Investors Bet on Airlines That Don't Need Boeing's 737 MAX

By Akane Otani 

The grounding of Boeing's 737 MAX fleet is continuing to have ripple effects in the air-travel industry.

Southwest Airlines Co. said early Thursday that it would end flights at Newark Liberty International Airport this fall. The reason: The airline, which has the largest exposure of U.S. airlines to Boeing Co.'s 737 MAX, is dealing with a reduced capacity for flights while the jets are grounded.

American Airlines Group, which along with Southwest reported earnings before the opening bell Thursday, delivered more bad news for the industry. It said the Boeing grounding would likely shave $400 million off its pretax earnings in 2019, up from earlier estimates of $350 million.

The dual reports sent many airline stocks lower, with the U.S. Global Jets exchange-traded fund -- which includes U.S. companies such as Southwest, American and United Airlines Holdings Inc., along with foreign airlines -- falling 2.4% and heading for its steepest one-day decline since May. Shares of Boeing, which said Wednesday it might have to halt 737 MAX production if the grounding dragged on, recently was down 3.5%.

Instead, investors are embracing airlines that don't rely heavily on Boeing's troubled model.

JetBlue Airways Corp. jumped past the S&P 500 Thursday. It is one of the airlines that had no plans to fly Boeing's 737 MAX in the coming months, meaning the continuing grounding has had no effect on its bottom-line. Shares were recently up 1%, on track to set a fresh closing record.

Allegiant Travel Co., a discount airline that also doesn't have exposure to 737 MAX jets, recently was up 4.8%.

Write to Akane Otani at [e-mail]

(END) Dow Jones Newswires

July 25, 2019 13:26 ET (17:26 GMT)

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