Airlines Take Off as Economy Starts Reopening

The coronavirus pandemic has dealt a heavy blow to airline stocks. Top airliners have shed more than half of their peak value as flights remains grounded due to lockdowns put in place to curb the spread of the virus. Recently, airlines started showing signs of having risen from the lowest possible level and are attracting travelers as several states have begun easing the lockdown orders.

On Jun 4, American Airlines Group Inc. AAL reported plans to boost flights by 74% in July, pointing that the coronavirus-led standstill in travel is over. Following the news, shares of American Airlines rose 41.3%, helping the S&P 500 Airlines Industry Index jump 12.8% on the same day.

The gains in American Airlines also pushed peers like United Airlines Holdings, Inc. UAL, Delta Air Lines, Inc. DAL and Southwest Airlines Co. LUV to close 16.2%, 13.7% and 5.1% higher, respectively.

Airlines Rally as Travel Resumes

With the economy reopening, there has been a significant increase in demand for air travel, leading airliners to add back some flights to their network. Several airlines companies also provided flights to help shippers transport their goods during the lockdown.

Major airlines are also witnessing an increase in flights to tourist spots like Florida, the Gulf Coast, Montana, Colorado, Utah and Wyoming as lockdowns eased.

United Airlines in mid-May said in a U.S. Securities and Exchange Commission filing that it expects to increase passenger capacity in July to 25% of its 2019 level, compared to 10% available capacity in May and June.

On Jun 4, American Airlines reported on average 110,330 passengers per day in the last week of May, which is more than thrice the average for April’s 32,154. Additionally, the company claims that its load factor or the average share of seats filled per plane climbed to 55% last month from 15% in April.

American Airlines’ senior vice president of network strategy, Vasu Raj, said that the company expects to operate about 4,000 flights during the busiest days of July compared to 2,300 in June. In fact, flights in July are expected to be 55% of the 2019 level, which is nearly double from 25% in June and 20% in May. The company also plans to reopen some of its airport lounges with limited capacity.

On the international front, American Airlines has restarted flights to London, Amsterdam, Paris and Frankfurt and some Caribbean and South American routes on Jun 4. The airline expects international passenger capacity to increase in July and reach nearly 20% of its year-ago level. American Airlines carries a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank(Strong Buy) stocks here.

As the coronavirus-led lockdowns are being gradually lifted and businesses are reopening, the airlines industry is expected to see a significant jump in bookings. In fact, domestic tourism can play a significant role in the improvement as uncertainties regarding coronavirus resurgence in several parts of the world are deterring international tour plans.

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Southwest Airlines Co. (LUV) : Free Stock Analysis Report
 
Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
 
United Airlines Holdings Inc (UAL) : Free Stock Analysis Report
 
American Airlines Group Inc. (AAL) : Free Stock Analysis Report
 
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