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Air Travel to Hit All-Time High This Summer: Top 5 Picks
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A slew of incidents have garnered some bad press for airlines. However, travelers chose to ignore such events, with the airline industry gearing up for record high number of passengers this summer.
Consumers continue to shift toward air travel as investments start pouring into new aircraft, technology, overall customer experience and well-being. A decent economy, uptick in household net worth, lower air fares, low fuel prices and an improvement in operations are also fueling growth in summer air travel. Banking on such bullish factors, investing in sound airline stocks seems judicious at the moment.
Summer Air Travel to Grow 4%
In terms of public relations, it hasn’t been a good few months for the airline industry. A viral footage in April captured a screaming passenger being dragged off an overbooked United Continental Holdings Inc (UAL - Free Report) flight. Subsequently, United Airlines made a settlement with the passenger with an undisclosed but seemingly large amount. In the days that followed, the airline flew a woman 3,000 miles in the wrong direction, Spirit Airlines Incorporated (SAVE - Free Report) cancelled a lot many flights that led to a brawl in a Florida airport and American Airlines Group Inc (AAL - Free Report) apparently made a woman sit at the back of a plane despite a first class ticket.
However, these incidents have failed to deter Americans from flying in the summer months. According to the Airlines for America (A4A), around 234.1 million passengers or approximately 2.54 million per day are expected to take to the skies between June and August, which represents an all-time high. This also represents growth of 4% over last summer’s 224.8 million travelers. During this period, airlines have been adding 123,000 seats per day to accommodate the additional 100,000 passengers likely to fly.
Jack Christine, deputy aviation director of Charlotte Douglas International Airport in North Carolina, the second largest transportation hub in the U.S. said that “we will break records this summer”, while Oakland International Airport expects a 10% increase in passenger count from last year.
In addition to crowded airports, several airlines reported higher earnings, while the revenue environment is expected to improve further. American Airlines, Delta Air Lines, Inc. (DAL - Free Report) and JetBlue Airways Corporation (JBLU - Free Report) have raised quarter unit revenue guidance, while United Airlines bumped up the guidance for passenger capacity and revenues.
What’s Driving Air Travel?
Airlines’ initiatives to meet growing demand by increasing staffing and seat supply, as well as investing in new aircraft and technology are boosting air travel. The upside has also been driven by a sound economy, an all-time high household net worth, low airfares and reliable operations.
Rise in U.S. GDP, Improving Economy
U.S. economic growth slowed down less sharply in the first quarter than initially anticipated. According to the Commerce Department, gross domestic product (GDP) increased at an annual rate of 1.2% in the first quarter than the 0.7% pace reported last month.
This might, still, sound weaker compared to previous quarters, but, GDP for the first three months of the year tends to underperform due to difficulties in calculating data that the government has acknowledged and is working to resolve.
Record Household Net Worth
The Federal Reserve reported that in the fourth quarter, U.S. household net worth had hit an all-time of $86.8 trillion. This is almost double the level recorded in 2000. It is further expected to go up on a strong labor market that is near full employment.
The unemployment rate dipped to its lowest in April since 2007, supporting the Fed’s view that the economy’s sluggish first quarter was just a blip. Additionally, hiring rebounded last month after a slow start this year, offering fresh evidence that the economy is still growing at a healthy clip.
Cheaper Fares
Several airlines including Spirit Airlines, Frontier Airlines and Southwest Airlines have introduced Ultra-Low-Cost Carriers (ULCCs) and Low-Cost Carriers (LCCs). They believe that no matter how many issues the airlines face, passengers are willing to avail airlines if the price is right.
The drop in crude prices, lately, is also sparking a rally in airline stocks amid optimism surrounding lower fuel cost. Crude went south as the broader market was expecting a deeper cut from the OPEC and 11 non-OPEC players, including Russia or at least an extension of the prevailing curb for another 12 months.
Commendable Operational Performance
Airlines faced several challenges including severe weather conditions during the first three months of the year. However, they were able to complete 98.24% of all flights, similar to 98.28% seen during the first quarter of last year. Airlines also properly handled 99.74% of the bags, up from 99.72% in the same quarter in 2016.
Furthermore, the Transportation Security Administration (TSA) said that they are prepared to handle the influx of travel by coordinating with airports to track daily screening operations and deploy personnel, canine teams and technology wherever necessary.
5 Airline Stocks to Fly High This Summer
Given the aforesaid factors, travel by plane is set to break records this summer. This calls for investing in fundamentally solid airline stocks to boost your portfolio. We have, thus, selected five such stocks that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).
United Continental Holdings Inc is a holding company and its principal subsidiary is United Air Lines, Inc. The company transports people and cargo through its mainline operations. United Continental Holdings has a Zacks Rank #1.
The Chicago-based carrier’s first-quarter 2017 earnings (on an adjusted basis) of 41 cents per share beat the Zacks Consensus Estimate by 4 cents. Operating revenues of $8,420 million in the first quarter were marginally ahead of the Zacks Consensus Estimate of $8,362.5 million (read more: United Continental Beats on Q1 Earnings & Revenues).
The Zacks Consensus Estimate for its current year earnings increased 6.8% over the last 60 days. The company has outperformed the Transportation - Airline industry in the last one-year period (+80.2% vs +36.3%).
SkyWest, Inc. (SKYW - Free Report) operates regional airline operations in the United States. The company's segments include SkyWest Airlines, ExpressJet and SkyWest Leasing. SkyWest has a Zacks Rank #2.
The Zacks Consensus Estimate for its current year earnings advanced 4.3% over the last 60 days. The company has outperformed the industry in the last one year (+49.8% vs +36.3%).
Southwest Airlines Co (LUV - Free Report) operates Southwest Airlines, a passenger airline that provides scheduled air transportation in the United States and near-international markets. Southwest Airlines has a Zacks Rank #2.
Southwest Airlines announced a dividend hike along with a new share repurchase program worth $2 billion. The carrier raised its cash quarterly dividend to 12.5 cents per share, representing an increase of 25% over the previous quarterly payout of 10 cents per share (read more: Southwest Airlines Hikes Dividend, Unveils New Buyback Plan).
The Zacks Consensus Estimate for its current year earnings improved 1.3% over the last 60 days. The company has outperformed the industry in the last one-year period (+42.9% vs +36.3%).
Gol Linhas Aereas Inteligentes SA is engaged in providing mobile geolocation services to its passengers and designing a Website featuring accessibility resources to assist people with visual and motor impairments. The company has a strategic partnership with Delta Air Lines. Gol Linhas carries a Zacks Rank #2.
The company’s first-quarter 2017 earnings per share of $1.06 per share topped the Zacks Consensus Estimate of 15 cents. Net revenue in the quarter came in at $841.2 million, with cargo revenues increasing 27.3% on a year-over-year basis (read more: GOL Linhas Q1 Earnings Beat Estimates, Decrease Y/Y).
The Zacks Consensus Estimate for its current year earnings soared 17.6% over the last 60 days. The company has outperformed the industry in the last one year (+275.4% vs +36.3%).
Hawaiian Holdings, Inc. (HA - Free Report) is engaged in the scheduled air transportation of passengers and cargo between the Hawaiian Islands and certain cities in the U.S. The company sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for its current year earnings increased 8.8% over the last 60 days. The company has yielded a solid return of 22.9% in the last one-year period.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>
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Air Travel to Hit All-Time High This Summer: Top 5 Picks
A slew of incidents have garnered some bad press for airlines. However, travelers chose to ignore such events, with the airline industry gearing up for record high number of passengers this summer.
Consumers continue to shift toward air travel as investments start pouring into new aircraft, technology, overall customer experience and well-being. A decent economy, uptick in household net worth, lower air fares, low fuel prices and an improvement in operations are also fueling growth in summer air travel. Banking on such bullish factors, investing in sound airline stocks seems judicious at the moment.
Summer Air Travel to Grow 4%
In terms of public relations, it hasn’t been a good few months for the airline industry. A viral footage in April captured a screaming passenger being dragged off an overbooked United Continental Holdings Inc (UAL - Free Report) flight. Subsequently, United Airlines made a settlement with the passenger with an undisclosed but seemingly large amount. In the days that followed, the airline flew a woman 3,000 miles in the wrong direction, Spirit Airlines Incorporated (SAVE - Free Report) cancelled a lot many flights that led to a brawl in a Florida airport and American Airlines Group Inc (AAL - Free Report) apparently made a woman sit at the back of a plane despite a first class ticket.
However, these incidents have failed to deter Americans from flying in the summer months. According to the Airlines for America (A4A), around 234.1 million passengers or approximately 2.54 million per day are expected to take to the skies between June and August, which represents an all-time high. This also represents growth of 4% over last summer’s 224.8 million travelers. During this period, airlines have been adding 123,000 seats per day to accommodate the additional 100,000 passengers likely to fly.
Jack Christine, deputy aviation director of Charlotte Douglas International Airport in North Carolina, the second largest transportation hub in the U.S. said that “we will break records this summer”, while Oakland International Airport expects a 10% increase in passenger count from last year.
In addition to crowded airports, several airlines reported higher earnings, while the revenue environment is expected to improve further. American Airlines, Delta Air Lines, Inc. (DAL - Free Report) and JetBlue Airways Corporation (JBLU - Free Report) have raised quarter unit revenue guidance, while United Airlines bumped up the guidance for passenger capacity and revenues.
What’s Driving Air Travel?
Airlines’ initiatives to meet growing demand by increasing staffing and seat supply, as well as investing in new aircraft and technology are boosting air travel. The upside has also been driven by a sound economy, an all-time high household net worth, low airfares and reliable operations.
Rise in U.S. GDP, Improving Economy
U.S. economic growth slowed down less sharply in the first quarter than initially anticipated. According to the Commerce Department, gross domestic product (GDP) increased at an annual rate of 1.2% in the first quarter than the 0.7% pace reported last month.
This might, still, sound weaker compared to previous quarters, but, GDP for the first three months of the year tends to underperform due to difficulties in calculating data that the government has acknowledged and is working to resolve.
Record Household Net Worth
The Federal Reserve reported that in the fourth quarter, U.S. household net worth had hit an all-time of $86.8 trillion. This is almost double the level recorded in 2000. It is further expected to go up on a strong labor market that is near full employment.
The unemployment rate dipped to its lowest in April since 2007, supporting the Fed’s view that the economy’s sluggish first quarter was just a blip. Additionally, hiring rebounded last month after a slow start this year, offering fresh evidence that the economy is still growing at a healthy clip.
Cheaper Fares
Several airlines including Spirit Airlines, Frontier Airlines and Southwest Airlines have introduced Ultra-Low-Cost Carriers (ULCCs) and Low-Cost Carriers (LCCs). They believe that no matter how many issues the airlines face, passengers are willing to avail airlines if the price is right.
The drop in crude prices, lately, is also sparking a rally in airline stocks amid optimism surrounding lower fuel cost. Crude went south as the broader market was expecting a deeper cut from the OPEC and 11 non-OPEC players, including Russia or at least an extension of the prevailing curb for another 12 months.
Commendable Operational Performance
Airlines faced several challenges including severe weather conditions during the first three months of the year. However, they were able to complete 98.24% of all flights, similar to 98.28% seen during the first quarter of last year. Airlines also properly handled 99.74% of the bags, up from 99.72% in the same quarter in 2016.
Furthermore, the Transportation Security Administration (TSA) said that they are prepared to handle the influx of travel by coordinating with airports to track daily screening operations and deploy personnel, canine teams and technology wherever necessary.
5 Airline Stocks to Fly High This Summer
Given the aforesaid factors, travel by plane is set to break records this summer. This calls for investing in fundamentally solid airline stocks to boost your portfolio. We have, thus, selected five such stocks that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).
United Continental Holdings Inc is a holding company and its principal subsidiary is United Air Lines, Inc. The company transports people and cargo through its mainline operations. United Continental Holdings has a Zacks Rank #1.
The Chicago-based carrier’s first-quarter 2017 earnings (on an adjusted basis) of 41 cents per share beat the Zacks Consensus Estimate by 4 cents. Operating revenues of $8,420 million in the first quarter were marginally ahead of the Zacks Consensus Estimate of $8,362.5 million (read more: United Continental Beats on Q1 Earnings & Revenues).
The Zacks Consensus Estimate for its current year earnings increased 6.8% over the last 60 days. The company has outperformed the Transportation - Airline industry in the last one-year period (+80.2% vs +36.3%).
SkyWest, Inc. (SKYW - Free Report) operates regional airline operations in the United States. The company's segments include SkyWest Airlines, ExpressJet and SkyWest Leasing. SkyWest has a Zacks Rank #2.
The Zacks Consensus Estimate for its current year earnings advanced 4.3% over the last 60 days. The company has outperformed the industry in the last one year (+49.8% vs +36.3%).
Southwest Airlines Co (LUV - Free Report) operates Southwest Airlines, a passenger airline that provides scheduled air transportation in the United States and near-international markets. Southwest Airlines has a Zacks Rank #2.
Southwest Airlines announced a dividend hike along with a new share repurchase program worth $2 billion. The carrier raised its cash quarterly dividend to 12.5 cents per share, representing an increase of 25% over the previous quarterly payout of 10 cents per share (read more: Southwest Airlines Hikes Dividend, Unveils New Buyback Plan).
The Zacks Consensus Estimate for its current year earnings improved 1.3% over the last 60 days. The company has outperformed the industry in the last one-year period (+42.9% vs +36.3%).
Gol Linhas Aereas Inteligentes SA is engaged in providing mobile geolocation services to its passengers and designing a Website featuring accessibility resources to assist people with visual and motor impairments. The company has a strategic partnership with Delta Air Lines. Gol Linhas carries a Zacks Rank #2.
The company’s first-quarter 2017 earnings per share of $1.06 per share topped the Zacks Consensus Estimate of 15 cents. Net revenue in the quarter came in at $841.2 million, with cargo revenues increasing 27.3% on a year-over-year basis (read more: GOL Linhas Q1 Earnings Beat Estimates, Decrease Y/Y).
The Zacks Consensus Estimate for its current year earnings soared 17.6% over the last 60 days. The company has outperformed the industry in the last one year (+275.4% vs +36.3%).
Hawaiian Holdings, Inc. (HA - Free Report) is engaged in the scheduled air transportation of passengers and cargo between the Hawaiian Islands and certain cities in the U.S. The company sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for its current year earnings increased 8.8% over the last 60 days. The company has yielded a solid return of 22.9% in the last one-year period.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>