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Busiest Thanksgiving Travel Period Likely for U.S. Airlines
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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 have a busy time in the upcoming Thanksgiving holiday period (Nov 16–Nov 27). The projection indicates 5.5% more passengers flying to various destinations in the period compared to 2017.
The bullish forecast further confirms strong demand for air travel. Additionally, air fares are still low despite high fuel costs. Low ticket prices have also contributed to the favorable projection.
A4A’s Projection
According to the forecast put forward by the Washington-based trade group, approximately 30.6 million passengers will travel on U.S. airlines during the Thanksgiving holiday period this year or 2.55 million fliers per day, compared with 29 million people who chose to travel by air in the same period last year. Moreover, Sunday, Nov 25 is likely to be the busiest day for carriers in the twelve-day period, with 3.06 million people expected to take to the skies on that day.
To meet the surge in travel demand, U.S. carriers are increasing the number of available seats by 158,000 per day. Also, with the U.S. economy improving and consumer confidence remaining strong, more Americans are taking vacations.
Further, affordable air fares in addition to a much-improved job market and rising disposable income have provided added incentive for consumers to opt for air travel. In fact, inflation-adjusted fares in the first half of 2018 have declined 7% since 2010.
Bullish Forecast Coincides With Oil Price Plunge
It is a well-known fact that high oil prices have hurt airline stocks this year so far. In fact, in the first nine months of 2018, the combined pre-tax operating profit of the nine publicly traded U.S. passenger carriers, which include the likes of Delta Air Lines (DAL - Free Report) , American Airlines Group (AAL - Free Report) , United Continental Holdings (UAL - Free Report) , JetBlue Airways (JBLU - Free Report) and Southwest Airlines (LUV - Free Report) declined more than 27% year over year mainly due to a 34% rise in fuel costs. In fact, high fuel costs resulted in year-over-year decline in third-quarter earnings per share of the likes of Alaska Air Group (ALK - Free Report) .
The Zacks Airline industry has lagged the Zacks S&P 500 composite year to date mainly due to high fuel costs. Over this period, the industry has declined 16.5% versus the S&P 500 Index’s gain of 1.7%.
However, oil prices have been declining sharply of late (down more than 20% since October highs) as fears of oversupply and a weakening demand outlook weighed on the commodity. Fall in oil prices is a blessing for airline stocks as expenses on fuel represent the major chunk of their operating expenses.
Good Times Ahead for Airlines?
The bullish forecast for the Thanksgiving travel period couldn’t have come at a better time for airlines. With travel demand remaining strong, the fall in oil prices indicates good tidings for these stocks.
Due to strong demand, passenger revenues should continue to grow in the coming quarters. Air travel demand is likely to remain strong in the long term as well. The International Air Transport Association (“IATA”) expects 8.2 billion passengers to take the sky route by 2037. In view of the tailwinds, we expect U.S. carriers to fly high in the coming days.
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Busiest Thanksgiving Travel Period Likely for U.S. Airlines
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 have a busy time in the upcoming Thanksgiving holiday period (Nov 16–Nov 27). The projection indicates 5.5% more passengers flying to various destinations in the period compared to 2017.
The bullish forecast further confirms strong demand for air travel. Additionally, air fares are still low despite high fuel costs. Low ticket prices have also contributed to the favorable projection.
A4A’s Projection
According to the forecast put forward by the Washington-based trade group, approximately 30.6 million passengers will travel on U.S. airlines during the Thanksgiving holiday period this year or 2.55 million fliers per day, compared with 29 million people who chose to travel by air in the same period last year. Moreover, Sunday, Nov 25 is likely to be the busiest day for carriers in the twelve-day period, with 3.06 million people expected to take to the skies on that day.
To meet the surge in travel demand, U.S. carriers are increasing the number of available seats by 158,000 per day. Also, with the U.S. economy improving and consumer confidence remaining strong, more Americans are taking vacations.
Further, affordable air fares in addition to a much-improved job market and rising disposable income have provided added incentive for consumers to opt for air travel. In fact, inflation-adjusted fares in the first half of 2018 have declined 7% since 2010.
Bullish Forecast Coincides With Oil Price Plunge
It is a well-known fact that high oil prices have hurt airline stocks this year so far. In fact, in the first nine months of 2018, the combined pre-tax operating profit of the nine publicly traded U.S. passenger carriers, which include the likes of Delta Air Lines (DAL - Free Report) , American Airlines Group (AAL - Free Report) , United Continental Holdings (UAL - Free Report) , JetBlue Airways (JBLU - Free Report) and Southwest Airlines (LUV - Free Report) declined more than 27% year over year mainly due to a 34% rise in fuel costs. In fact, high fuel costs resulted in year-over-year decline in third-quarter earnings per share of the likes of Alaska Air Group (ALK - Free Report) .
Alaska Air Group carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Airline industry has lagged the Zacks S&P 500 composite year to date mainly due to high fuel costs. Over this period, the industry has declined 16.5% versus the S&P 500 Index’s gain of 1.7%.
However, oil prices have been declining sharply of late (down more than 20% since October highs) as fears of oversupply and a weakening demand outlook weighed on the commodity. Fall in oil prices is a blessing for airline stocks as expenses on fuel represent the major chunk of their operating expenses.
Good Times Ahead for Airlines?
The bullish forecast for the Thanksgiving travel period couldn’t have come at a better time for airlines. With travel demand remaining strong, the fall in oil prices indicates good tidings for these stocks.
Due to strong demand, passenger revenues should continue to grow in the coming quarters. Air travel demand is likely to remain strong in the long term as well. The International Air Transport Association (“IATA”) expects 8.2 billion passengers to take the sky route by 2037. In view of the tailwinds, we expect U.S. carriers to fly high in the coming days.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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