Continental Airlines Inc. and American Airlines parent AMR Corp. led declines among U.S. carriers after February data showed fares and travel dropping.
Continental tumbled 17 percent, the most since October, and AMR fell to the lowest since April 2003 as analysts said the industry may be forced to cut seating capacity further because the collapse in demand may erase gains from lower fuel prices.
“The severity of the economic downturn is impacting all segments of travel,” Jim Corridore, a Standard & Poor’s analyst in New York, said in a note to investors today. He pared his rating on Atlanta-based Delta Air Lines Inc., the world’s biggest carrier, to “buy” from “strong buy.”
Continental, the fourth-largest U.S. airline, lost $1.60 to $8 at 4:01 p.m. in New York Stock Exchange composite trading, while No. 2 AMR declined 61 cents, or 16 cents, to $3.13 and Delta fell 33 cents, or 7.2 percent, to $4.26.
UAL Corp., parent of No. 3 United Airlines, dropped 32 cents, or 7.5 percent, to $3.94 in Nasdaq Stock Market trading. An 8.1 percent slide for the Bloomberg U.S. Airlines Index outpaced declines of less than 1 percent for the Dow Jones Industrial Average and Standard & Poor’s 500 Index.
“The market appears to be taking the view that the entire industry is approaching insolvency,” said Jamie Baker, a JPMorgan Chase & Co. analyst. “We strenuously disagree.”
Airline shares are at attractive prices after falling in the past year, and there are no signs of a new rise in jet-fuel prices, the New York-based Baker wrote in a note. Jet fuel has tumbled 72 percent since a July record.
Continental and Southwest Airlines Co., the largest low- fare carrier, both said late yesterday that traffic declined in February.
At Houston-based Continental, revenue for each seat flown a mile in its main jet operations dropped as much as 10.5 percent, exceeding estimates of an 8 percent decline from Hunter Keay, a Stifel Nicolaus & Co. analyst, and 7 percent by Helane Becker of Jesup & Lamont Securities Corp.
Softening demand, particularly among business travelers, has led to a “more cautious” outlook on revenue this year, Dallas-based Southwest said. Baker said Southwest’s year-to-date revenue for each seat indicates a decline of about 3 percent in February.
Southwest, which is cutting seat capacity this year for the first time since 1988, fell 29 cents, or 5.3 percent, to $5.23, its lowest price since July 1997.