Over the past 18 months, oil prices have plunged over 60% and remain in an ugly bear market. Certain industries benefit from lower oil prices, most notably the airlines. It is important to note that fuel is the biggest expense for the airlines, and the fact that fuel prices have fallen sharply bodes well for their bottom line.
Lower fuel prices also help boost the economy. Keep in mind, higher energy prices serve as an indirect tax on both consumers and businesses. So lower energy prices leave people (consumers and businesses) with more disposable income. When people have more money to spend, they tend to spend it and that boosts the economy. A stronger economy means more people will travel and that is also bullish for the sector. But if oil prices turn and start heading up, the story will change.
Take a look at the following charts for West Texas Intermediate crude, JetBlue (JBLU), Allegiant Travel (ALGT), Delta Air Lines (DAL) and Hawaiian Airlines (HA):
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