America’s love affair with flying is growing faster than the economy

Americans love to fly and it shows. US airlines carried a record 889m passengers in 2018, a 20% increase from five years earlier, according to Bureau of Transportation Statistics records that date to 2002. That wanderlust appeared in US airlines’ robust Q2 revenues and executives across the industry said they’re seeing continued strong consumer demand throughout the peak summer travel period. What’s most intriguing about this ardor for air travel, however, isn’t full planes at the peak of summer travel season, but that the planes have remained full even as US airlines add new flights, larger planes and more seats. “It’s the persistence of this [demand] that’s been interesting,” said Jamie Baker, a JP Morgan analyst who has tracked airlines for 17 years. The boom poses a big question for the industry, especially amid trade wars and worries about whether a recession looms: “Is this just a flash in the pan?” Baker said. The airlines’ traffic surge has outpaced the nation’s economic expansion over the same period. Current airline demand is roughly twice the rate of US growth. Historically, that figure “has been closer to 1.5 times,” said Rajeev Lalwani, a Morgan Stanley aerospace analyst. Airline stocks, however, have been a flop for investors. An index of five US carriers is up 9% this year, compared with 17% for the S&P 500. Only Delta’s 19% return is currently outperforming the index. The carriers have also underperformed the S&P index three of the past four years and merely matched its return in 2016. The demand trends suggest the world’s largest aviation market remains a growth business, and possibly not a mature industrial sector yoked firmly to economic performance. Airline executives and analysts point to a variety of sources for demand, which story explores. <br/>