Can weight-loss drugs save the aviation industry (some money)?

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Alphaville has been receiving a LOT of equity research related to the impact of weight-loss drugs such as Ozempic and Wegovy (mainFT has a great overview here).

As the potency of these treatments becomes evident, many analysts are asking a fundamental question about their sectors: “What happen to the companies I cover if appetite suppression becomes easily available to part of the population?”

Many analysts have taken a tilt lately, with hypotheses including:

— gyms will sell more memberships
— gyms will sell fewer memberships
— shops will sell more clothes
— shops will sell less and fewer clothes
— people will buy more cosmetic treatments
— people will buy fewer cosmetic treatments
— people will spend more on travel
— people will spend less on travel

etc.

Among all of this, there has been one obvious and burning question, which Citi has finally answered. From our inbox today:

CITI’S TAKE
It is possible that increased use of Ozempic, Wegovy and related weight loss/diabetes treatments could materially contribute to weight loss efforts of its users in the United States. However, digging through some of our recent work on A320 flight capabilities, the potential payload benefit from transporting lighter passengers is negligible, especially on shorter-distance flights. Use of these treatments would seem to have to be far more widespread to have any meaningful impact on A320 mission capabilities. Citi maintains Buy ratings on Delta, Copa, United, Air France/KLM, Volaris and Azul, among others.

OK, it’s not a completely absurd notion. Take-off weight is an important issue for airlines, which have devoted a lot of attention to making their aircraft lighter. But this looks really marginal. Here’s how Citi crunched the numbers:

With an estimated 9M users of Ozempic and Wegovy in the US or 3% of the population, Citi examined a scenario in which significantly increased use of these drugs would make only a marginal difference in aircraft payloads. The basic assumptions and considerations of this exercise are as follows:

— There are ̴160 passengers on board the average domestic flight.

— The average weight per passenger — from infants to the elderly — is 150 lbs.

— The total human payload weight of the average flight is 24,000lbs (160 passengers x 150lbs each =24,000).

— Air travelers are probably wealthier than the average resident — meaning they’re also more likely to afford these drugs.

— 9% of domestic passengers are Ozempic and/or Wegovy users or triple the current rate of penetration.

— 9% of passengers per flight would mean an average of 14.4 passengers per flight (9% of 160 pax) use these weight loss drugs (let’s round that down to 14 passengers).

— The average weight of all other passengers remains unchanged.

— Those 14 passengers lose 10lbs each. That would drop the total human payload weight per flight from 24,000 lbs to 23,860 lbs (146 passengers x 150lbs each + 14 passengers x 140 lbs each = 21,900 + 1,960 = 23,860). This would equate to a human payload reduction of just 0.6%.

— There is no reduction in demand for buy-on-board food products or related businesses such as airport food courts because these consumers eat less.

— There continue to be no serious long-term side effects of either drug.

Of course, the 140lb drop in payload roughly equates to one adult, but this does not mean that there would now be one extra available seat on the plane. Starting at the age of two years, each passenger requires their own seat.

They add, despite having undertaken the above exercise:

It is also important to notice that more detailed analysis on fuel consumption or seat mile cost improvements due to passenger weight reduction are not straightforward. Those estimates vary based on route conditions such as climb and descent profile, cruise altitude, in-flight temperature, flight distance, among others, while the calculation of those effects depends on data that are generally not available in the public domain.

So there you go.