U.S. airline stocks surge 20% in June as jet fuel costs tumble

Falling jet fuel prices and sustained travel demand have lifted U.S. airline stocks more than 20% in June, with United Airlines and Delta Air Lines approaching record highs.

U.S. airline stocks surged more than 20% in June, pushing United Airlines and Delta Air Lines toward record highs as jet-fuel prices tumbled and travel demand remained strong.

"Air-travel demand was strong before the Iran war and has remained strong throughout," said David Russell, global head of market strategy at TradeStation. "The fighting drove up air fares but ended in time for fuel costs to fall."

Jet-fuel prices have fallen to about $2.90 a gallon from nearly $5 in early April, when the U.S. and Israel's conflict with Iran effectively closed the Strait of Hormuz. Crude-oil futures slid about 20% in June, with West Texas Intermediate crude trading at $69.83 a barrel. Jet fuel accounts for 25% to 30% of airline operating costs, making it the industry's second-largest expense after labor.

The combination of lower input costs and constrained capacity — Spirit Airlines collapsed and Boeing and Airbus face persistent delivery backlogs — has set the stage for what could be a record summer earnings season. Delta Air Lines kicks off reporting July 10, with American Airlines and United Airlines following the next week.

United Airlines shares hit a record $130.60 on Wednesday, extending gains after the carrier introduced its first transatlantic flight equipped with SpaceX's Starlink connectivity and unveiled a live-television content partnership. UBS raised its price target on United to $153 while maintaining a buy rating ahead of the company's second-quarter earnings report.

The U.S. Global Jets ETF, a proxy for the sector, reached a record $34.66 on Friday and is on track to end June with a 13% gain. The broader market has also supported the rally, with the S&P 500 rising 0.8% to 7,500.10 and the Dow Jones Industrial Average closing at a record 52,348.49.

BofA Securities analysts said in a recent note that domestic capacity growth is "flattish" through September and real-time demand indicators remain firm. Average ticket prices rose more than 18% year over year in May, with economy fares climbing more than 20% for the third consecutive month, outpacing premium fares. Aggregated credit- and debit-card data showed airline spending returning to double-digit growth, supported by strength in spend per transaction.

The Cboe Volatility Index fell 5.7% to 16.65, reflecting easing concern about broader market turbulence. The U.S. 10-year Treasury yield stood at 4.42%, while gold traded at $4,044 an ounce.

This article is for informational purposes only and does not constitute investment advice.