Airline stocks are higher on stronger ticket bookings since the presidential election
Shares of major U.S. airlines were higher Friday, after American Airlines and United Airlines raised profit and revenue forecasts for the fourth quarter. Several carriers said ticket bookings have been stronger during the holiday season and since Election Day.
American, which operates a hub in Philadelphia, said Friday it expects fourth-quarter unit revenue will be flat, plus or minus 1 percent, up from a previous forecast of a decline of 2.5 percent to 0.5 percent. American now expects fourth-quarter pre-tax margin will be 6 percent to 8 percent, up from a previous guidance range of 5 percent to 7 percent.
United also forecast a higher profit margin Thursday for the current quarter, saying bookings were stronger and employee-related benefit expenses were lower than expected.
"December was always a wildcard for the industry as it was unclear how demand trends would be," said analyst Helane Becker with Cowen & Co. "We believe the improvement in bookings is driven by leisure and business travel relative to initial expectations."
Southwest Airlines CEO Gary Kelly told Bloomberg News Thursday that ticket bookings at Southwest have been up since the presidential election, and Kelly said he was encouraged by President-elect Donald Trump's pledge to unwind regulations, cut corporate taxes, and build transportation infrastructure.
"There's definitely a lift in spirit," Gary Kelly said in an interview at Bloomberg's headquarters in New York, citing the stock market's rally in the last month. "I don't know that we can explain it, but we've seen a lift in our booking activity since the election."
American said that November was the "best operation since the merger" with US Airways in December 2013. American had the lowest number of cancellations and best on-time departures and on-time arrivals of any month, said president Robert Isom.
"Yield trends continue to exceed expectations as leisure and business travel appear to have picked up post the U.S. presidential election," Becker said in a client note, referring to American.
Despite a record 2016 expected for airline profits, the International Air Transport Association, an industry group, projected global airline industry profits will fall in 2017 and capacity growth - supply of seats and flights - will slow next year because of higher oil costs and slowing global GDP growth.
American shares were up 2.82 percent, or $1.36, to $49.41. United shares rose 3.12 percent, or $2.28, to $75.02, while Delta shares ticked up 0.70 percent, or 36 cents, to $51.71. Southwest stock was up 0.40 percent, or 20 cents, to $49.80 in afternoon trading.