Airlines Soar Above Pandemic Pessimism

Can American Airlines’ parent sustain its recent rally as travelers fly into the height of the flu season?

A month ago American Airlines parent AMR Corporation (AMR) traded for less than $5 a share. The stock is now soaring near the $9 mark, adding another 20% after the company announced that it has raised $2.9 billion in funding. According to The Wall Street Journal, AMR sold $1.3 billion in assets, negotiated a $1.6 billion aircraft sale-leaseback deal with General Electric (GE), and will net another $1 billion from the sale of frequent flyer miles to Citigroup (C).

The company is also looking to buy a stake Japan Airlines (OTC: JALSY), according to The Journal. Delta Air Lines (DAL) is also reportedly in talks with the Japanese carrier, which Forbes.com said was hurt by, among other things, H1N1 swine flu virus fears.

As a whole, the Airline Stocks Index is ahead by 1.7% in today. Investors don’t appear to be too worried about the potential impact of swine flu on the sector this fall, sending airline stocks higher by an average 25% over the last month. However, according to recent reports, some high-rolling fliers aren’t taking any chances.

Rob Dore, a director at England-based air charter company Jet Direct told Bloomberg, “Swine flu has certainly increased traffic,” as corporate clients, “are concerned about the well-being of their staff from a commercial, as well as moral, standpoint.”

Losing highly profitable first-class fliers to charter service could weigh on carriers like British Airways (BAY), Continental Airlines (CAL), and United Air Lines parent UAL (UAUA). Berkshire Hathaway’s (NYSE: BRK-A, BRK-B) NetJets should benefit from corporate clients flight to germ-free travel.

As of this writing, the Airline Stocks Index is one of the top-10 performing tickerspy Indexes over the last month.

Tags: AMR, BAY, BRK-A, BRK-B, C, CAL, DAL, GE, JALSY, UAUA