Things are looking good for U.S. airlines this coming holiday season. How good? More than 45 million people will fly between Dec. 16 and Jan. 5.
All that thanks to an improving economy and lower airfares, according to Airlines for America, a trade organization representing the principle U.S. air carriers.
Numbers Behind The Predictions
Airlines for America notes the predictions represent an increase of 3.5% from last year. The group says Dec. 22 and 23 will be the busiest days and that to accommodate the expected crowds, airlines are adding more seats on larger planes.
In terms of number of passengers, the increase means 73,000 more people are expected to fly each day during the holiday season. All together that’s 99,000 additional seats per day.
A New Record
John Heimlich, chief economist for Airlines for said 2015 was a record year for travel on U.S. airlines. If the trend for this year continues, however, 2016 could set yet another new record.
On those two busiest days, Dec. 22 and 23, volume could hit 2.4 million fliers each day. The lightest days at about 1.8 million travelers per day will be Dec. 24, 25, 31 and Jan. 1. On average, U.S. airlines carry about 2.2 million passengers per day throughout the year.
The International Air Transport Association (IATA), which represents 265 global airlines, projects a record net profit of $35.6 billion in 2016. More than half of that is expected to go to U.S. carriers.
IATA director general and CEO, Alexandre de Juniac said, "Even though conditions in 2017 will be more difficult with rising oil prices, we see the industry earning $29.8 billion. That's a very soft landing and safely in profitable territory. These three years are the best performance in the industrys
In a nutshell IATA expects post-tax profits of $20.3 billion in 2016 for U.S. carriers, followed by a decline to $18.1 billion in 2017. The net margin is expected to be 8.5%, the best in the world.
Breaking It All Down
October was the 19th consecutive month of domestic PRASM declines and the 29th month in a row of international declines. Primary cause for the declines are actually the positive impact of declining oil prices. That’s because as oil prices go down, fares go down, revenue goes down and PRASM shows a decline.
The Buffet Effect
When it was disclosed in November that Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK-BD) had acquired airline shares valued at about $1.3 billion, airlines saw a boost. American Airlines Group Inc. (TSX:AALA) shares comprised most of Buffet’s buy-in or about $800 million.
American CEO Doug Parker said the U.S. airline industry has effectively been transformed, into a viable long-term investment vehicle for the first time in its history. "The Berkshire Hathaway investment,” Parker said, “is as good as any validation for that."