Airline stocks, including United Airlines (UAL), Delta Airlines (DAL), Southwest Airlines (LUV), and American Airlines (AAL), have been on a losing streak in the past five trading sessions as their troubles have mounted. According to a CNBC report, airlines are increasingly faced with congested airports, a shortage of pilots, and rising prices even as travel is on a rebound.
The report stated that to resolve some of these issues, airlines are looking at bigger planes to fit in more passengers, called ‘upgauging’. CNBC cited data from aviation data firm Cirium that indicated “flights operated by the 11 largest U.S. airlines had an average of more than 153 seats on domestic flights last year, up from an average of nearly 141 seats in 2017.” Airlines are also looking at reducing their dependence on regional airlines, where the unit costs are more, and the pilot shortage is more acute.
In addition to the above problems, another issue that airlines could face is the rising costs of jet fuel. This prompted Jeffries analyst Sheila Kahyaoglu to slash her second-quarter EPS estimates by 11% across the board for all airlines. The reason is that the analyst believes that jet fuel costs are poised to increase following the production cut announced by OPEC+ earlier this week.
As airlines get ready for what promises to be a busy spring and summer, airline companies like American Airlines are shifting toward dynamic pricing and replacing its frequent flyer award chart. Starting from Wednesday, AAL has started showing starting points for how many frequent flyer miles will be required to redeem for a ticket in certain regions. AAL had stated last year that it was going to do away with different redemption categories, MileSAAver, and AAnytime awards.
Meanwhile, United Airlines has started to concentrate on expanding into international markets, which is already paying dividends for the airliner. UAL stated on Thursday that international bookings are up by 15% year-over-year in March, and its international flying is up by 25% from last year. The airliner stated that it is “already the largest carrier across both the Atlantic and Pacific and this summer’s schedule includes nearly 25 new routes.”
Over the past five trading sessions, U.S. Global Jets ETF (JETS) has lost around 2% of its value.
