There’s a little ingredient airplanes need to fly … and it’s called Oil (NYSE:USO). Unfortunately for airlines, the price of oil is surging over $112 per barrel today.
This is bad news for companies which already are notorious for running horrible businesses. It’s even worse news after the Southwest Airlines (NYSE:LUV) debacle put passengers into emergency landings.
So begins the negative cycle in which airlines start raising ticket prices, fuel surcharges, and baggage fees (wait, they never removed those when gas prices fell … hmmm). Then passengers cut back on flying. Then airlines ask the government for a bailout. The one of the companies either goes bankrupt or a few merge. Then we start the process all over again.
Airline stocks are starting to reflect this nasty reality: AMR Corporation (NYSE:AMR) is down over 3%, Delta Air Lines (NYSE:DAL) is down almost 4%, United Continental (NYSE:UAL) is down 6%, JetBlue (NASDAQ:JBLU) is down 5%, US Airways (NYSE:LCC) is down 3.5%, Alaska Air (NYSE:ALK) is down 3.5%, while discount airlines Southwest Airlines (NYSE:LUV) and AirTran Holdings (NYSE:AAI) are down only less than 1%.