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Airlines Rally; Imperial Capital Says Fuel Trend 'Largely Overlooked'

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Airline investors tried to shake off Ebola fears Tuesday and staged a rally that recouped a portion of recent losses.

"The positive impact of lower fuel prices has been largely overlooked," Imperial Capital's Robert McAdoo said Tuesday.

Jet-fuel prices have fallen 10 percent in the past few weeks and the cost can represent as much as a third of airlines' operating expenses.

American Airlines Group Inc (NASDAQ: AAL) gained nearly 9 percent Tuesday morning, while JetBlue Airways Corporation (NASDAQ: JBLU) and United Continental Holdings Inc (NYSE: UAL) rallied 7 percent.

Despite a worldwide health scare that has driven an index of major airlines down more than 6 percent in the past week, McAdoo said improving "fundamentals" will drive record third-quarter results for a number of carriers.

The global oil glut spurred McAdoo to raise his 2014 profit estimates for a half-dozen companies in the sector. McAdoo didn't address prospects that the traveling public could get spooked by the health crisis in West Africa regarding Ebola.

Yet there are signs the Ebola scare could have an impact, as the nation's airports gear up for another layer of passenger screenings, this time related to health.

A United Emirates flight from Dubai on Monday was held on the runway for several hours on arrival at Boston's Logan International Airport as teams of workers decked out in "hazmat" suits escorted several passengers to a local hospital after they complained of illness.

The Centers for Disease Control said subsequently that Ebola wasn't suspected among the passengers from Dubai.

A similar scenario Sunday when a sick passenger delayed a United Airlines' flight disembarkation at Los Angeles for several hours Monday.

The Arca Airline Index (NYSE: XAL) gained more than 3 percent in early trading Tuesday.

Latest Ratings for AAL

DateFirmActionFromTo
Jan 2021SusquehannaMaintainsNegative
Dec 2020Deutsche bankDowngradesBuyHold
Nov 2020Raymond JamesDowngradesMarket PerformUnderperform

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TXNDeutsche BankMaintains170.0
BYDDeutsche BankMaintains56.0
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