CHARLOTTE, N.C. TheStreet) -- July was not so hot for the airline industry, as stocks swooned. Although some analysts had suggested that earnings might propel the depressed sector, the hope was misplaced. Since the eight major airlines started to report second-quarter earnings nine days ago, shares of all eight have declined.
Not only that, but earnings coincided with a new
media lashing -- when the FAA temporarily halted collection of ticket taxes, airlines did not move immediately to give away money to the public. A positive aspect, perhaps overlooked, is that most airlines are now collecting more revenue. One other note: A sad truth in the airline industry is that everybody -- including aircraft makers, vendors, airports, the federal government, executives and some employees -- gets rich except for the airlines and their investors. This has been true since the Wright Brothers first flew. Illustrating this fact in July is Boeing ( BA - Get Report), whose earnings beat boosted shares primarily because of strong sales to commercial airlines. Boeing also benefited from the announcement of a major sale to American ( AMR - Get Report), the only carrier to lose money in the quarter. It is very likely that the decline in airline shares has been overdone, wrote J.P. Morgan analyst Jamie Baker, in a recent report. "We don't understand the panic," Baker said. In his report, Baker lays out the reason for the current airline share price collapse. "The bad news is fairly straightforward: jet fuel prices have rallied and are approaching the vicinity of their April items," he said. "At the same time, the sluggish economy is gradually catching up to the industry." But should that push shares down about 30% in 30 days? Baker said no way. In fact, he uses a "Down 30 in 30" trading rule as the basis to recommend American, United ( UAL - Get Report) and US Airways ( LCC).