Airline stocks soared in October, easily eclipsing the S&P 500's substantial 8.1% gain, as reported by Bank of America (BAC, Financial). The airline sector enjoyed a notable 20.2% rise, propelling its year-to-date performance to 33.1%, surpassing the S&P 500's 19.6% increase. However, Spirit Airlines (SAVE, Financial) and JetBlue Airways (JBLU, Financial) underperformed compared to their industry peers but still managed to post positive returns.
This type of outperformance aligns with a recurring trend of pre-Christmas upswings for airlines from September to November, with this October marking the second strongest since 2008, following a record-setting September. Analysts Andrew G. Didora and Samuel Clough from Bank of America noted that the earnings season highlighted successful strategies in reducing capacity to boost yields. Looking ahead to 2025, they anticipate a slight increase in capacity, with January and February schedules expected to rise by 1.1%.
Historically, airline stocks have outperformed the market in November 63% of the time. From a valuation standpoint, the majority of airline stocks are currently trading just above the midpoint of their historical evaluations based on projected 2024 and 2025 EBITDAR. This suggests that the market recognizes the strong fundamentals of the airline sector and investors are optimistic about its future growth potential.
