Celsopupo | Istock | Getty Images
Wall Street is finding an unexpected beneficiary of America’s weight-loss boom: airlines.
Now with the first GLP-1 weight loss drug available in tablet formBroader public acceptance could quietly lower fuel bills — airlines’ single biggest cost — and boost carriers’ profits, Jefferies analysts said.
“A leaner society = lower fuel consumption. Airlines are careful to save on aircraft weight, from olives (without pits, of course) to paper stock,” the Wall Street firm said in a note to clients.
Jefferies estimates that a 10% reduction in average passenger weight can save about 2% in gross aircraft weight, reduce fuel costs by up to 1.5% and increase earnings per share by up to 4%.
Patients are already getting their hands on it the first anti-obesity GLP-1 pill from New Nordiskand a similar product Eli Lilly not far behind, awaiting US approval within months. By eliminating the need for self-injection, the pills are expected to attract first-time patients to obesity treatments.
Income gains
Jefferies believes the implications could be significant for the largest US carriers American Airlines, Delta Air Lines, United Airlines and Southwest Airlines.
Jefferies said the four carriers are expected to burn 16 billion gallons of fuel in 2026 at an average fuel price of $2.41. That’s about $39 billion, which is about 19% of their total operating expenses.
It estimates that a 1% reduction in aircraft weight improves fuel efficiency by 0.75%, while the investment bank estimates that a 2% reduction in average passenger weight could lead to around a 4% increase in earnings per share for the group. That equates to potential EPS growth of about 2.8% for Delta, 3.5% for United, 4.2% for Southwest, and 11.7% for American, which has more operating leverage for fuel costs.
Weight is one of the most important factors in fuel efficiency, including point-and-shoot aircraft manufacturers Boeing to mention regularly. When Boeing delivers an aircraft with a fixed “operating empty weight,” the remaining allowance is divided between fuel, passengers, baggage and cargo up to the maximum takeoff weight, Jeffery noted.
Jefferies used the 737 Max 8 as an example. The aircraft has an operating empty weight of approximately 99,000 pounds, a capacity of approximately 46,000 pounds of fuel and 36,000 pounds of payload. Assuming a two-class configuration with 178 passengers with an average weight of 180 pounds, the passengers are about 32,000 pounds.
If the average passenger weight is reduced by 10%, total passenger weight is reduced by about 3,200 pounds, or about 2% of maximum take-off weight, which translates into fuel savings on thousands of flights a year, Jefferies says.
The industry’s weight fixation is well documented. In 2018, United Airlines switched its Hemisphere magazine to lighter paper, cutting one ounce per copy, which is expected to save 170,000 gallons of fuel annually at a cost of about $290,000, Jefferies noted.
— CNBC’s Michael Blum contributed reporting.