Airline Stocks Jump As American, United Hike 3Q Forecasts

Airline stocks surged Tuesday after United and American slightly sweetened their outlook for third-quarter revenue.

Those two carriers were the biggest gainers on the Standard & Poor's 500 in midday trading.

Investors have grown concerned about slower growth in revenue from tickets and fees, partly due to a fare war between United and discounters such as Spirit Airlines. Heavy discounting threatened to halt a rally in airline revenue that has helped airlines post strong profits in recent years.

American said that revenue for every seat flown one mile would rise about 1 percent compared with a year earlier, and by an even bigger margin in the fourth quarter. The per mile figure is a closely watched indicator of pricing power in the airline business, and even raising the third-quarter range by a half-point was enough to push American's shares higher. American credited stronger than expected pricing.

United still expects third-quarter revenue per seat each mile to fall from 2016, but by 3.75 percent instead of 4 percent, as it forecast a month ago. United also said its profit margin would likely be at least 1 point more than previously forecast because of higher revenue and lower fuel expenses.

Shares of United Continental Holdings Inc. jumped $3.86, or 6 percent, to $68.56; and American Airlines Group Inc. climbed $2.41, almost 5 percent, to $53.01. Shares of Delta, Southwest, JetBlue, Alaska and Spirit rose by smaller percentages.

Copyright AP - Associated Press
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