Per Airlines for America (A4A), air travel during the Christmas and New Year break is expected to jump significantly compared with last year. The organization also expects that one in three Americans will travel this holiday season. It goes without saying that an increasing number of Americans are traveling, which has made airline companies offer additional seats since last Christmas.
That said, air travel is becoming expensive in 2018 owing to surging fuel prices. However, oil recently saw its deepest plunge in more than three years in the international market. Understandably, lower fuel cost should aid airline companies in the near term.
Year-End Flying to Hit Record High
Per Airlines for America, 45.7 million people will travel on U.S. airlines over the 18-day holiday period from Dec 20 to Jan 6. This reflects a 5.2% increase over the expected 43.4 million passengers, who flew during this period in 2017.
Moreover, per travel agency AAA, a record-breaking 112.5 million people will be traveling this holiday season, an increase of 4.4% over last year and the highest since AAA began tracking holiday travel. Naturally, airports are bracing for longer security queues and parking crunch and trying to meet demand by adding more seats per day.
Per the A4A, since last Christmas airlines have added 143,000 seats on domestic and international flights. This is expected to be enough for handling the increase of 126,000 flyers a day. Air travel during the Christmas and New Year break is considered one of the busiest periods for airlines. And with holiday flying expected to hit a record high, it will definitely boost revenues of U.S. airlines.
Airlines Poised to Gain on Low Oil Prices
Oil recently saw its steepest decline in more than three years in the international market due to fears of oversupply and a weakening demand outlook. On Monday, oil prices once again fell to a 14-month low on signs of oversupply in the United States and concerns over prospects of global economic growth and demand for fuel.
On Dec 17, U.S. light crude settled below $50 for the first time since October 2017, closing at $49.88, down $1.32 or 2.6%. Brent crude oil fell 67 cents or 1.1% to settle at $59.61 per barrel. This definitely is a blessing in disguise for the aviation industry.
In the last six months, shares of Spirit Airlines, Inc. SAVE and United Continental Holdings, Inc. UAL have gained 47.5% and 15.7%, respectively, while shares of American Airlines Group, Inc. AAL and JetBlue Airways Corporation JBLU have declined 24.5% and 13.9%, respectively. Spirit Airlines has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
U.S. airlines have been facing turbulence this year, with crude oil futures hitting nearly four-year highs last month. However, the sudden collapse in oil prices will definitely help airline companies. Moreover, the all-important Christmas and New Year travel period is likely to witness a record number of flyers, which definitely bodes well for the aviation industry.
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