If the general stock market holds up in 2015 then the airline sector looks set to do very well, especially in the US, mainly due to very low oil prices. Jet fuel makes up about 25% of the running costs of an airline, and oil, which has already dropped a lot, looks set to fall even further and to stay low for some time, partly for geopolitical reasons to further weaken and destabilize Iran, Russia and Venezuela.
Whilst the Precious Metals sector remains the core focus of this site, that doesn't mean that we have to stand idly by watching other people make money in a sector that look set to soar, if we can get a piece of the action too, and we will be on the lookout for other outstanding sectors too.
The 2000s were a miserable time for the airlines, with the fallout from 9/11, which lead to a severe crisis in the industry, especially in the US where airlines were forced to pare costs to the bone, which meant not updating fleets and flying ancient aircraft, doing away with meal service on planes etc. The misery of passengers was compounded by draconian security measures at airports, involving long lines and invasive searches. Before the airlines could recover from all this, along came the 2008 market crash with its associated fear and gloom. It is only in the last few years that things have started to pick up again, with the security paranoia easing and general optimism about the future recovering somewhat.
We will start by looking at the long-term 20-year chart for the airline index, on which is added the chart for the S&P 500 index for comparison. The grim decade of the 2000s for the airline industry was accompanied by many years of depressed stock prices, with the picture only starting to brighten in 2013, when the sector commenced a reasonably vigorous rally which is now accelerating. As we can see, unlike the S&P 500 index shown at the top of this chart, the airline index has room to double from its current level before it can start to make new highs. Technically, all of the action from mid-2002 looks like a giant Head-and-Shoulders base pattern, which the index only broke out from late last year. The rate of advance appears to have started to accelerate, and with persistent low oil prices, which is what is expected, the index could advance swiftly towards it old highs in the 200 area. At the bottom of this chart we see the miserable performance of the large Precious Metals stocks XAU index over past several years, which gives rise to hope because it is now so low that it is either close to or at a bottom.
We will be looking at a range of better looking airline stocks on the site in the near future, in addition to Ryanair (NASDAQ:RYAAY) that we looked at about a week ago.