A 60% surge in one year! American airline stocks achieve their best performance in a decade

Thanks to the booming tourism industry, American airline stocks have successfully outperformed the market, achieving their best performance in nearly a decade.

So far this year, the S&P Super Composite Airlines Index has risen by 60%, far exceeding the S&P 500 Index's increase of 27%. This is also the first time since 2014 that the airline industry index has significantly outperformed the market.

On December 27, Bloomberg reported that the strong recovery in travel demand is one of the driving forces behind the surge in airline stocks. Data from the U.S. Department of Transportation also shows that the number of flights taken by Americans is at an all-time high.

Among them, United Airlines has performed the best, with its stock price soaring by 147.72% this year, making it the fourth largest gainer in the S&P 500 Index. Traditional airlines such as Delta Air Lines, American Airlines Group, and Southwest Airlines have also been favored by investors due to their premium travel services and international business.

Barclays analyst Brandon Oglenski expressed optimism about traditional airlines like United Airlines and Delta Air Lines, as well as the improved frequent flyer programs of Alaska Air Group and Frontier Airlines Holdings.

In terms of earnings reports, several airlines, including Jetblue Airways, Southwest Airlines, and American Airlines Group, have raised their profit forecasts for the fourth quarter of 2024.

Looking ahead to 2025, industry insiders generally hold an optimistic outlook. Oglenski stated:

"We expect the fundamentals of the airline industry to improve significantly in 2025, with many airlines' profit margins and earnings prospects becoming stronger."

At the same time, the potential deregulation and tax cuts that may be implemented after Trump's election as president are also seen as favorable factors for the airline industry. An investment manager noted, "Overall, I feel more confident; many management teams we've talked to seem more optimistic about the improvement in business and economic activity."

However, the rising trend in airline stocks also faces some challenges. Due to delays in Boeing aircraft deliveries and fluctuations in oil prices, airlines have had to continue using older planes, leading to increased flying costs, which has made many investors adopt a wait-and-see attitude. Therefore, despite the recent rebound, the airline industry index is still more than 10% lower than its level at the beginning of 2020.

Additionally, it is worth noting that the world's largest international travel-related ETF, US Global Jets ETF (JETS), has risen by 36% this year, but its short positions have also increased significantly. Analysts believe this indicates that some fund managers are skeptical about the sustainability of its upward trend. Morgan Stanley analyst Ravi Shanker also stated, "Institutional investors' holdings in airline stocks remain relatively low."