Airline stocks outperform on Friday amid hopes for lower interest rates

[Landing airplane]
Jetlinerimages/iStock via Getty Images

Airline stocks gained on Friday after Federal Reserve Chairman Jerome Powell said conditions allow the FOMC to proceed carefully as it consider changes to the policy stance. "The baseline outlook and the shifting balance of risks may warrant adjusting our policy stance," he highlighted.

Frontier Group (ULCC [https://seekingalpha.com/symbol/ULCC]) saw the biggest gain in the sector, with a 12.5% jump. Other movers included American Airlines (AAL [https://seekingalpha.com/symbol/AAL]) +6.3%, Delta Air Lines (DAL [https://seekingalpha.com/symbol/DAL]) +5.9%, Southwest Airlines (LUV [https://seekingalpha.com/symbol/LUV]) +3.8%, United Airlines (UAL [https://seekingalpha.com/symbol/UAL]) +5.2%, JetBlue Airways (JBLU [https://seekingalpha.com/symbol/JBLU]) +7.0%, Alaska Air Group (ALK [https://seekingalpha.com/symbol/ALK]) +6.8%, Allegiant Travel (ALGT [https://seekingalpha.com/symbol/ALGT]) +9.4%, Mesa Airlines (MESA [https://seekingalpha.com/symbol/MESA]) +1.1%, SkyWest (SKYW [https://seekingalpha.com/symbol/SKYW]) +4.2%, and Sun Country Airlines (SNCY [https://seekingalpha.com/symbol/SNCY]) +8.5%.

After a tepid start to the year, U.S. domestic travel demand rebounded in July and August, with bookings up notably for late summer travel, offsetting earlier declines linked to international and business travel. However, overall air passenger growth has slowed compared to last year, running below 5% year-over-year.

Airfares in the U.S. broke a streak of declines with a 0.7% increase in July compared to a year ago on an unadjusted basis. On a month-to-month comparison, airfares were up 4.0% after falling 0.1% in June, declining 2.7% in May, and moving 2.8% lower in April, according to data compiled by the Bureau of Transportation Statistics.

For investors, airline stocks have been buoyed by largely positive Q2 earnings reports in the sector and a lower overall level of jet fuel prices.

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