| By Andy Swan Scrolling through my newsfeed, you’d think the travel sector is in for a massive boost this holiday season. Headlines floating around online are decidedly bullish on 2024 travel demand: "The presidential election is a minor blip in otherwise robust holiday travel demand" "U.S. consumers are less concerned about holiday travel costs this year" "Upbeat forecasts from Airbnb, Expedia, and Booking signal strong travel demand" “No end to travel boom in sight” Those are all from the last month alone. Airline stocks seem to be riding that wave of optimism. All the major players have posted double-digit gains over the last three months, with United Airlines (UAL) in the clear lead, up 124%, and Southwest Airlines (LUV) bringing up the rear at +19%.
Source: TradingView Time to Invest in Airline Stocks? Not so fast. The airlines themselves set a mixed bar during the third-quarter earnings season: Delta Air Lines (DAL) is leaning into high-spending flyers: "Looking forward, demand for travel on Delta remains healthy with continued preference for our premium offerings." United Airlines (UAL) is counting on revamped corporate travel: "We're clearly seeing an acceleration of return to office policies, which are driving corporate traffic revenue growth at an accelerated level and creating a great setup for 2025." Southwest Airlines (LUV) is still struggling with backend logistical hurdles, like labor disputes: "For the fourth quarter, we expect continued cost pressure driven primarily by new labor contracts and overstaffing with additional pressure from the lower capacity, including over 0.5 point of unexpected unit cost headwind from flight cancellations associated with Hurricane Milton." American Airlines (AAL) is in cleanup mode, firing its CEO after a flubbed sales strategy – and reinstating its prior model: "We have taken aggressive action to reset our sales and distribution strategy and reengage the business travel community, which we’re confident will improve our revenue performance over time." But at LikeFolio, our data suggests some caution may be warranted. Investors: Beware These Red Flags These two charts could be the canary in the travel coal mine. Web visits are trending lower for each of the four major airlines on a 90-day moving average:
Compared to this time last year, AAL web visits are down by 10%, UAL and DAL’s have slid by 15% each, and LUV’s traffic has plummeted by 19%. Our second cause for concern? On a larger scale, visits to and searches for Google flights are also trending lower year over year:
Source: Google Trends While some downturn is to be expected alongside a presidential election, and some impact could be attributed to a later Thanksgiving, these numbers are pretty stark. Here’s what this all means for you as an investor. Our Key Takeaways Big picture: Holiday travel may come in a bit weaker than expected – and we'll continue to monitor in real time prior to any official trades. On a stock-by-stock basis: UAL may be getting a bit ahead of itself. United's stock has gained a whopping 136% year over year, setting an enormous bar for the fourth quarter. LUV is still clearly struggling to regain consumer favor. What was once leisure travelers’ most-loved airline has lost its mojo. Of all the airlines, we see the most severe declines in consumer demand for Southwest, despite efforts to clean up its house. It’s simply too early to call a turnaround here. AAL is worth watching. Its stock growth is modest compared to competitors (+49% in the last three months), but it seems to be faring the best when it comes to muted consumer demand. Could this be the dark horse? DAL looks the most promising long-term. Delta's focus on premium offerings matches what we see in other industries. Consumers aren't afraid to pay for a high-value experience. Its stock is just back to where it was trading prior to the COVID-19 pandemic, but its strategy is refined. We’ll be keeping a close eye on our data – an opportunity could be just around the corner. Until next time, Andy Swan
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