The airline industry is sensitive to changes in the economic cycle. It is both capital and labor intensive. Airlines are vulnerable to higher borrowing costs (interest rates) and high and rising crude oil and jet fuel prices. Labor and fuel costs make up the largest portions of airlines´ total expenditures.

U.S. airlines have been doing well in recent years. Slow but steady economic recovery and increased domestic crude oil production has helped to keep oil prices, and thus jet fuel prices, relatively low. Airlines usually hedge their jet fuel purchases, at least partly. Still, there are times when they do not hedge as they count the cost of hedging to outweigh the benefits of hedging.

The outlook for the airline industry depends on further demand, discipline in airlift supply factors and relatively stable labor and jet fuel costs. Below is a chart of the DJ US Airlines Index. It has been in a range (304-246) for a long time. Some catalyst is needed to push the index out of the range.