The NYSE ARCA Airline Index was up 1.56% yesterday as analysts raised industry wide stock price forecasts due to better than expected revenues from unit seat miles flown. Previous forecasts, which included a much more severe drop in expected revenue due to hurricane related flight cancelations and fare competition, were adjusted with positive earnings forecasts from United Continental (UAL), American Airlines (AAL) and Delta Air Lines (DAL). The Airline Index is up 1.80% year-to-date and up 4.85% over the last month.
Short interest in the Domestic Airline sector is $5.4 billion, up $203 million, or 3.9%, for the year, and notably short interest has increased by $448 million over the last month, even though the sector rallied by 5% recently.
Short sellers have increased their overall Airline sector short exposure by 9% over the last month but short interest has not increased in all individual airline stocks. Shorts have added $430 million of short interest in their American and JetBlue positions and decreased their individual short exposure to United, Delta and Southwest airlines by $411 million. This may be a short term indication of a best of breed/worst of breed “pair’s trade” in the Airline sector prior to this quarter’s earnings season.
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Managing Director Predictive Analytics, S3 Partners, LLC
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