The airline industry's biggest trade group is forecasting the busiest air travel period in history over the Thanksgiving holiday with some 27.3 million passengers expected to jump on board, a 2.5% leap from last year. Does that make it a buying opportunity for airline stocks?
Maybe, considering what a boon that will be for the airlines, which have slapped a whopping 42% premium on tickets during the 12-day period, according to Hopper.com, the airline-ticket research group.
What's more, the longer you wait to buy a ticket to travel over Thanksgiving with the other 2.27 million passengers that the Airlines for America trade group estimated will be taking to the skies each day during that period, the price will climb. Tack on an extra $4, on average, to the ticket price for each day you delay, said FareCompare.com CEO Rick Seaney.
"That's the bad news," he said. "The good news is, as high as Thanksgiving prices are, they're not as bad as they have been."
Indeed, overall prices in November are projected to be 2.7% higher than they were last month, but down about 1% from last year and off 14% from two years ago, Hopper said. And for December, Hopper is forecasting a 2.3% pullback from November to $215 before bottoming out at $211 in January, 1.8% lower than December. Then ticket costs start to climb again as spring travel begins.
Prices have been dropping precipitously as airlines have put more seats in the air than there are passengers to fill them. That's been a welcome relief to consumers but a headache to the industry's largest legacy players, which have seen the PRASM measure fall for 18 straight months.
PRASM, or passenger revenue per available seat mile, is a key measure of airline profitability that divides all the passenger-related operating revenue, which includes ticket prices, baggage fees, costs for extra legroom or an aisle seat, and the like, by the total available passenger seat miles. The higher the PRASM, the better the profitability of the airline. When it falls, it underscores the level of competition, and price hacking, in the industry. (It's similar to RASM, revenue per available seat mile, which includes other revenue-generators such as freight and charter flights).