After the kind of turbulence that has the captain asking passengers to buckle up and stay seated, the airline industry and its exchange traded fund (ETF) finally appear poised for takeoff. Are we free to move about the cabin yet?
The signs of improvement within the airline industry can be seen in most domestic, low-fare carriers. Susan Carey and Mike Esrtel for The Wall Street Journal report that passenger miles and unit revenue—the money taken in for each seat per mile flown—at discount king Southwest Airlines (NYSE: LUV) soared 12% last month from a year ago. (Why does the health of the airline industry indicate market health?)
Higher cost carriers and international carriers are still facing headwinds. What factors are helping out the domestic set?
- Planes are fuller with fewer discounted fares
- Lower fuel prices and revenue from a variety of formerly free services are starting to pay off
- Airlines have raised billions of dollars of new debt and equity since the summer, encouraging investors and easing concerns about potential bankruptcy filings
Four major carriers are experiencing the uptrend with a cautious attitude: Southwest Airlines, United Airlines (NASDAQ: UAUA), Continental Airlines (NYSE: CAL) and Jet Blue Airways (NASDAQ: JBLU) carried between them almost 20 million passengers – up from 19.12 million a year ago, reports Breaking Travel News. Although traffic overall is up 11.7%, capacity is down by 7.7%. (Airlines may be seeing bluer skies).
United Airlines (NYSE: UAL) said Tuesday it has ordered 25 wide-body Boeing Co. 787 Dreamliner and Airbus A350-XWB jetliners for delivery beginning from 2016 to 2019, with an option to buy up to 50 more of each aircraft if desired, reports Christopher Hinton for MarketWatch. This order is right in line with a bottoming out in falling demand over the past couple years. (Why airlines could be at the bottom).
For more stories about airlines, visit our airline category.
- Claymore/NYSE Arca Airline (NYSEArca: FAA): up 17.7% in the last month
- iShares Dow Jones Transportation Average (NYSEArca: IYT): up 17.5% year-to-date; holds some airlines in small amounts
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.