[1/3] A woman checks the arrivals and departures board at Chicago Midway International Airport in Chicago, Illinois, U.S. April 18, 2023. REUTERS/Jim Vondruska/File Photo
CHICAGO, July 12 (Reuters) – Relentless travel demand has sent bookings at U.S. carriers soaring, translating into bumper earnings. However, their shares have not shown the same trajectory as questions linger about the sustainability of consumer spending.
Airline shares have suffered because of bearish sentiment about the broader economy as interest rates are up sharply and inflation remains high, analysts said. That’s even though consumers have shifted their spending to leisure activities like travel.
US Global Jets ETF , an exchange-traded fund that includes airlines and is seen as a proxy for the industry, is down about 30% from pre-pandemic levels even as passenger traffic has hit record highs. In the same timeframe, S&P 500 (.SPX) has gained about 31%.
Even after a rally in airline stocks so far this year, shares of United Airlines (UAL.O) and Delta Air Lines (DAL.N) still trade at 5.2 and 7 times forward profit estimates, respectively. That’s well below the S&P 500’s 19.1 multiple and below the industry’s average of 8.27, according to Refinitiv Eikon figures.
US airline stock valuations stuck on runway despite travel boom
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