Midday Report: Airline Stocks Soar, in Spite of Sequestration

Airline stocks have been soaring over the past year, and the latest round of earnings reports from the industry could add to the momentum.

All of the major carriers beat Wall Street expectations, even though some are still struggling to post consistent profits.

And then there’s the budget sequestration, which is angering airline executives, members of Congress and the flying public. That’s because the mandated spending cuts have forced the FAA to reduce staffing levels in air traffic control towers, which has caused major flight delays this week, mostly in the East and the Midwest.

Getty Images The FAA reports significant travel delays today at Chicago’s O’Hare Airport, as well as the three New York area airports – JFK, LaGuardia and Newark. There have also been problems this week in Los Angeles, Dallas, Las Vegas, Denver, Miami and Tampa.

The airlines are worried that travelers will blame them for the delays. Some airlines are warning the bottlenecks could reduce bookings heading into the summer travel season.

Thousands of flights have been delayed or cancelled since the rolling staff furloughs began last Sunday. That’s forcing air traffic controllers to put more distance between planes in the air, as well as those taking off and landing, in order to maintain safety.

That adds to the normal problems created by bad weather, because air traffic controllers have fewer options to re-route flights. An airline industry trade group wants the FAA to waive restrictions on how long passengers can be kept on the runway to accommodate the flight delays, and to avoid worsening the disruptions.

All of this angst is leading to new calls for Congress to act. Some want to allow the FAA to reallocate its funds to stop the furloughs, while others want to use this mini-crisis as the impetus to strike a broad budget agreement.

Now let’s go back the good news for the airlines and for investors.

Over the past year, shares of US Airways (LCC) have soared 73 percent. It’s in the midst of merging with AMR (AAMRQ), the parent of American Airlines.

Southwest (LUV) is up 69 percent from a year ago. Delta’s (DAL) up 59 percent, and United Continental (UAL) 36 percent.

And all beat analysts’ estimates for the first quarter, which is traditionally the weakest period for the industry. In addition, they all report that some key measures of growth and profitability improved in the quarter.

–Produced by Drew Trachtenberg

DailyFinance.com

Midday Report: Airline Stocks Soar, in Spite of Sequestration