Airline Stocks: Fundamentals Remain Unchanged

After a very strong performance in 2014, airline stocks have given back some of the gains despite our belief that the fundamentals remain completely unchanged. 

We believe that the lack of an established shareholder base makes these stocks very volatile. Yesterday the DoJ announced the initiation of a probe on US airlines pricing collusion. However, fares are down 16.3% since its peak in 2000 adjusted for inflation. 

The stocks reacted violently by correcting ~7% on the release of the news of the probe, even though we believe the basis for this investigation is unfounded. They ended the day down ~2%.