The industry fell as much as 14% during October, led by a 21% fall in Southwest Airlines (LUV), though there was not enough logical backing to LUV’s wide post-earnings dip. The company had reported reasonably fair results, but investors were apparently spooked by the management’s prediction that it expects modest inflation in costs other than fuel and profit-sharing expenses.
However, at least two analysts think the worst is over for the airline industry, which will soon soar into 2019. JPMorgan analyst Jamie Baker’s findings are backed by the optimism seen so far this month. All airline stocks have been on a recovery path this month, with Jetblue reporting the highest growth rate of 8.3%.
In a recent investor note, Baker said, the “case for industry margin expansion remains the best we’ve seen in four years.” Along with the investor note, the rating firm downgraded United Airlines, Spirit Airlines (SAVE) and Southwest Airline, but upgraded Jetblue.
JetBlue Q3 earnings top estimates while revenues come in line
Macquarie analyst Susan Donofrio is also bullish on the industry and predicts that margin expansion, higher travel demand, and capacity discipline would lift airline stocks going into next year.