Market Overview

The Best Predictor Of Airline PRASM Trends, According To Raymond James

Share:
The Best Predictor Of Airline PRASM Trends, According To Raymond James

Sentiment around Delta Air Lines, Inc. (NYSE: DAL), Southwest Airlines Co (NYSE: LUV) and American Airlines Group Inc (NASDAQ: AAL) is particularly vulnerable to passenger revenue per available seat mile, according to Raymond James.

By Raymond James’ account, jet fuel remains the best predictor of PRASM performance, with a one-to-three-quarter lag in effect. In fact, jet fuel is the only factor demonstrating meaningful correlation, analyst Savanthi Syth said in a Monday note.

Neither the purchasing managers index nor the consumer confidence index provide meaningful predictive insight into PRASM trends, the analyst said.

The S&P 500 proves similarly unrelated, she said.

“While we were concerned that stock market declines could eventually pressure PRASM due to the market's impact on business confidence and individual net worth levels, we do not see any meaningful relationship between the two."

How To Read Cause, Effect

Jet fuel’s prominent place in the PRASM equation suggests sentiment struggles in the near future, Syth said.

“While jet fuel prices have seen a sharp sell-off since October, airlines will benefit from year-over-year declines only starting [in the first quarter of 2019]," assuming current levels hold, the analyst said.

“This implies risk to RASM trends starting [in the second quarter of 2019].”

Syth expects sustained demand to yield a moderation rather than correction of PRASM as fuel costs rise in the second quarter.

“Somewhat complicating matters will be the timing of Easter, with the related holiday travel split between [the first and second quarters in 2018] vs. all in [Q2 of 2019]."

Related Links:

Goldman Sachs Clears Airline Stocks For Takeoff

Deutsche Bank's Airline Update: Delta, American Upgraded To Buy

Posted-In: Raymond James Savanthi SythAnalyst Color Education Travel Analyst Ratings General Best of Benzinga

 

Related Articles (DAL + AAL)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
SWKSCascendReiterates100.0
IBMWells FargoMaintains140.0
PNCWells FargoMaintains147.0
TWOUDA DavidsonMaintains17.0
IDYAOppenheimerInitiates Coverage On17.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com

Best Sector ETFs For January: Looking For Leadership

24 Stocks Moving In Tuesday's Pre-Market Session