The major U.S. airlines have been reporting their quarterly earnings over the past week, and a common theme has emerged: higher fares.
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American Airlines (AAL), United Airlines (UAL), Delta Air Lines (DAL), and others, have all signaled that passengers should expect higher air fares in the months ahead. “We do expect airfares to come up,” said American Airlines chief financial officer (CFO) Devon May when reporting the carrier’s fourth-quarter 2024 financial results.
Fare-tracking platform Hopper recently reported that the average domestic airfare in the U.S. is currently $304, up 12% from the same period a year ago. The airlines say that the higher airfares are the result of strong demand, even during winter, and limited capacity growth. Analysts say that in the current environment, airlines can be expected to flex their pricing power.
Lack of New Aircraft
Adding to the current situation is the difficulty airlines have had in taking delivery of new aircraft from Boeing Co. (BA), which has limited their ability to expand flights, contributing to higher fares. Boeing endured a costly worker strike last autumn and has been dealing with safety and production issues.
Still, most airline executives aren’t complaining about raising airfares, saying it will bolster future financial results. Shareholders shouldn’t complain either. “The domestic pricing environment is improving,” said United Airlines chief commercial officer Andrew Nocella on the carrier’s recent earnings call.
Is UAL Stock a Buy?
United Airlines stock has a consensus Strong Buy rating among 17 Wall Street analysts. That rating is based on 17 Buy recommendations. There are no Hold or Sell ratings on the shares currently. The average UAL price target of $128.06 implies 23% upside from current levels.
