A new president, Buffet & the year ahead for U.S. airlines

shutterstock_250900600The U.S. elections in November set in motion events that are still unfolding. Many wonder how a president who owned an airline and currently owns a hotel chain will influence the travel industry. Only time will tell what the future holds for U.S. travel companies and travelers. However, the economic elements that will impact travel companies the most include the strength of the U.S. dollar, GDP growth and the regulatory environment.

Economic boom or bust?

The U.S. GDP grew in the third quarter of 2016 at the highest rate in two years, and the dollar has significantly strengthened in recent months. In a recent CNBC interview, Delta Air Lines CEO Ed Bastian said the company is beginning to see improvement, adding, “You see it in the marketplace. You see it in some optimism with respect to starting to get things done in Washington. We saw it in our results. Lower airfares also started to stabilize during the quarter,” Bastian added. “The outlook for ’17 is looking good.”

If we take a look at the overall stock market, it reached an all-time high in December, and the U.S. airline index (DJUSAR) is up a whopping 20 percent in the last three months.

The Warren Buffett effect

Recently Berkshire Hathaway CEO, Warren Buffett, one of the most successful investors on the planet, but also well-known for his disparaging remarks about the airline industry, recently made an investment into all four of the U.S. major airlines. United Airlines CEO Oscar Munoz called it “a Good Housekeeping seal of approval” for the airline industry and United. Doug Parker, CEO at American Airlines, also weighed in on the sudden change of heart. “The reality is we didn’t deserve shareholders like that in the business we had before. You couldn’t get long-term investors in the airline business when we weren’t sure we were going to be around in the long term. So as we’ve been saying, for quite some time now, this is a whole new business.”

Let’s hope that 2017 brings prosperity to the travel industry. There are positive indicators for the U.S. major carriers, a vital part of our transportation infrastructure, whose growth will underpin a robust U.S. travel industry.

 

What are your 2017 predictions for the airline and travel industry?

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