Shares of Delta Air Lines Inc. rose the most in more than four months, sparking an industrywide rally, as the world’s second-largest carrier prepared to rejoin the Standard & Poor’s 500 Index.
Delta was up 9.4 percent to $21.76 at Monday's close in New York, for the biggest gain since April 23. The Bloomberg U.S. Airlines Index surged 5 percent, its biggest increase since April 16.
The S&P 500 move, which will come Tuesday after trading closes, will prompt money managers to shift holdings to match the index, according to Walter “Bucky” Hellwig, who helps manage $17 billion at BB&T Wealth Management in Birmingham, Alabama. Delta will be the second carrier in the S&P 500, joining Southwest Airlines Co.
“This positive development is occurring earlier than expected and is anticipated to drive close to 90 million shares of incremental demand,” Jamie Baker, an analyst at JPMorgan Chase & Co. in New York, wrote in a Sept. 6 note to clients. He rates Delta neutral.
Delta President Ed Bastian said in a May interview that he hoped the carrier would be added back to the benchmark gauge after reducing debt and restarting dividend payments and a stock buyback in its comeback from bankruptcy. Delta had been dropped from the index in August 2005 ahead of its Chapter 11 bankruptcy filing weeks later.
Delta replaces BMC Software Inc., which is being bought by closely held Bain Capital LLC., according to a statement on Sept. 6 from S&P Dow Jones Indices. More than $5 trillion is benchmarked to the S&P 500, according to the website.
At $17.1 billion before Monday, Delta’s market value was the largest among U.S. airlines, ahead of United Continental Holdings Inc.’s $10.6 billion.
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