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Can Crude Slide, Holiday Season Boost Airline Stocks Further?

Ritujay Ghosh
Air travel is becoming expensive in 2018 owing to surging fuel prices. But oil has seen its deepest international plunge in more than three years, resulting in airline stocks jumping in November.

Per the Transportation Security Administration (TSA), the Thanksgiving holiday period is expected to witness a record-breaking number of flyers. Also, per the Airlines for America (A4A), the industry’s trade organization for the leading U.S. airlines, a record 30.6 million passengers will be flying on U.S. airlines during the 12-day Thanksgiving air travel period.

Air travel is becoming expensive in 2018 owing to surging fuel prices. However, oil recently saw its deepest plunge in more than three years in the international market. This has resulted in airline stocks jumping in November.

Holiday Flying to Hit Record High

Per the TSA, 25 million passengers are expected to fly across the United States from Nov 16 to Nov 26. This reflects an increase of 5% from 2017. The busiest travel days leading to Thanksgiving are likely to be Friday and Wednesday before the holiday, with 2.6 million passengers and crew expected to fly on each of these two days.

Also, more than 2.7 million passengers are expected to be flying home on Nov 25, the Sunday after Thanksgiving. Moreover, the A4A recently projected that a record 30.6 million passengers would be traveling on U.S. airlines during the 12-day Thanksgiving air travel period, up from an estimated 29 million passengers during the 2017 travel period.

Naturally, airports are bracing for longer security queues and parking crunch and trying to meet demand by adding 158,000 seats per day. The holiday season is considered one of the busiest periods for airlines. And with holiday flying expected to hit a record high, it will definitely boost revenues of U.S. airlines.

Airlines Poised to Gain on Low Oil Prices

Oil recently saw its steepest decline in more than three years in the international market due to fears of oversupply and a weakening demand outlook. On Wednesday, oil prices closed higher after witnessing 12 straight sessions of decline. However, oil prices once again slipped on Thursday on concerns of rising supply going into a market, in which consumption is predicted to slow down given a gloomy economic outlook. (Read More: 4 Top Stocks to Gain as Oil Enters Bear Market)

At 0441 GMT, Brent Crude Oil futures were trading at $65.88 per barrel, down 0.24 cents from their last close. This definitely is a blessing in disguise for the aviation industry. Month to date, shares of American Airlines Group, Inc. AAL, JetBlue Airways Corporation JBLU and Southwest Airlines Co. LUV have surged 7.6%, 7.8% and 5.7%, respectively.

Shares of Alaska Air Group, Inc. ALK, Delta Air Lines, Inc. DAL and Spirit Airlines, Inc. SAVE have gained 7.9%, 2.5% and 0.8%, respectively. Spirit Airlines sports a Zacks Rank #1 (Strong Buy), while the other stocks carry a Zack Rank #3 (Hold) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

Understandably, U.S. airlines have been facing turbulence this year, with crude oil futures hitting nearly four-year highs last month. This has been weighing on the aviation industry, with expenses increasing and cutting into its revenues.

However, the sudden collapse in oil prices will definitely help airline companies. Moreover, the all-important holiday season is likely to witness a record number of flyers, which definitely bodes well for the aviation industry.

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Southwest Airlines Co. (LUV) : Free Stock Analysis Report
 
Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
 
JetBlue Airways Corporation (JBLU) : Free Stock Analysis Report
 
Alaska Air Group, Inc. (ALK) : Free Stock Analysis Report
 
Spirit Airlines, Inc. (SAVE) : Free Stock Analysis Report
 
American Airlines Group Inc. (AAL) : Free Stock Analysis Report
 
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