Airlines are starting off weak in the first half, but I think that the comparisons will become positive by the fourth quarter. In 2001, I forecast a much better year. The greatest challenge is much higher labor costs. So labor is securing most of the benefits rather than consumers or shareholders. Primarily, the health of the economy and corporate profits.
Airlines tend to discount an upturn in the economy six months ahead.
If you wait for the news flow to turn positive, it s often too late to buy the stocks. For the first time in years, investors are showing an interest in airlines, anticipating the next upturn. If the upturn occurs later on this year, then the sector s recent price gains will continue. If an economic recovery won t occur until 2002, then the rally will probably fail to hold. The second most important fundamental to airline investors is supply.