Airlines Shares Fall; Oil Up, German Crash Deliberate (Investor's Business Daily)

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  • March 26, 2015
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Delta Air Lines (NYSE:DAL) and other carriers’ shares fell Thursday as oil prices rose when Saudi Arabia began military action in Yemen and French prosecutors released new information on the Germanwings airliner crash.
Delta shares fell 2.7% to 43.32 in the stock market today while United Continental (NYSE:UAL) fell 2.3% to 64.05.
Domestic carriers Southwest Airlines (NYSE:LUV) and JetBlue (NASDAQ:JBLU) were also down.
U.S. oil climbed 3% to $50.77 per barrel while Brent was up 2.3% to $57.70.
Late Wednesday Saudi Arabia and allies in the region began air strikes in Yemen after its most recent ex-President Abed Rabbo Mansour Hadi fled the country, fueling concerns over security at key shipping lanes in the Persian Gulf.
Fuel accounts for nearly a third of air carriers’ costs and airlines had benefited from the drop in oil prices. In January, fuel costs for airlines were down nearly 50% vs. September as oil prices plunged 60% from a high in June.
Also Thursday, French prosecutors said Germanwings co-pilot Andreas Lubitz may have deliberately crashed the plane after locking the captain out of the cockpit. The black box revealed that the pilot tried to break down the door.
The FAA required updated security on planes after the Sept. 11, 2001 attacks. The Germanwings Airbus A320 most likely featured a revamped cockpit door that is strong enough to withstand gunfire. If the door is locked from the inside a crew member can unlock it with a a two- to seven-digit code on a keypad. If prosecutors are correct that the co-pilot crashed the Germanwings flight deliberately, the vulnerability of cabin safey systems may weigh on all involved, including investors.
The crash is the latest of several high-profile incidents in the last 12 months. On March 8 Malaysia Airlines Flight 370 disappeared while flying from Kuala Lumpur to Beijing and Malaysia Airlines MH17 was shot down over Ukraine in July.
IBD’s Transportation-Airline group is ranked No. 4 out of the 197 industry groups IBD tracks.
Follow Gillian Rich on Twitter: @IBD_GRich.