Wall Street is turning its attention to an intriguing development in the airline industry, highlighting how the surge in weight loss treatments in America could indirectly benefit airline profits. With the introduction of the first GLP-1 weight loss drug now available in a pill form, analysts at Jefferies suggest that widespread adoption of these medications could lead to lower fuel costs, which represent the largest single expense for airlines.
The firm noted that a reduction in average passenger weight could translate into significant weight savings for aircraft. According to Jefferies, a 10% drop in average passenger weight could generate around a 2% reduction in total aircraft weight, resulting in up to a 1.5% decrease in fuel expenses and a potential 4% increase in earnings per share for airlines.
Patients in the U.S. are currently beginning to access the GLP-1 weight loss pill from Novo Nordisk, while a similar treatment from Eli Lilly is anticipated to gain U.S. approval shortly. The move to pill-form treatments is expected to encourage more first-time patients to seek obesity management solutions.
Jefferies’ analysis posits that the implications from these medications could be significant for major U.S. airlines, including American Airlines, Delta Air Lines, United Airlines, and Southwest Airlines. The combined fuel consumption of these carriers is projected to reach approximately 16 billion gallons by 2026, with an average fuel cost of $2.41 per gallon. This would result in a staggering fuel bill of nearly $39 billion, which constitutes around 19% of their total operating expenses.
If airlines achieve a 1% reduction in weight leading to a 0.75% improvement in fuel efficiency, the effects of an average passenger weight decline of 2% could mean a 4% benefit to earnings per share across these major carriers. Projections estimate potential earnings per share increases of about 2.8% for Delta, 3.5% for United, 4.2% for Southwest, and a significant 11.7% for American Airlines, which is notably sensitive to fuel cost fluctuations.
The importance of passenger weight in fuel efficiency is underscored by aircraft manufacturers like Boeing, which emphasize that every pound affects operational dynamics. Using the Boeing 737 Max 8 as a case study, Jefferies illustrated how even a modest decrease in passenger weight could result in meaningful fuel savings over numerous flights.
The airline industry’s keen focus on weight management is longstanding, with past changes like United Airlines’ switch to lighter paper for its in-flight magazine yielding notable annual fuel savings. Such persistent efforts illustrate how even minor changes can lead to tangible financial benefits. With the growing impact of weight loss medications, airlines may be preparing for a more prosperous future, adapting to this unexpected factor that could reshape their operational costs.