Is it Time to Sell These Airline Stocks?

Almost all airline stocks are having a great earnings season. Despite falling ticket prices, profits have soared to record high levels thanks to cheaper crude. With crude oil still trading near $45 per barrel, airlines should continue enjoying good profits going forward. However, there are a couple of stocks that I think have appreciated substantially, and investors should consider booking profits. Also, airlines have been plagued with reducing passenger unit revenue as the companies have been slashing ticket prices left, right and center in order to increase customers.

Following the Department of Justice’s allegation of colluding, airlines have reduced ticket prices considerably, and that has negatively impacted their passenger revenue per average seat mile, or PRASM.
Although I still think there’s value left in the airlines industry, I think investors should consider selling stocks like Delta Air Lines (DAL) and Hawaiian Holdings (HA).

I have recommended both Delta and Hawaiian multiple times in the past, and both the stocks have performed very nicely for investors. I first recommended Delta Air Lines at $35, and Hawaiian Airlines at $14. While Delta has just appreciated roughly 40% since my call, Hawaiian has returned over 100% as the stock is currently trading at $32.87.

While none of these stocks are expensive per say, but I think there are better opportunities in the aviation sector. Both Delta and Hawaiian do not have attractive growth prospects. Delta’s management is wary of the increasing capacity and competition, and the company will slow down its expansion to drive PRASM.

Similarly, Hawaiian also has limited growth opportunities and the company may be negatively affected but the arrival of Virgin America (VA) in Hawaii. Virgin America is highly focused on providing the best customer experience in the industry and its venture into the Hawaiian’s primary market could spell trouble for the latter.

Moreover, both the companies are prone to an increase in oil price. While airlines have managed to slash ticket prices in the weak crude environment, the carriers will have trouble increasing the price again once crude starts rising.


Both Delta Air Lines and Hawaiian Holdings are not expensive by any means, however I think there are stocks with better growth prospects that investors can buy. Both Delta and Hawaiian are more prone to overcapacity, increasing competition, and a recovery in crude oil prices than other carriers like JetBlue (JBLU) and Spirit (SAVE). Thus, I think investors should book profits and sell both of these airline stocks for now.
Published on Oct 24, 2015
By Ayush Singh

Copyrighted 2020. Content published with author's permission.

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