Delta Air Lines (NYSE:DAL), United Continental (NYSE:UAL) and US Airways Group (NYSE:LCC) all plunged Tuesday as the airlines aren't able to pass on rising costs to consumers, with fuel costs continuing to rise.
With Middle East tensions escalating, it's unknown how deeply the events could ultimately impact the price of fuel and the airlines, who will be stuck trying to figure out how high they can raise price in an atmosphere of austerity.
WTI crude futures closed in on $100 a barrel level for April 11 contracts, reaching as high as $99.77 on the Comex. The news is devastating for airlines, who are still haven't recovered from the impact of the recession.
Already in 2011 jet fuel prices have climbed 20 percent, and five rate increases have already been implemented by the airlines, creating uncertainty as to how much further they can go.
That will ultimately reflect in margins and earnings, as they'll have to slowly feel their way through the process in order not to alienate customers.
Delta closed Tuesday at $10.61, falling $0.63, or 5.60 percent. United Continental closed at $23.02, dropping $1.02, or 4.24 percent. US Airways plunged to $7.95, losing $0.66, or 7.67 percent.
No comments:
Post a Comment