After Trump's victory, a cyclically recovering industry is gaining attention - the aviation industry.

$United Airlines (UAL.US)$ 、$Delta Air Lines (DAL.US)$ and $American Airlines (AAL.US)$After the election results were announced, the stock prices of airlines surged by 9.4%, 6.9%, and 6.1%, respectively. Investors expect a more lenient regulatory environment for the aviation industry after Trump takes office, and the alliance of airlines is expected to return.MergerIt will also be easier.

However, the aviation/airlines industry has not only risen in the 'Trump victory trade'; the entire industry cut unprofitable routes this summer. As the economy recovers, consumer confidence is rising, and the improvement in airlines' revenue is reflected in their financial reports.

Since August, tracking the U.S. Global Jets Index, $U.S. Global Jets ETF (JETS.US)$ has been continuously rising, and its constituent stocks.$United Airlines (UAL.US)$ 、$Delta Air Lines (DAL.US)$ and $American Airlines (AAL.US)$Airlines' stock prices have been surging for three consecutive months.

With the holiday season approaching, ticket bookings and passenger numbers in the usa and international aviation industry are steadily rising. The strengthening of the dollar makes overseas travel more attractive, which will continue to drive the strong recovery of the industry.

The fundamentals of the industry are recovering.

Since the global pandemic, air travel has not only strongly recovered but is also expected to continue to grow. Consumers and businesses will have the ability to keep spending on travel, which will provide momentum for continued revenue for airlines.

In November, the consumer confidence index from the University of Michigan in the usa recorded 73, reaching a new high since April. This survey from the University of Michigan also showed that the index for people's expectations of their personal financial situation rose by 6%, reaching the highest level since March, partly due to improved income outlooks. The assessment of short-term business conditions surged by 9%, while confidence in long-term business conditions jumped to the highest level in nearly four years, highlighting favorable expectations.

Specifically in the aviation industry, according to the International Air Transportation Association (IATA), international demand measured by revenue passenger kilometers (RPK) grew by 9.2% year-on-year in September 2023, while total demand increased by 7.1% year-on-year, marking a historic high for September.

Willie Walsh, Director General of the International Air Transport Association, said: "At the end of this year's travel peak season, demand reached a historic high. This is not only good news for passengers but also for the global economy. Every flight creates more jobs and trade."

Fluctuations in oil prices have a direct impact on the profitability of airlines. Since February this year, $Crude Oil Futures(JAN5) (CLmain.US)$ has fallen from a price range of $74-$83 to $72-$67 since September. The sluggish oil prices are a huge help for the aviation industry, as aviation fuel is one of the largest expenses for the industry.

United Airlines' stock price has doubled since its low in August.

$United Airlines (UAL.US)$ In the third quarter report released on October 16, profits exceeded Wall Street's expectations. Although the revenue per available seat mile (RASM) slightly declined, the company remains bullish about the future outlook, with robust free cash flow for the year, reaching $3.4 billion.

On the first trading day after the earnings report was released, United Airlines’ stock price rose by 12.44%. As of the close on Thursday, November 14, United Airlines' stock price reached its highest level since February 2020, climbing for 13 consecutive weeks, setting a record.

$Delta Air Lines (DAL.US)$ The stock price performance has also been good, with an increase of 62.94% since the beginning of the year. However, in the third quarter of this year, delta air lines' revenue did not meet analysts' expectations, mainly due to the "blue screen" network outage during this summer.$CrowdStrike (CRWD.US)$And.$Microsoft (MSFT.US)$This led to a revenue loss of 0.38 billion.

Nevertheless, delta air lines stated that it is relying on strong holiday demand to boost its earnings in the fourth quarter, expecting revenue growth between 2% and 4%.

Market analysts generally hold a bullish view, believing that companies like united airlines will continue to perform strongly in the coming quarters. TD Cowen analyst Tom Fitzgerald stated that united airlines benefits from various factors, including the rebound in travel demand, adjustments to the MileagePlus program, and cost management.

With the economic recovery rebound, many airlines have worked hard to improve service quality and operational efficiency, and these efforts will give them an advantage in competition. The management of united airlines has also stated that with the recovery of more routes and the introduction of new routes, the company has the ability to further increase its market share.

Seaport Research analysts point out that airlines have a narrative of expanding profit margins and continued capital returns, and in the context of the economic cycle, valuations remain attractive.

Will Trump loosen regulations on corporate mergers and alliances, causing stock prices to continue to rise?

The best-performing airline from last week (November 4 to November 9) was $Spirit Airlines (SAVE.US)$ , but because on Tuesday a federal judge in the usa blocked the proposal for the merger with $JetBlue Airways (JBLU.US)$ , its stock price took a severe hit.

Merging or forming alliances will allow airlines to share resources, such as flights, routes, and customer service, which will help expand market share and improve efficiency.

During Biden's term, the USA Department of Justice lifted $American Airlines (AAL.US)$ and $JetBlue Airways (JBLU.US)$ the alliance in the New York and Boston areas. A federal judge ruled that this cooperation "significantly weakened" competition in the domestic air travel market.

According to reports, $Spirit Airlines (SAVE.US)$In negotiations for a merger with Frontier Airlines. $Frontier Group (ULCC.US)$ Hold shares of Frontier Airlines.

Industry analysts expect that Trump's presidency will take a more 'hands-off' approach to airline operations and may be more bullish on mergers and alliances than the current Biden/Harris administration's Federal Trade Commission.

With the establishment of a new business-friendly government. $American Airlines (AAL.US)$ and $JetBlue Airways (JBLU.US)$ They may reconsider their Northeast alliance, and$Spirit Airlines (SAVE.US)$ with competitors$Frontier Group (ULCC.US)$ can explore mergers without the opposition of the FTC.

Other details regarding policy relaxation may see new regulations issued by the USA Department of Transportation, which could benefit airlines. This new regulation gives delayed passengers the right to automatically receive compensation from airlines, costing them millions of dollars each year.

In addition to deregulation, Trump's policy proposals could also help extend the tourism boom. Analyst Conor Cunningham from Melius Research stated that the potential business-friendly policies under Trump could boost business travel activities in 2025, while the prospect of consumer tax cuts could drive growth in international and high-end travel.

Editor/Rocky