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Andrew T. Gillies is Director of Communications at the Center for Audit Quality, an affiliate of the American Institute of CPAs, in Washington, DC. Based in Washington since 2002, he has also worked in editorial and communications roles at the Investment Company Institute, the World Bank, Forbes, and Vault.com. His policy-themed writing has focused on aerospace and defense, energy and environment, transportation, and financial services.

Friday, June 25, 2004

Airline Stocks: Taking A Flyer

According to the Air Transport Association, the U.S. airline industry group, each $1 rise in the price of a barrel of oil costs American carriers $425 million per year. So it's little wonder that investors have been ditching their airline shares lately. Year-over-year, airline stocks in the S&P 500 are down 11 percentage points, versus a gain of 16 points for the broader index.

In the stock market, however, sometimes it pays to run in the opposite direction of the stampede. "Nobody wants to own the [airline] industry," says John Escario, manager of the Rydex Transportation Fund. "If you're a contrarian, that's probably the best time to start looking at it."

The airline industry does show a few signs of coming out of the clouds, especially if you believe that the economic recovery can be sustained. Through May, revenue passenger miles (RPMs)--a measure of demand equaling the total number of passengers carried times the number of miles flown--is up 12 percentage points versus the same period last year. And oil prices have dipped below the $40 level of a few weeks ago.

Full story at Forbes.com