Analysts predict that United Airlines Holdings (UAL) is well-positioned to capitalize on a favorable environment, mainly due to declining oil prices.
Yuanta Securities analyst Ko Seon Young noted that the U.S. airline sector has relatively stable stock performance despite macroeconomic challenges following the presidential election. She explained that this stability reflects the industry’s advantages from lower fuel costs and easing aircraft delivery delays.
As global oil prices continue to decline, the average fuel cost as a percentage of revenue for the four major airlines has dropped to 19.8%, falling below 20% for the first time since Q2 2023. Fuel prices have now trended downward for three consecutive quarters. Ko projected that further reductions in fuel costs and improved profitability are likely as international oil prices stabilize in 2025.
Ko identified two key investment drivers for UAL. First, the company benefits significantly from reduced fuel costs due to falling oil prices. Second, UAL is expected to be the first airline to receive aircraft deliveries once Boeing’s production normalizes. She emphasized that UAL’s profitability is particularly sensitive to fuel cost fluctuations.
While this sensitivity increased cost burdens during periods of rising oil prices, it is expected to become a competitive advantage starting in 2025.
Another positive development for UAL is the resolution of Boeing 737 Max delivery delays, which weighed heavily on sentiment in the U.S. airline industry throughout 2024.
Ko noted that with the conclusion of the Boeing strike and aircraft deliveries set to normalize by the end of the year, UAL is poised to be the first customer to receive new aircraft. Given the robust post-pandemic growth in passenger demand, the rapid acquisition of new planes will likely support the company’s expansion efforts.
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