Will Weight-Loss Drugs Be the Savior of the Airlines Industry?

United Airlines' shares (UAL) fell more than 11% last week after the carrier cut its forecast for the last three months of the year. Airline sector sees broad weakness in wake of United Airlines' dour profit outlook.

Start Date: Oct.17, 2023 - End Date: Oct.20, 2023

Israel-Hamas War: Many major airlines have stopped operating fights to Israel since war broke out this month. United said flights to Tel Aviv could be suspended through the end of October, or through year end.The longer that the Israel-Hamas war lasts, the lower the expected profit.

Crude oil prices rising: A 1.7% jump in crude oil prices CL.1, 1.12%, which stoked concerns over rising fuel costs, added to investor concerns.

Stock market downbeat outlook: Bond yield are surging, sell signs are popping up all over the stock market.

With Airline stocks rocked, can weight-loss drugs be the savior? It's not a completely absurd notion. Airlines are consistently looking for ways to reduce plane weight to increase fuel efficiency. The more a plane weighs, the more fuel it burns.Fuel and labor are the two largest expenses for carriers, with fuel accounting for about 25 percent.

While it's unclear how wide an impact the spread of weight-loss drugs will actually have on average passenger weights, Sheila Kahyaoglu, a Jefferies Financial analyst, estimated in a recent report on the implications of a "slimmer society" that airlines could save a significant amount of money if the average passenger lost weight.

Using United Airlines (UAL) as a model, Kahyaoglu estimated thatif each passenger weighed 10 pounds less on average, the weight savings would equal around 1,790 pounds per flight.Referencing a past example of the airline cutting down aircraft weight, she estimates that the airline would save 27.6 million gallons of fuel per year,or around $80 million worth going by the average price of fuel this year.

After digging through some of our recent work on A320 flight capabilities,the potential payload benefit from transporting lighter passengers is negligible, especially on shorter-distance flights.

--There are 160 passengers on board the average domestic flight.

--The average weight per passenger (from infants to the elderly) is 150 pounds.

--The total human payload weight of the average flight is 24,000 pounds (160 passengers x 150 pounds each =24,000).

--Assuming 9% of passengers are Ozempic and/or Wegovy users.

--9% of passengers per flight would mean an average of 14.4 passengers per flight (9% of 160 passengers) use these weight loss drugs (let's round that down to 14 passengers).

--Those 14 passengers lose 10 pounds each. That would drop the total human payload weight per flight from 24,000 pounds to 23,860 pounds. This would equate to a human payload reduction of just 0.6%.

" It is also important to notice that more detailed analysis on fuel consumption or seat mile cost improvements due to passenger weight reduction are not straightforward. Those estimates vary based on route conditions such as climb and descent profile, cruise altitude, in-flight temperature, flight distance, among others, while the calculation of those effects depends on data that are generally not available in the public domain." CITI added.