Boston, MA 06/13/2014 (wallstreetpr) – Delta Air Lines, Inc. (NYSE:DAL) recorded the steepest decline on standard & Poor’s 500 Index today after oil prices in Iraq soared up to their eight month high.
The Iraq crisis and violence caused uproar in the prices of oil which roped in Delta Airlines among other U.S. carriers who have been reporting a fall. Shares of the airlines company fell 5.4% to close at $38.50 in New York. An analyst, Savanthi Syth, from the Raymond James Financial Inc. said that the sudden jumps in crude prices causes a great impact on short term earnings. He said that in the long term, airlines can better manage earnings as they have a scope of pushing up fares to compensate.
Surging Oil Prices
Crude refined jet fuel and labor pose the largest costs to any airlines. The price had surged only 1.2% in a 12 month period stretching up to June 6. However, just then the al-Qaeda offshoot expanded its control to encompass the northern regions of Iraq which raised alarms over a likelihood of increasing oil prices. Post that a jump of as high as 2.9% was noted today, which is the highest shoot since October 2012.
The fall in the share price of Delta followed Lufthansa’s announcement which lowered its operating profit from 1.3 -1.5 billion euros to 1 billion euros. This is on account of the increase in competition from Gulf airlines which are hampering the airlines businesses in Europe and in the U.S.
Airlines Hurt
Other Airlines who declined include United Continental Holdings Inc (NYSE:UAL), which reported the steepest decline of 5.9%, with Delta being the runner up. Southwest Airlines Co (NYSE:LUV) with its 4.5% fall down to $25.72 was the third largest on the S&P 500. The Bloomberg U.S. Airlines Index reported a retreat in all the recorded 11 carriers, making it the biggest two day fall since April 2013.
