With climate change becoming an increasing threat to the world, it’s no wonder that many consumers and investors are looking at industries’ carbon footprints. Airlines are squarely in the crosshairs on this issue given their dependence on fossil fuels, but Cowen & Co. argues that the companies are taking steps to reduce their emissions.

The back story. Cowen analyst Helane Becker writes that on a recent marketing trip in Europe, investors were clearly focused on airlines’ energy use and efficiency. Of course, airlines are taking steps in this direction—on Earth Day this year, Delta Air Lines (DAL) offset the emissions of more than 300,000 customers—but it’s more than just a concern for the planet that’s driving this move, she notes. “As airlines reduce their carbon footprint, they reduce their costs.”

What’s new. On Wednesday, Becker, reviewed the airlines’ progress, writing that while she doesn’t expect airlines’ huge consumption of fossil fuels to change anytime soon (the U.S. industry alone uses 17 billion gallons of jet fuel a year), the industry is working toward being more sustainable. 

She noted that replacing older planes with newer, more efficient ones leads to fuel savings, fewer maintenance breaks, increased aircraft reliability, and reduction in noise pollution. While it might not reduce fuel use as much as many would like, it has made a noticeable difference in airlines’ consumption, and given that at the moment there’s no renewable energy resource to replace jet fuel, it’s a compromise that seems necessary for now.

Looking ahead. Becker writes that she is still “cautiously optimistic about the 2019 outlook for the airlines. We believe the second quarter and third quarter are likely to be the best two quarters of this year with the first quarter the toughest.” She also thinks that airlines have plenty of economic incentive to reduce their fossil fuel use, and “continue to focus on addressing climate change and reducing their carbon footprint for the foreseeable future.”

Airlines could use a boost. While individual stocks have been all over the map year to date, even some of the best performing stocks like Delta andSouthwest Airlines (LUV) haven’t been able to keep pace with the S&P 500, including the recent market decline. 

A number of companies have delivered upbeat earnings, but the impact of the Boeing (BA) 737 Max grounding has taken a toll on others, and even with many analysts convinced that the industry is stronger than ever, the recent trade war woes have taken their toll as investors worry that tariffs could crimp the global economy and business and leisure travel along with it.  

While there’s still reason to believe there’s value in airline stocks, it’s been tough going in light of the macro backdrop dominated by trade, and while carbon footprints may not be front of mind for some of the U.S., airlines’ lowered emissions could not only help profits via efficiency savings but improve investor sentiment around the world.

Source:https://www.barrons.com/articles/take-two-stock-videogame-earnings-guidance-51557842637