters. Now, with Irma approaching there seems to be little respite for the sector in the near term.

Price Performance

In view of the above headwinds, it is of little wonder that the Zacks Airline industry underperformed the broader market in the last three months. The S&P 500 Index gained 1.2%, as against the industry’s decline of 5.3%.

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