A veteran airline industry analyst said Trump administration plans for fiscal stimulus will likely lead to higher demand for air travel.
"Although U.S. airline profits peaked in 2015, we have revised our view on where we are in the economic cycle in light of the U.S. election and the growing likelihood that we could see material fiscal stimulus initiatives in 2017," said Deutsche Bank analyst Mike Linenberg, in a report issued Tuesday.
"This should translate into a stronger demand environment," Linenberg wrote.
Linenberg acknowledged that he previously viewed 2017 as late in the economic cycle ("We are in the eighth year of expansion," he wrote), but he has revised that view: His report is called "Adopting mid cycle stance."
The revision is important, he said, because airline shares tend to underperform late in the cycle.
Meanwhile, passenger revenue per available seat mile, an industry metric that measures revenue for flying one passenger one mile, is broadly expected to turn positive in 2017 after about two years of declines.
On Tuesday, United (UAL) said it expects fourth-quarter PRASM to decline between 1.25% and 1.75%, higher than previous guidance, "due to stronger than expected close-in bookings and yields during the month of December."
United shares gained 28% in 2016. Many analysts saidUnited has had its run and now is the time to invest in Delta (DAL) , which declined 3% in 2016. Delta will report earnings on Thursday.
"We are on the verge of positive unit revenue growth," Linenberg said on a conference call for investors on Tuesday. "We will know more when Delta reports. We could be on the cusp of a much stronger trading period."