Airline Stocks Tumble Amidst Rising Oil Prices as Boeing Secures $24 Billion Deal

Airline stocks

Airline stocks across the markets ended up falling significantly on Thursday as oil prices saw record gains. Despite the Dow Jones Transportation Index ending the day up 0.7 percent, major airline stocks were almost all in the red.

The news follows another development that shook the industry, where Boeing (NYSE: BA) made a historic agreement at the 2019 Paris Airshow to sell of 200 of it’s Max airplanes in a deal that’s estimated at being worth $24 billion in sales.

Crude oil prices, which are a major factor in jet fuel costs, surged today on concerns about the rising tensions between the U.S. and Iran. With the latter having shot down a U.S. military drone with President Trump tweeting threats against Iran, oil prices are expected to increase even further amidst these concerns, which will further impact the bottom lines of aircraft carriers as costs go up.

Alaska Air Group (NYSE: ALK), American Airlines (NASDAQ: AAL), Spirit Airlines (NYSE: SAVE), United Continental Holdings (NASDAQ: UAL), JetBlue Airways Corporation (NASDAQ: JBLU), and Delta Air Lines (NYSE: DAL) all were in the red, falling between 0.8 and 3.4 percent on Thursdays trading session.

While these stocks had little news to report on that could have led to these declines, there were some other developments in the airplane industry, albeit not with the airlines themselves.

Boeing made news yesterday when it struck a historic agreement between Amazon (NASDAQ: AMZN) and General Electric (NYSE: GE), where Amazon agreed to lease 15 extra Boeing 737 plans to GE. Additionally, a further 200 of Boeing’s Max aircraft would be sold to International Airlines Group, the parent company of British Airways and Aer Lingus.

Analysts described the order as being “a noteworthy shot in the arm for Boeing.” Moody’s senior vice president and lead Boeing analyst Jonathan Root went on to say that “It underscores our belief in the long-term viability of the MAX program and our expectations for a full restoration of Boeing’s financial profile following the aircraft’s return to service.” The deal is estimated at being worth around $24 billion as is a major confidence boost for the company, as 737 Max jetliners have remained grounded over safety concerns after a couple of fatal crashes.

In response to this development, Airbus (OTC: EADSY) went on to say today that they would challenge the secret Paris deal Boeing made. Speaking at a press conference in Paris, Airbus sales chief Christian Scherer said that they had never received a request for proposals and that they would like to compete with Boeing before the deal turns into a final contract.

Currently, the deal is outlined as a letter of intent, so the negotiations over the specifics need to be confirmed in the coming months.

Boeing Company Profile

Boeing manufactures commercial airplanes, provides defense equipment, and maintains a small captive finance division.

With headquarters in Chicago, the firm competes with Airbus in commercial aviation and with Lockheed, Northrop, and several other firms in defense. Sales are split about 70% and 30% between the commercial aircraft and defense end markets. In 2018, Boeing generated over $100 billion in sales. – Warrior Trading News