To The Moon

Airlines have always been a bad investment, not only is it affected by the company's performance, but it can't stand up to any kind of macro event.Warren Buffett's record on airlines has been poor. $U.S. Global Jets ETF(JETS)$

And with $.DJI(.DJI)$ hitting new highs and airline shares performing at new highs, there's not really that strong a case to be made from last week's earnings performance.

1. Unit fares are down and unit costs are up.Means fares are down, but cost pressures are up, which is not good for overall margins.

• $Delta Air Lines(DAL)$ : Revenue per available seat mile (PRASM) of $0.2058, down from $0.2115 a year ago, while cost per available seat mile (CASM) of $0.1875, slightly higher than last year's $0.1844.

• $American Airlines(AAL)$ : PRASM down 3.5% y/y, CASM up 1.85% y/y In addition to the issues mentioned above, gearing remains the worst of the Big Three.

• $United Continental(UAL)$ : PRASM down 2.4% y/y, CASM up 1.68% y/y

What's supporting it to new highs?

1. Airfares are up year-over-year. the September CPI data showed a rise of 1.6%, though still relatively low compared to the 3.3% year-over-year rise in core inflation for the month.On a year-over-year basis, airfares rose 3.2% in September after rising 3.9% in August, according to the U.S. Bureau of Transportation Statistics.Airfares have risen in four of the past five months.

2. Confidence in the economy's soft landing, and therefore demand for Q4 holidays will be strong, and the short interval between Thanksgiving and Christmas is seen as supportive of prices.

3. UAL's buyback: the company announced that it bought back $500 million worth of stock in the third quarter.The fact that a company like the airline, where cash flow is so important, is still buying back gives the market a lot of confidence.

4. Short Positions Closed.Several airlines are down quite a bit after earnings, and some of these short-term profitable shorts may be closing out their positions after new highs.

But none of this will stop the overall trend to the downside.

The following factors could drag down airline stock prices:

1. A possible pause in demand due to the U.S. election.This has been seen in past national elections.

2. If inflation picks up, it could further dampen demand and could adversely affect the airline industry during the peak holiday season.

3. Due to the recent non-plus manufacturing data, shorts are further accumulating positions in the industrial sector, especially at the current time when stocks are trading at new highs but facing strong uncertainty.