Although airline executives have been publicly excited about what they think the Trump administration has in store for them, the spoils are not going to be shared equally. Deutsche Bank (DB) believes that the number of industrial profits in the first year of the second term of the Trump administration will be very heavy.
“Our call for investment for 2025 is similar to the call we made in 2024 which are the industry leaders, that is, the airlines that make the most of the industry’s profits, the Big 3: American, Delta, and United,” analysts from the bank. he said in a research note to clients. In particular, Deutsche expects the triumvirate to absorb 90% of the industry’s profits next year.
After the so-called “capacity” problem of understaffed aircraft, many players in the space industry felt compelled to cut their schedules in order to increase revenue. Additionally, companies that have competed for market share with cheap tickets, such as Southwest Airlines (LUV), Frontier Airlines, and Spirit Airlines, are creating pivots in offering premium flight experiences so they can serve a more profitable customer.
Unfortunately, pivoting from a business model that leads to low revenue is easier said than done. Spirit Airlines is filing for bankruptcy, and Southwest Airlines had to give up board seats to a hedge fund activist that said its turnaround strategy wasn’t moving fast enough.
“Simply put, we said that the lower position of the carriers was too much and that one of the main consequences of their problem was the destruction of funds,” Deutsche Bank recalled about its industry last year. “Twelve months later, the financial performance of many of them supported our view.”
Although Spirit declared bankruptcy in large part because its merger with JetBlue Airways ( JBLU ) failed, other mergers have been more successful than expected to provide clear space outside the industry’s biggest players. Alaska Airlines (ALK) was able to successfully merge with Hawaiian Airlines, and that investment could soon pay dividends.
“Alaska’s timing couldn’t be better as Hawaiian makes changes that we expect will increase earnings faster than expected from the airline merger and at a higher rate than previously forecast,” Deutsche analysts wrote.
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