Shares of major U.S. airlines fell to one-year lows on Monday on uncertainty over the economy and expectations that travel will slow down in the fall.
Some of the big airlines are trading close to recessionary levels, said Ray Neidl, a senior aerospace sector specialist with Maxim Group. The market does look three or four months ahead to the slow fall season.
Among major airlines, Delta Air Lines Inc
The overall market was also lower, and some analysts said airlines were also suffering because of nervousness over the U.S. congressional stalemate ahead of the August 2 deadline for an increase in the United States' borrowing limit.
If the debt ceiling isn't raised, the airlines will see a substantial rise in interest rates and interest costs, making the firms less valuable, Morningstar analyst Basili Alukos said.
Major U.S. airlines will start reporting earnings this week, with AMR Corp's
Neidl said he expected strong results from most major U.S. airlines, but he added that carriers were not getting enough fare increases to cover high fuel prices.
Airlines were able to raise fares in the first quarter, Neidl said, but you saw that slow down dramatically in the second quarter. Economic uncertainty could make future fare increases difficult and bring discounting this fall, he added.
A new systemwide U.S. fare increase appeared to falter on Monday. Southwest Airlines and American both rolled back initial matches of a domestic rise of up to $10 roundtrip initiated by industry leader United Continental on Friday, according to Rick Seaney, chief executive of FareCompare.com.
Most of the news that's been coming out has a nervous market getting even more nervous for the market and for the airline sector, Neidl said.
(Reporting by Karen Jacobs, additional reporting by Kyle Peterson in Chicago)