The Thanksgiving holiday season is off to a strong start with millions of people traveling across the United States. However, the airline industry has been facing some obstacles in recent months, making it challenging for airline stocks to gain momentum. Historical data suggests that these stocks may continue to struggle until the end of 2023.
The U.S. Global JETS exchange-traded fund, which closely monitors the performance of airlines, has experienced a decline between the day before Thanksgiving and the year-end for the past five years. On average, it has seen a 1.8% decrease during this period over the past eight years.
While the long-term trend remains concerning, there is some hope in the short term. Since 2015, the JETS ETF has shown an average increase of 0.9% between the day before Thanksgiving and the following Thursday.
Nevertheless, it is crucial to remember that historical data should only be used as a guide. A successful holiday season could potentially bolster the airline industry's ongoing recovery or prevent further downward pressure. Although airline stocks enjoyed a prosperous first half of the year, they experienced significant declines from July through October due to concerns about rising costs and decreasing domestic demand.
Of all the major airline stocks, Delta Air Lines (DAL) and United Airlines (UAL) are the only ones that have managed to maintain positive performance so far in 2023, with gains of 9% and 6% respectively.
As the holiday season progresses, it will be interesting to see how these trends develop and whether the airline industry can regain its footing in the market.
Encouraging Start for the Travel Sector during the Holiday Season
With domestic leisure demand weakening and business travel yet to fully recover, the typically strong holiday peak periods have become increasingly important for the travel sector this year.
Promising Demand Trends
Although the busiest days of the holidays are still to come, the initial signs of demand are quite encouraging. According to the Transportation Security Administration, they are expecting to screen a staggering 30 million passengers at U.S. airports over a 12-day period, beginning from Friday, November 17th and lasting until Tuesday, November 28th. This projection serves as a reliable indicator of the volume of travelers. The data for the first five days of this period, up until Tuesday, suggest that the TSA's target is within reach, with a total of 12.8 million people passing through U.S. airport checkpoints.
The Anticipated Busiest Air Travel Day in History
Sunday is expected to be the busiest air travel day in U.S. history, surpassing the previous record of 2.88 million passengers on June 30, 2023.
Critical Importance of a Record-Breaking Holiday Period
A record-breaking holiday period is considered the minimum requirement for airline stocks to reverse their fortunes. However, even achieving this milestone may not be sufficient to sustain long-term recovery in the sector.