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AAA  Apr. 13, 2013
Flying high
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Airline stocks have been hard to beat this year. The NYSE Arca airline index, a measure of the largest companies in the industry, is up 26 percent. That's more than double the 11 percent climb of the Standard & Poor's 500 index.

The airline industry was once filled with dozens of carriers, but consolidation has enabled the surviving airlines to offer a larger network of routes that appeal to high-paying business travelers. And it has allowed them to limit the supply of seats, which helps prop up fares and airline profits.

The pending merger of American Airlines and US Airways will leave four big airlines that will dominate the domestic travel market — the post-merger American, United, Delta and Southwest — and a smattering of smaller rivals.

The stocks of major U.S. airlines slid last week after a measure of March revenue proved disappointing. One key factor was that automatic federal budget cuts were starting to have an impact on government air travel. Michael Linenberg, a financial analyst at Deutsche Bank, responded to the price drop by noting that management teams across the industry are more disciplined than in the past and have effectively dealt with greater challenges. He says the stock market has yet to recognize fully the airlines' improved performance and that the drop in airline stocks should be viewed as a buying opportunity.

Associated Press
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