Here’s why airline stocks fell hard on Wall Street

The share price of the nation’s largest airlines fell by as much as 10% in trading on Wall Street on Monday as surging oil prices caused by the Russian invasion of Ukraine is delaying carriers’ recovery from the pandemic.

United Airlines was down by more than 10% during trading on Monday while Delta shed some 8%.

American Airlines was down around 7% on Monday.

Earlier on Monday, oil prices surged to their highest level in more than a decade as the Biden administration mulls a potential ban on Russian imports in response to the invasion of Ukraine – a move that could further upend the global energy market.

Brent crude oil hit nearly $140 per barrel overnight as the market reacted to the possibility of a ban. That’s up sharply from prices that hovered around $70 just as recently as August.

The Russian invasion of Ukraine has sent oil prices surging in recent days, likely causing US carriers to trim their earnings expectations.
STEFANI REYNOLDS/AFP via Getty Images

The escalating energy crisis is spooking investors on Wall Street, sending them running out of stocks. The Dow Jones Industrial Average plunged more than 680 points — or by more than 2% — while the broad-based S&P 500 was down more than 2.5% and the tech-heavy Nasdaq index dropped about 3%.

The Russia-Ukraine conflict is also driving price spikes for other commodities. Gold jumped 1% to nearly $2,000 per ounce on Monday.

The spike in fuel costs is likely to force airlines to downgrade their first-quarter profit and revenue estimates.

The major US domestic carriers are still trying to recover from the losses caused by the spread of the Omicron variant.

The airline industry has struggled to recover after it was battered by the coronavirus pandemic.
The airline industry has struggled to recover after it was battered by the coronavirus pandemic.
Jose M. Osorio/Chicago Tribune/Tribune News Service via Getty Images

American Airlines lost $931 million in the fourth quarter of 2021 while generating a reported revenue of $9.43 billion — which was down from $11.3 billion in the same quarter of 2019.

United Airlines reported losses of $646 million in the fourth quarter while domestic rival Delta reported a loss of $408 million in the fourth quarter of 2021.

Even before the invasion of Ukraine, the airlines expected that the decline in Omicron cases, the lifting of pandemic restrictions and the warmer weather would lead to renewed demand in air travel.

But the higher fuel prices is likely to put those plans on hold.

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