It seems the airline industry just can’t take a break. After nearly two years of declining demand, travel prospects have finally picked up as Covid-19 restrictions have begun to ease. Unfortunately, airline stocks face more headwinds as rising jet fuel costs eat away at profit margins.
So what’s been going on with these high flyers lately?
Well, following Russia’s invasion of Ukraine, oil, gas and other forms of energy suffered a brutal supply shock. Reasonably, because Russia is the second largest producer of natural gas in the world. Russia’s conflict in Ukraine, in addition to the brutal sanctions imposed on the country, has driven the price of oil to decade highs.
As the cost of oil rises, jet fuel costs have skyrocketed to more than 13-year highs. Despite expectations of a resurgence this quarter in the airline industry as travel demand returns as Covid-19 cases decline, rising fuel costs will likely wipe out any expected gains.
So what’s going on with airline stocks amid rising fuel prices?
Airline stocks face volatility
the NYSE Arca Airlines Index, which tracks a number of major airlines, suffered a major setback on Monday, losing more than 13%. Today, however, it is up 4% at the time of writing. Over the past few days, many airlines have suffered steep losses amid massive sales. American airlines (NASDAQ:AAL) saw its value drop more than $19 earlier this year to yesterday’s closing price of $12.77. At the time of writing, AAL stock is up around 3%.
This morning, most airline stocks traded roughly flat, with United (NASDAQ:LAU), Delta (NYSE:DAL) and Mind (NYSE:TO SAFEGUARD) each up 1%-2% at the time of writing. That said, at the time of writing JetBlue (NASDAQ:JBLU) is up a bit more, currently enjoying a 3.5% gain.
Airlines will likely continue to experience turbulence as the price of oil remains fluctuating. However, investors will surely have their eyes on the sky as market forces continue to unfold.
As of the date of publication, Shrey Dua did not hold (either directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.