Raymond James' Airline Analyst Talks Stocks, Capacity And Growth Expectations

Raymond James' airline analyst Savanthi Syth was a guest on CNBC's "Squawk On The Street" segment on Thursday to discuss her latest "quarterly seat check" report.

According to Syth's checks, unit revenue for the airline industry has fallen 6 percent in the recent quarter, but fuel costs have fallen "a lot more," which is helping airliner companies generate "record profits."

"I think what investors struggling with is how much of those profits that they could hold on to when fuel starts moving up," she said. "From a capacity standpoint I'm going to admit to 2 contradictory statements. I think airlines are very disciplined on capacity but at the same time supply has risen more than demand."

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She continued that her statement is contradictory because when capacity levels were set by the airlines, the expectations for GDP growth was "much higher." However, the industry hasn't seen capacity being adjusted to lower GDP growth expectations because fuel costs "has surprised" on the downside as well.

Looking forward, airliners can adjust their capacity levels to the new reality, but it can take three to six months to do so, which may create a "lag" in earnings. This would mean investors won't see any proof of companies being disciplined in the next three to six months.

Syth concluded that investors with a longer-time frame could find the risk to reward profile on the sector "really attractive."