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US Carriers to Fly High During Winter Holiday Season?
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Leading trade group, Airlines for America (‘A4A’), has predicted that 45.2 million passengers will opt for air travel in the upcoming winter holiday period (Dec 16- Jan 5). The projection reflects a 3.5% increase from the 2015 figure.
US carriers are planning to meet the surge in demand through the usage of new routes as well as larger planes. The carriers aim to offer 99,000 additional seats per day through these measures. The efforts are likely to result in 73,000 more passengers per day, up 3.9%, taking to the skies this year during the period. According to the prediction, the busiest travel days in the period would be Dec. 22 and Dec. 23, while the lightest travel days are projected to be Dec 24, Dec 25, Dec 31 and Jan 1.
The bullish forecast was driven by an improving economy and declining air fares. Bullish domestic data released over November have repeatedly indicated that the U.S. economy is picking up steam. With the economy recovering, major indexes like the S&P 500 and the Dow Jones industrial average recently hit all-time highs.
The Thanksgiving travel rush further indicates the strong demand for air travel. Flight completion factor and on-time arrival rate were 99.4% and 84.5%, respectively for U.S. carriers during the Thanksgiving travel period (Nov 18–Nov 29). The bullish A4A forecast for the winter holiday season is another positive for airline stocks, which have been receiving encouraging news of late. Consequently, the NYSE ARCA Airline Index has gained in excess of 22% over the last three months.
It is no secret that airline stocks have been hurt by unit revenue issues for quite some time. However, the circumstances seem to be changing for the better as most carriers are coming out with improved forecasts for total revenue per available seat mile (TRASM: a key measure of unit revenue) in the fourth quarter of 2016. The most recent bullish RASM view came from American Airlines Group (AAL - Free Report) . The metric is projected in the band of a decline of 1% to an increase of 1% in the fourth quarter. The view represents a marked improvement from the guidance issued last month, when it expected the metric to decline in the band of 0.5%–2.5%. If American Airlines records TRASM growth in the fourth quarter, it will be the first carrier to do so in two years. Delta Air Lines (DAL - Free Report) expects to return to positive unit revenues early next year. United Continental Holdings (UAL - Free Report) expects passenger unit revenues to decline in the range of 3% to 4% in the fourth quarter compared with an earlier issued guidance of a decline of 4% to 6%
Hawaiian Holdings (HA - Free Report) expects fourth-quarter RASM to grow in the range of 3% to 6%. Earlier, the company had anticipated an increase of 0.5% to 3.5%. Hawaiian Holdings sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Other Positives
Though fears related to overcapacity have been plaguing airline investors for quite some time, the bullish capacity-related updates recently provided by carriers like Southwest Airlines (LUV - Free Report) are putting to rest such fears. Moreover, U.S. carriers like Delta Air Lines, Alaska Air Group (ALK - Free Report) and JetBlue Airways (JBLU - Free Report) have recently started flying to Havana. The move is expected to further bolster their top line as Havana is a favorite tourist spot.
The improving scenario for the airline industry can be further gauged by fact that the current Zacks Industry Rank of 76 (among more than 260 groups) for the Transportation-Airline division is much more favorable than the 200+ rank carried couple of months ago.
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US Carriers to Fly High During Winter Holiday Season?
Leading trade group, Airlines for America (‘A4A’), has predicted that 45.2 million passengers will opt for air travel in the upcoming winter holiday period (Dec 16- Jan 5). The projection reflects a 3.5% increase from the 2015 figure.
US carriers are planning to meet the surge in demand through the usage of new routes as well as larger planes. The carriers aim to offer 99,000 additional seats per day through these measures. The efforts are likely to result in 73,000 more passengers per day, up 3.9%, taking to the skies this year during the period. According to the prediction, the busiest travel days in the period would be Dec. 22 and Dec. 23, while the lightest travel days are projected to be Dec 24, Dec 25, Dec 31 and Jan 1.
The bullish forecast was driven by an improving economy and declining air fares. Bullish domestic data released over November have repeatedly indicated that the U.S. economy is picking up steam. With the economy recovering, major indexes like the S&P 500 and the Dow Jones industrial average recently hit all-time highs.
The Thanksgiving travel rush further indicates the strong demand for air travel. Flight completion factor and on-time arrival rate were 99.4% and 84.5%, respectively for U.S. carriers during the Thanksgiving travel period (Nov 18–Nov 29). The bullish A4A forecast for the winter holiday season is another positive for airline stocks, which have been receiving encouraging news of late. Consequently, the NYSE ARCA Airline Index has gained in excess of 22% over the last three months.
Industry Price Index
Industry Price Index
Unit Revenue woes mitigating
It is no secret that airline stocks have been hurt by unit revenue issues for quite some time. However, the circumstances seem to be changing for the better as most carriers are coming out with improved forecasts for total revenue per available seat mile (TRASM: a key measure of unit revenue) in the fourth quarter of 2016. The most recent bullish RASM view came from American Airlines Group (AAL - Free Report) . The metric is projected in the band of a decline of 1% to an increase of 1% in the fourth quarter. The view represents a marked improvement from the guidance issued last month, when it expected the metric to decline in the band of 0.5%–2.5%. If American Airlines records TRASM growth in the fourth quarter, it will be the first carrier to do so in two years. Delta Air Lines (DAL - Free Report) expects to return to positive unit revenues early next year. United Continental Holdings (UAL - Free Report) expects passenger unit revenues to decline in the range of 3% to 4% in the fourth quarter compared with an earlier issued guidance of a decline of 4% to 6%
Hawaiian Holdings (HA - Free Report) expects fourth-quarter RASM to grow in the range of 3% to 6%. Earlier, the company had anticipated an increase of 0.5% to 3.5%. Hawaiian Holdings sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Other Positives
Though fears related to overcapacity have been plaguing airline investors for quite some time, the bullish capacity-related updates recently provided by carriers like Southwest Airlines (LUV - Free Report) are putting to rest such fears. Moreover, U.S. carriers like Delta Air Lines, Alaska Air Group (ALK - Free Report) and JetBlue Airways (JBLU - Free Report) have recently started flying to Havana. The move is expected to further bolster their top line as Havana is a favorite tourist spot.
The improving scenario for the airline industry can be further gauged by fact that the current Zacks Industry Rank of 76 (among more than 260 groups) for the Transportation-Airline division is much more favorable than the 200+ rank carried couple of months ago.
Confidential: Zacks' Best Investment Ideas
Would you like to see a hand-picked "all-star" selection of investment ideas from the man who heads up Zacks' trading and investing services? Steve Reitmeister knows when key trades are about to be triggered and which of our experts has the hottest hand. Click for his selected trades right now >>