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Airlines flying high
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February 12, 1998: 7:18 p.m. ET
American Airlines' chief says there's a flight to quality in the industry
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NEW YORK (CNNfn) - There's decidedly less turbulence in the airline industry nowadays, and investors may be in for a smoother flight on Wall Street, according to the chief of the nation's biggest airline.
"We've had three good years in a row," Robert Crandall, chairman and chief executive officer at AMR Holdings, said during an interview with CNNfn.
In January, AMR reported a 60 percent jump in fourth quarter profits to a record $195 million, in large part because its massive fleet of aircraft was chock full of passengers and fuel prices were under control.
The skies are getting a lot friendlier for Wall Street as a result. Investors are taking a much less bumpy ride from airline stocks than in previous years, he said.
"If the market decides that the amplitude of the airline ups and downs may be less now than it had been in years past, we may move closer to the kinds of P/E ratios we see for other stocks," Crandall said.
P/E ratios, or price to earnings ratios, are widely used on Wall Street for comparing the prices of different common stocks by assessing how much the market is willing to pay for a share of each corporation's earnings.
AMR's P/E ratio of 12 is slightly better than rival airline UAL Corp.'s ratio of 9 but well below Microsoft Corp.'s ratio of 53, or even IBM Corp.'s ratio of 16.
Airline stocks like AMR took to new heights again Thursday, mirroring a pattern of the past few weeks as lower oil prices, upbeat profit forecasts and signs of more industry alliances on the horizon buoyed investors.
AMR Corp. rose 3 5/8 to 134 3/4. But the good feeling spread across the entire sector - and Dow Transports rocketed to another record high, gaining 80.57 to 3575.07.
UAL Corp., the parent of United Airlines, jumped 2 15/16 to 89 3/4 and Delta Air Lines added 3 3/16 to 123 1/8. US Airways Group soared 4 1/2 to 69 7/8; Northwest climbed 3 1/4 to 59 1/4.
The industry's stock price climb has been fueled by the drop in oil prices. Prices have plunged by more than one-fourth over the past year.
Oil prices are near four-year lows. Light sweet crude oil prices have dipped recently below the $16 per barrel mark in New York trading.
"Ten cents a gallon in our business, is a big, big number - $250 to $300 million" in savings, said Crandall. But throughout the industry, rising labor costs are a prevalent counterweight to those savings.
Crandall also expressed optimism that a proposed alliance with British Airways on transatlantic routes will get the go-ahead from regulators.
In late January, the two airlines asked regulators in Europe to put on hold their application in order to win their approval with the European Commission.
"I think this deal is going to get done," said Crandall. 
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