All of the industry drama has led to a seemingly helpful outcome—system capacity (defined here as U.S. carriers’ domestic international flights) has been held in check for an extended period of time.
-Kristen Hendrickson and Jun Zhu, research analyst and senior analyst, Leuthold Weeden Capital Management
We think a positive supply/demand scenario may finally be playing out for this notoriously troubled industry group. Endless impediments over the past decade (recession, record-high oil prices and union labor issues just to name a few) have ultimately and painfully led to a massive industry transfor- mation. While the storm is subsiding, an inordinate amount of obstacles may continue troubling the air- line industry. Still, this doesn’t mean there isn’t potential for money to be made, as the Airlines group has managed to handily outperform the S&P 500 (total return) by nearly 7% YTD.