Many U.S. residents are traveling to other parts of the world, and they use airlines to get where they're going.
The U.S. airlines industry is flying high with profits still increasing. Profits are on the increase for a number of reasons such as low fuel prices, increasing numbers of people traveling daily, solid investment strategy and strong management application.
Since the drop in fuel prices started some time ago, the U.S. airline industry has been seeing an increase in profits. Recently, Euroconsult reported that it is expecting airline revenues to skyrocket. In 2015, the industry made approximately $700 million, and the industry is expected to earn $5.4 billion by 2016.
The number of expected U.S. spring travelers might rise this year by 2.8%, and the expectation is that over 140 million Americans will take to the sky. Airlines for America is touting that the growth of the industry will happen mainly because of affordable fares and additional flights taking off on the runway. It went on to explain that between March and April, about 2.3 million people are expected to travel within the U.S. during that time. For those two months, an increase in the region from 136.2 million will occur, and this amount can be the equivalent of about 2.2 million people who travel on a daily basis. Of the 136.2 million who travel regularly, 17 million of them travel to international destinations.
The travel boom is attracting a number of people to work in the industry. Although some airlines are short of pilots, others are boasting of great staff turnout. In the meantime, applications are turning up at the airline companies from people who want to become flight attendants.
Airlines of America’s chief economist John Heimlich said “The continued growth in passenger volumes can be attributed to the accessibility and affordability of air travel today.” He went on to add, “To meet the extra demand, airlines are deploying new and larger aircrafts on many flights.”
Since February, American Airlines Group (AAL, Financial) reported that shares went down further. Shares ended up trading at 6.4x forward earnings and triggered a large enough buyback. At this time, the market remains bullish; however, investors are still on the watch for further growth.
The growth of Spirit Airlines (SAVE, Financial) has been phenomenal and is showing a solid stock increase. As a low cost airline, Spirit has made some headway in winning passengers from the bigger airlines mainly because of the low airfares and low fuel cost.
In 2014, air carriers ended up paying about $2.32 for one gallon of jet fuel. However, a decline took place in 2015 and they paid only $1.46. For smaller airlines like Spirit, the low fuel cost was passed down to their passengers. In addition, recently the company reported that they are seriously considering lowering fares even lower so that passengers flying with them can benefit further. Furthermore, there is a drive to locate and start additional routes, which would also result in gaining a bigger share of the market.
Since 2012, Spirit Airlines has been booming even until today as growth continues. Presently, traffic is growing for the airline and improving the company’s financial position. As long as fuel prices continue remaining low, the U.S. airline will continue enjoying great profit margins. Still, if prices increase, the company may like get the upper hand over the larger carriers. Either way, Spirit stands a good chance of coming out on top.
Regardless of the financial bumps and rutty cash flow that the U.S. airlines industry passed through in the past, today it is picking up fast and outlook is showing that it will continue doing great. Stock investors and airline owners are enjoying great profits and may continue to do so, while low fuel cost plays an important role in experiencing profitability growth.
