CNBC’s Jim Cramer on Monday reviewed the case for airline stocks, many of which have soared over the past few months. While he said he’s not certain if the rally will continue, he thinks it’s possible as long as the airlines keep their flight capacity on an even keel.
“I’d say the strength can continue for however long the capacity discipline does,” Cramer said. “How long will that be? I’m not sure, but for now, these companies are all saying the right things.”
Major players Delta, United and American Airlines have rallied from their lows over the past six months. Cramer attributed some of these gains to factors related to the broader economy, including eased worries about consumer spending as the Federal Reserve cuts rates. At the same time, he added, airlines report that business travelers are returning in masses post pandemic.
But there are structural changes in the industry that piqued Cramer’s interest. He said a major factor in these airlines’ recent success is that they have cut back on new capacity, giving them more pricing power. He suggested part of this move stems from struggling low-cost carriers like Spirit and Southwest that are no longer adding to the industry’s oversupply. Boeing‘s manufacturing issues have also lead to a supply bottleneck, he added.
Usually, airline stocks make better trades than investments, according to Cramer. But he said it’s possible that these moves are more sustainable than an average boom and bust cycle.
“So, after this kind of run, my gut tells me maybe to ring the register before the music stops and the light comes on,” he said. “But I’m also open to the idea that maybe things, things can change.”
Source: Airline stocks could keep running if they keep capacity under control, Jim Cramer says
