WASHINGTON (MarketWatch) — Airline stocks declined sharply on Monday after an industry group forecast a “significant slowdown” in demand growth by the year end.
Recent international traffic data shows solid demand, particularly among high-paying business travelers, despite “gloomy” leading economic indicators showing a decline in global trade and business confidence.
However, the continued strength for June and July is likely due to corporate travel offices decisions made in the early part of the year when trade and confidence was still strong, the International Air Transport Association said, which collects traffic data from its 230 member airlines.
“In the fourth quarter we will see a significant slowdown,” the trade group predicted.
At last check, the NYSE Arca Airline Index points with all but one of its 15 components deep in the red. In the last three months the sector benchmark has declined roughly 18%.
Shares of Southwest Airlines, Delta Air Lines lost 1.3% to $8.29 and American parent AMR Corp. declined 4.7% to $3.38.
The benchmark Standard & Poor’s 500 Index shed more than 1% to around 1,200, weighed by indications Greece was on the brink of default. Read more about U.S. stocks .
But so far airlines have not seen any indication of ticket demand cooling off despite market volatility, flattening freight-traffic growth and slumping business confidence.
For July, passengers traveling overseas in premium-class seats rose 7.5% from a year ago, following a 6.4% climb in June, according to IATA.
International economy-class travel rose 5.5% in July from a year ago, versus a 4.8% rise in June.
“Premium travel is still 6% below its pre-recession peak, but economy travel is 6% above its previous high point,” IATA said in a statement. “As of July, there was no sign yet of the deepening economic gloom discouraging air travel.”
The strongest growth in the premium travel segment was in developing economy markets, the group said, with market segments within Asia and South America showing “solid” double-figure growth.
“However, markets linked to the troubled European economies, across the Atlantic and within Europe, slowed down – particularly in the business-related premium markets,” IATA said. “The exception is the route area between Europe and the Far East that continue to show double figure growth in both seat classes.”
Airlines have said they will shrink their seat capacity in the fourth quarter in anticipation of a growth slowdown, but add they have not yet seen any cool off for future bookings.
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