U.S. Airlines Pin Hopes on Record-Breaking Thanksgiving Travel

As the Thanksgiving travel season approaches, U.S. airlines are gearing up for what could be a pivotal moment for their stocks. After facing challenges such as declining domestic demand and increasing labor and fuel costs, the industry needs a strong performance during the holiday period to sustain its recent recovery.

While the summer's peak travel season feels like a distant memory and corporate travel has yet to fully rebound from the impact of Covid-19, carriers are counting on the traditional winter peak periods to bolster their outlook. However, there is still a factor that could significantly influence the outcome: the weather.

According to the Transportation Security Administration (TSA), this year's holiday travel season is expected to be the busiest ever, starting as early as this weekend. TSA estimates that between Friday, November 17, and Tuesday, November 28, more than 30 million passengers will pass through U.S. airports. In fact, during the first three days of this period alone, TSA has already screened a total of 7.7 million passengers.

One date in particular stands out as potentially breaking records: Sunday, November 26. The current record for the highest number of passengers in a single day is 2.88 million on June 30, 2023.

The air travel industry has seen significant activity throughout the year, with seven out of the ten busiest days in history occurring within the past six months (the remaining four took place in 2019). This highlights the importance of the upcoming Thanksgiving travel period for U.S. airlines as they aim to sustain their recent stock market rebound.

Read this to stay informed about the latest developments in the airline industry.

Airlines Preparing for a Busy Thanksgiving Travel Season

As the holiday season approaches, airlines are gearing up for a surge in travel. United Airlines (ticker: UAL) is anticipating its busiest Thanksgiving ever, with projections of flying over 5.9 million passengers between November 17 and November 29 - a 13% increase compared to last year. Similarly, American Airlines (AAL) expects a record-breaking Thanksgiving season, estimating around 7.8 million passengers from November 16 to November 28.

However, not everyone shares the same level of optimism. TD Cowen analyst Helane Becker believes that while the holiday week will be robust, it may not surpass previous passenger volume records. Her forecast suggests around 27 million passengers, slightly below the Transportation Security Administration’s (TSA) projection of 30 million. Nonetheless, Becker highlights that she expects this year's year-end holiday travel to be better than last year.

A recurring theme during airline earnings season has been strong peak periods, coupled with weaker off-peak periods. As a result, holidays like Thanksgiving have become increasingly important for the industry. They also serve as a litmus test for the progress made in resolving the pilot shortage issue.

The airline market has experienced turbulence throughout this year. The NYSE Arca Global Airline Index (AXGAL) witnessed a commendable 37% increase from the beginning of the year until its peak in July, driven by a surge in travel demand during the summer. However, the index subsequently plummeted 60% from its peak to its lowest point in November 2023. While it has rebounded slightly this month, it currently stands at a 0.5% decline for the year.

A successful Thanksgiving travel season, accompanied by a strong Christmas holiday period, could be instrumental in sustaining this nascent recovery for the industry as we approach the end of the year.