Important points
United Airlines was the S&P 500’s best-performing stock on Wednesday, rising 12% and trading at its highest since February 2020, when travel stocks first began to reel due to the coronavirus outbreak. United Airlines executives say the U.S. airline industry is “Business travel continues to recover from the pandemic-induced downturn, contributing to record U.S. airport traffic, executives said.
United Airlines (UAL) was the best performer on the S&P 500 on Wednesday after executives said the airline industry had reached a long-awaited “inflection point,” underscoring the company’s rosy business outlook. It became a brand that received the following.
Wednesday’s 12% rise puts United stock at its highest since February 2020, when travel stocks first began to reel due to the coronavirus outbreak. The past few years have been a roller coaster for airlines and their shareholders, navigating a global pandemic, soaring inflation and oil prices at their highest in nearly a decade.
United executives say the tide is turning in their favor, vindicating the bulls who have been buying up airline stocks in recent months. The U.S. Global Jets ETF (JETS), which includes airlines, jet makers and other travel stocks, is up more than 30% since falling in early August following the broader stock market selloff.
Delta Air Lines (DAL) stock rose nearly 7% on Wednesday, hitting its highest since February 2020, along with United Airlines.
What is an airline stock price increase?
Airfare pricing trends improved throughout the third quarter as the air travel industry reached the “inflection point” that United executives had predicted.
“As unprofitable capacity begins to exit the market, we expect domestic yields to improve,” CEO Scott Kirby told analysts on the company’s earnings call Wednesday morning. Investopedia obtained the records from AlphaSense.
Intense competition between America’s largest carriers and low-cost carriers has put pressure on airfares, which have fallen nearly 5% this year, according to official inflation data.
United executives are optimistic that the industry’s worst oversupply problem is over. Domestic passenger revenue per average seat mile (PRASM), a key airline performance indicator, declined in August and September after declining more than 4% in July, according to Chief Commercial Officer Andrew Nocera. was positive.
Nocera said much of the company’s third-quarter earnings challenge was due to “low yields” on domestic leisure travel. “Going into the first quarter, we are selling the exact same tickets at a much higher yield,” he said.
Travel demand remains healthy
Travel demand has slowed since the heyday of post-pandemic “revenge travel” in 2022, but remains strong. U.S. airports have seen record congestion this year, according to TSA throughput data.
Healthy leisure travel has been supplemented by an increase in business travel, as companies mandated returns to the office or adopted hybrid work, encouraging remote employees to occasionally travel to the office. Business contract revenue rose 13% in September, with business customer sales on track to be slightly below 2019 levels.
Improvements in corporate travel demand are strongest in coastal hubs serving high-tech, financial and professional services industries, executives said, “setting us up excellently for 2025,” Nocera said.
