The Airline Stocks Generally Rose Over the Past Month, With Summer Travel Season Upcoming
Over the past month, major airline stocks have risen considerably in anticipation of the upcoming summer travel season. Delta Air Lines has grown for 13 consecutive days as of Tuesday and has increased by more than 20% during this period. Similarly, Southwest Airlines, American Airlines, and United Airlines have seen their stock prices increase by 16.81%, 14.60%, and 12.85%, respectively.
1. Strong summer travel demand drives strong ticket sales. According to data from Expedia, flight searches between June and August rose by 25% compared to last year. This optimistic outlook is also confirmed by hoteliers and analysts at J.P. Morgan.
Marriott international president and CEO Anthony Capuano said, “We saw strong recovery across price tiers and geographies, and that continues. I was looking at some July 4 data. Revenue per available room is up about 10% year over year. Forward bookings through the end of the year look particularly strong.”
Hilton’s CFO Kevin Jacobs also expressed optimism about the strong summer travel demand, “Demand is strong across the board.”
The third edition of J.P. Morgan’s Cost of Living survey shows that vacations remain a relatively higher priority for American and European consumers than other non-essential items. As Jamie Baker, U.S. Airlines and Aircraft Leasing Analyst at J.P. Morgan, said, “U.S. domestic travel revenue in the second quarter of 2023 is starting to pace toward that of the second quarter of 2022, but this is largely offset by surging international demand.”
2. On the cost side, falling fuel prices are contributing to airlines' profitability. The International Air Transport Association (IATA) reports that current average jet fuel prices (week ending 18/Jun/2023) are down by 31.6% compared to last year's average. IATA revised the Airline industry net profits forecast to $9.8 billion in 2023, more than double the forecast of $4.7 billion in December 2022.
The relative strength Index (RSI) is a momentum indicator that measures the speed and extent of price changes. Generally, RSI above 70 is considered overbought, and below 30 is considered oversold.
Source: J.P. Morgan, ChineseFN, IATA, FactSet
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