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Busiest Spring Season in the Cards for U.S. Airlines Per A4A
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According to a projection by Airlines for America (‘A4A’) — the trade organization for leading U.S. airlines — companies in the airline space are set to be extremely busy in the 2019 spring travel season (Mar 1-Apr 30). The projection mirrors a 4.3% increase in passengers flying to various destinations over the period compared with last year.
This bullish forecast further confirms a solid demand for air travel. Affordable ticket prices have also contributed to the favorable projection. With the advent of spring, many people spend on outdoor activities and traveling. After all, very few can travel in the harsh winter months characterized by inclement weather.
A4A's Projection
According to the forecast put forward by the Washington-based trade group, passengers traveling on U.S. airlines during the spring travel period this year will reach an all-time high of 158.2 million. Notably, 151.7 million people chose to travel by air in the same period last year. The forecast translates into 2.59 million fliers per day during the above-mentioned period.
To meet the surge in travel demand, U.S. carriers are increasing the number of available seats by 129,000 per day. Also, with the U.S. economy improving and consumer confidence remaining strong, more Americans planning for vacations.
Affordable airfares in addition to rising disposable income and low unemployment have provided added incentive for consumers to opt for air travel. Driven by the above reasons, the two-month period is likely to see 106,000 additional passengers taking to the skies per day on various U.S. carriers.
Impressively, the solid spring season travel forecast made by A4A comes close on the heels of the findings of the A4A commissioned research, conducted by Ipsos Public Affairs.
According to the survey, 50% participants revealed that they flew at least once in 2018. The figure compared favorably to 39% recorded in 1997. Per the research findings, 72% Americans resorted to air travel for personal reasons including vacations, with overall flight satisfaction exceeding 80% last year.
Oil Price Decline Bodes Well for Airlines
The upbeat performance by airline stocks during the 2018 Thanksgiving holiday period and the bullish projection for the spring travel season this year coincide with the decline in oil prices. With oil prices declining in excess of 20% from the highs of $76 a barrel touched in October 2018, operating expenses of airlines have decreased.
In line with the decline in oil prices, carriers have issued a favorable projection for the metric. For example, American Airlines (AAL - Free Report) anticipates fuel costs between $1.97 and $2.02 per gallon in the first quarter of 2019 compared with $2.10 recorded in the year-ago quarter. The same for 2019 estimated to be between $1.99 and $2.04, lower than $2.23 in 2018.
The current tax law, which came into effect in late 2017, is a huge positive for the airline industry. A considerably lower corporate tax rate is boosting cash flow and improving the bottom line of carriers. Huge savings owing to the reduction in corporate tax rate implies that more cash will be available to fund their capital expenditures, acquisitions and share repurchases, among others. Shareholder-friendly activities apart, lower tax related outflow of most carriers have enabled them to undertake employee-friendly activities such as profit sharing.
Carriers like SkyWest (SKYW - Free Report) and Alaska Air (ALK - Free Report) have already increased their dividend payouts this year. Dividend hikes from the likes of Delta Air Lines (DAL - Free Report) and Southwest Airlines (LUV - Free Report) are expected through 2019.
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This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
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Busiest Spring Season in the Cards for U.S. Airlines Per A4A
According to a projection by Airlines for America (‘A4A’) — the trade organization for leading U.S. airlines — companies in the airline space are set to be extremely busy in the 2019 spring travel season (Mar 1-Apr 30). The projection mirrors a 4.3% increase in passengers flying to various destinations over the period compared with last year.
This bullish forecast further confirms a solid demand for air travel. Affordable ticket prices have also contributed to the favorable projection. With the advent of spring, many people spend on outdoor activities and traveling. After all, very few can travel in the harsh winter months characterized by inclement weather.
A4A's Projection
According to the forecast put forward by the Washington-based trade group, passengers traveling on U.S. airlines during the spring travel period this year will reach an all-time high of 158.2 million. Notably, 151.7 million people chose to travel by air in the same period last year. The forecast translates into 2.59 million fliers per day during the above-mentioned period.
To meet the surge in travel demand, U.S. carriers are increasing the number of available seats by 129,000 per day. Also, with the U.S. economy improving and consumer confidence remaining strong, more Americans planning for vacations.
Affordable airfares in addition to rising disposable income and low unemployment have provided added incentive for consumers to opt for air travel. Driven by the above reasons, the two-month period is likely to see 106,000 additional passengers taking to the skies per day on various U.S. carriers.
Impressively, the solid spring season travel forecast made by A4A comes close on the heels of the findings of the A4A commissioned research, conducted by Ipsos Public Affairs.
According to the survey, 50% participants revealed that they flew at least once in 2018. The figure compared favorably to 39% recorded in 1997. Per the research findings, 72% Americans resorted to air travel for personal reasons including vacations, with overall flight satisfaction exceeding 80% last year.
Oil Price Decline Bodes Well for Airlines
The upbeat performance by airline stocks during the 2018 Thanksgiving holiday period and the bullish projection for the spring travel season this year coincide with the decline in oil prices. With oil prices declining in excess of 20% from the highs of $76 a barrel touched in October 2018, operating expenses of airlines have decreased.
In line with the decline in oil prices, carriers have issued a favorable projection for the metric. For example, American Airlines (AAL - Free Report) anticipates fuel costs between $1.97 and $2.02 per gallon in the first quarter of 2019 compared with $2.10 recorded in the year-ago quarter. The same for 2019 estimated to be between $1.99 and $2.04, lower than $2.23 in 2018.
American Airlines carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Low Taxes: A Boon
The current tax law, which came into effect in late 2017, is a huge positive for the airline industry. A considerably lower corporate tax rate is boosting cash flow and improving the bottom line of carriers. Huge savings owing to the reduction in corporate tax rate implies that more cash will be available to fund their capital expenditures, acquisitions and share repurchases, among others. Shareholder-friendly activities apart, lower tax related outflow of most carriers have enabled them to undertake employee-friendly activities such as profit sharing.
Carriers like SkyWest (SKYW - Free Report) and Alaska Air (ALK - Free Report) have already increased their dividend payouts this year. Dividend hikes from the likes of Delta Air Lines (DAL - Free Report) and Southwest Airlines (LUV - Free Report) are expected through 2019.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
See their latest picks free >>