Tom Fitzgerald, airline analyst at TD Cowen, tells 'Worldwide Exchange' that demand is improving, especially for full-service carriers, with a k-shaped recovery favoring premium travel and wealthier consumers.

Newark

Tom Fitzgerald, an airline analyst at TD Cowen, stated that disruptions at Newark did not significantly alter the full-year outlook for major airlines. He observed a sequential increase in demand, particularly for full-service carriers, with business travel showing notable growth.

Fitzgerald described a 'K-shaped' recovery in the airline sector, where premium and international travel are rebounding faster than domestic and economy segments. He emphasized that airlines catering to higher-income consumers and premium services are experiencing stronger profitability amid ongoing market volatility.

Fitzgerald: Newark issues didn’t derail the full-year outlook much

All right. You have a buy rating on this company a 101 price target. That's kind of in line with consensus. But the company essentially lowered its guidance from the previous numbers they gave out there. Why is this company still an attractive buy especially when the CEO is even saying it's just less uncertain. He's not saying there's certainty. He's saying it's just less uncertain. I thought it was a pretty positive release and we would definitely be buyers on this today at the open. They called out a six point sequential increase in demand that began in early July across the total system with business demand increasing double digits sequentially. So you combine that with the supply that's coming out of the system. I don't think it's the case for all airlines but similar to Delta last week. I think it's kind we're kind of getting the all clear sign for the full service carriers right now. So I think there was a lot of uncertainty about how Newark would weigh on the full year outlook. And I think I wouldn't I wouldn't weigh too much in on how the full year guide shook up. And I think you know I think a lot of investors we speak with this was a better than they had. They had thought going that the company might be able to do when Newark was first having problems earlier in the quarter. So so better than a lot of people thought. Still the stocks down more than 3 percent. I want to go into these results and tell me is this a read on just United or the broader airline industry. Domestic revenue down almost 1 percent. Atlantic revenue up two and a half percent. Pacific revenue up almost 9 percent. And then the premium revenue revenue up about five and a half percent. What does that mean. I think we're seeing a K shaped demand environment for consumers and we're seeing that play out in a K shaped environment for airline profitability with airlines like United or Delta showing pretty robust profitability in the face of volatility. And then the airlines more reliant on the main cabin like leisure demand. They're having trouble. Tom does that mean domestic focus airlines are less attractive. We talk about K shaped. What are you talking about. Like a bifurcated consumer where people with more money they're willing to go international but domestic travelers are less willing to spend. I think so. I think higher income airlines that have exposure to higher income consumers and whether even if it's not the long haul international but the premium cabin seating the loyalty revenue streams like that just the higher margin less volatile revenue streams or relative economy class tickets.

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