Airlines are among the most discretionary sectors out there, tied closely to the health of the consumer. So, perhaps it is no surprise that the stocks are seeing an oversize reaction to reports suggesting key parties are moving to de-escalate the trade war gripping the U.S. economy.
Shares of JetBlue Airways (JBLU 9.26%) traded up 10% as of 10 a.m. ET, and shares of United Airlines Holdings (UAL 6.30%), Delta Air Lines (DAL 6.12%), American Airlines Group (AAL 5.48%), and Southwest Airlines (LUV 5.05%) were all up more than 5%.
We are only halfway through airline earnings season, but the message from the companies that have reported is clear: The industry is not seeing a dramatic fall-off from near-record demand, but executives are anticipating declines in demand should tariffs eat into the economy and cut consumer purchasing power.
Historically, airlines have been a bad sector to invest in during a recession. Households struggling to pay bills and afford groceries are unlikely to book vacations.
On Wednesday, investors were buying in hopes a worst-case scenario could be avoided. The market is up big on reports that the White House is mulling cuts to steep tariffs on Chinese imports, a move that could lessen the blow on consumers and lower the odds the U.S. falls into a recession in the second half of 2025.
Investors should proceed with caution from here. The market has been volatile of late, trading up and down based on the latest tariff headlines. It is dangerous to try to get ahead of rumors, and until there are actual moves to de-escalate, it is possible these gains could evaporate just as quickly as they materialized.
For those willing to accept the turbulence and look past whatever near-term noise might be on the horizon, Delta and United are the safest investment choices from this group. JetBlue and American have relatively high debt burdens and questions about their revenue models, and Southwest is in the process of eliminating consumer-friendly policies and could see a backlash in the quarters to come.
United execs sounded an optimistic tone about the quarters to come even with the headwinds the airline is currently facing. If those headwinds recede, the airline looks best-positioned to gain altitude from here.
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