Airline Loyalty Shift: See Who’s on Top Now

BY ANDY SWAN

We are in the middle of a very telling consumer gut check.

It’s Spring Break season, and travel demand is strong: TSA throughput data from this year reveals an average increase of 125,000 passengers each day compared to 2023 levels.

But with the average cost of a trip increasing 11.2% over the past year, travel budgets are tightening – making consumers more selective about which companies they travel with.

A recent survey by Go City found that balancing travel expenses with other financial priorities is top of mind for consumers.

via gocity.com

Other top concerns? Finding affordable accommodation options – and hidden or unexpected fees.

Consumers hunting for affordable options may be looking in surprising places.

As travel trends evolve, we’re here to keep you one step ahead with real-time insight into how this could impact consumer-facing stocks.

And LikeFolio is picking up a massive shift in one critical corner of the industry…

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Two Airlines Poised for a Comeback

Our data reveals that American Airlines (AAL) and Southwest (LUV)are be in prime comeback position.

After months of domination from Delta Air Lines (DAL) and United Airlines (UAL), the script has flipped, sending LUV and AAL to the top of the pack when it comes to Consumer Happiness:

Digging deeper, a month-over-month view of website traffic corroborates the same trend we are seeing in consumer sentiment.

As you can see from the chart above, LUV and AAL are now leading in this metric as well: Website visits for both airlines have grown by 8%.

What’s going on?

Airlines had a particularly rough start to 2024, marked by Boeing 737-9 Max failures and emergency landings.

But this loyalty shift isn’t about perceived safety – it’s about affordability.

In February, United increased its checked bag fees by $5. That might not sound like a lot, but it means a single bag now costs $40 (or $35 if you pay in advance), with a second checked bag now setting travelers back $50 (or $45 in advance). And that’s on top of charging a fee for a domestic carry-on – something the rest of the “Big Four” airlines do not.

Delta isn’t much better in this regard: Its “hidden” fees can amount to 158% of the total flight cost.

Consumers have taken notice of the added costs from United and Delta – and they’re not happy.

Here’s where it gets interesting for investors…

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Ready for Takeoff?

Although LUV and AAL are getting some love from consumers, both are seriously trailing UAL and DAL in stock gains over the last two years:

✓ DAL: +27%
✓ UAL: +9%
✓ AAL: -11%
✓ LUV: -31%

TradingView

But the future looks bright.

Southwest added 86 new aircraft to its fleet in 2023, the most of any airline. And while American Airlines only added 31 planes, it already boasts the largest fleet of all.

It’s not just the current fleet sizes that are promising. Both airlines have large plane orders already placed for the upcoming future. LUV has 495 orders for new planes, and AAL has 440 orders, with 260 orders just last month.

The takeaway: Both LUV and AAL have positioned themselves to handle the increasing flow of air travel as well as cycling out older models and shifting to more fuel-efficient, safer, and higher-quality planes.

Revenue for the companies is also trending in the right direction.

Southwest recorded 10.5% revenue growth in the fourth quarter of 2023…

Guru Focus

While American Airlines experienced a 7.7% increase in its annual revenue in 2023:

Guru Focus

Keep an eye on this.

Both airlines have their sights set on the horizon with strong growth in revenue, fleet sizes, and yearly passengers, as well as significant growth from LikeFolio metrics, such as mentions and Consumer Happiness levels beating out competitors.

Bottom line: While consumer demand for travel is continuing to grow, budget has become a top priority, and it’s evident that AAL and LUV are positioned for strong comeback opportunities.

Until next time,

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