7 Most Shorted Airline Stocks Since The 737 Max Grounding

Airline stocks have been losing altitude over the past six months following the grounding of the Boeing Co BA 737 Max. Delta Air Lines, Inc. DAL shares sold off last week on concerns about rising costs and lackluster fourth-quarter guidance. To make matters worse, the Southwest Airlines Co LUV pilot union said Monday the 737 Max will not be cleared for takeoff until at least February.

Southwest, United Airlines Holdings Inc UAL and American Airlines Group Inc AAL reportedly have a combined total of 74 737 Max planes in their fleets. All three airlines cancelled 737 Max flights through January last week.

Short sellers that have bet against airline stocks since the 737 Max was officially grounded in March following two crashes have had mixed returns up to this point.

S3 Partners analyst Ihor Dusaniwsky said Tuesday total short interest in the U.S. airline sector is up $591 million to $4.8 billion since the 737 Max was grounded.

After an initial surge of airline short selling following the news back in March, short covering took the total airline short position down below $3.9 billion by late April. However, a steady flow of short selling since late August has airline short interest back up near its highest level since the 737 Max groundings.

Most Shorted Airline Stocks

Here are the seven most shorted airline stocks since the 737 Max groundings, according to S3 Partners (sorted by change in outstanding short position since March 19).

1. Delta (+$389.1 million)
2. American (+$217.5 million)
3. JetBlue Airways Corporation JBLU (+$137.3 million)
4. United (+$61.6 million)
5. Allegiant Travel Company ALGT (+$53.1 million)
6. Spirit Airlines Incorporated SAVE ($43.9 million)
7. Mesa Air Group Inc MESA ($2.5 million)

Benzinga’s Take

It’s somewhat surprising to see Delta as the most heavily shorted airline stock since March given Delta doesn’t have any 737 Max planes in its fleet. Short sellers should remember that the 737 Max problem may have lasted longer than airline investors had anticipated, but it should ultimately still be only a temporary phenomenon.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

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Photo by Steve Lynes via Wikimedia.