The airline industry in the United States is bracing itself for what is expected to be a historic Thanksgiving travel season, and the success of this period is critical for their stocks.
In recent months, the sector has faced challenges due to a decrease in domestic demand and an increase in labor and fuel expenses. Although there has been a slight recovery in stock prices during November, Thanksgiving will serve as a significant test to determine if this upward momentum can be sustained.
With the busy summer season now a distant memory and corporate travel still far from returning to pre-Covid levels, airlines are relying on the traditional winter peak periods to be exceptionally strong.
Early forecasts indicate that their hopes may be fulfilled, although the weather will still play a crucial role.
The Transportation Security Administration (TSA) foresees the busiest holiday travel season ever, starting this weekend. From Friday, November 17 to Tuesday, November 28, the TSA is anticipating screening over 30 million passengers at U.S. airports. Within the first three days of this period alone, 7.7 million passengers have already been screened.
According to their predictions, Sunday, November 26 is expected to be the busiest day for air travel in U.S. history. The current record was set on June 30, 2023, with 2.88 million passengers.
This year has undoubtedly been a busy one for air travel. Of the top ten busiest days in history, seven have occurred within the last six months, while the remaining four were recorded in 2019.
Airlines Prepare for Busy Thanksgiving Travel Season
United Airlines (ticker: UAL) and American Airlines (AAL) are gearing up for a bustling Thanksgiving travel period. United Airlines expects to fly more than 5.9 million passengers between November 17 and November 29, a 13% increase compared to last year. American Airlines is also predicting a record, estimating that they will transport 7.8 million passengers from November 16 to November 28.
However, not everyone is convinced that these numbers will reach record-breaking levels. TD Cowen analyst, Helane Becker, believes that the total number of passengers will fall slightly short of expectations. She forecasts 27 million passengers, which is less than the Transportation Security Administration’s (TSA) estimate of 30 million. Despite this, Becker points out that compared to last year, holiday travel should be stronger due to people saving up for the year-end holidays.
A recurring trend observed during airline earnings season is that while airlines report strong peak periods, off-peak periods are weaker than anticipated. As a result, the key holiday seasons have become increasingly important for the industry’s success.
Additionally, the approaching holidays will provide an opportunity to assess the progress made in resolving the pilot shortage that has plagued the industry.
This year has been tumultuous for airline stocks. The NYSE Arca Global Airline Index (AXGAL) experienced a 37% increase from the beginning of the year until its peak in July, thanks to high travel demand during the summer. However, the index swiftly plunged by 60% to its lowest point in November. After a partial recovery this month, the index is now down by 0.5% for the year.
A successful Thanksgiving season without significant disruptions, followed by a robust Christmas holiday period, could contribute to the ongoing recovery of the airline industry throughout the remainder of the year.