Airline stocks have plunged this week for two major reasons. First, trade tensions with China caused investors to start worrying about demand. Second, oil prices have started moving higher again, following a brief respite prior to last week’s OPEC meeting.
Not surprisingly, the airlines with the lowest profit margins have been hit hardest. These carriers are the most vulnerable to fuel price increases and demand shocks, as small changes in their profit margins can severely impact their earnings. During the past year, American Airlines (NASDAQ: AAL) has fallen into the bottom echelon of U.S. airlines in terms of profitability, and so its share price tumbled 7.5% in the first three days of this week.
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