Airline Shares – Will Travel Demand Increase Stock Prices?
Will Travel Demand Increase Stock Prices? Much of world tourism stopped in 2020 when the pandemic started. Countries closed their borders and took extraordinary measures to control the spread of Covid-19.
Due to the cessation of the flow of passengers, the domestic air and international traffic reduced, which had a rather lousy impact on the airlines. The industry plunged into crisis as the value of the airline’s stock fell sharply during Covid-19.
According to Willie Walsh, Director of IATA, International Air Transport Authority: The scale of the Covid-19 crisis is vast for airlines. In 2020-2022, total losses may reach $200 billion. To survive, the airlines reduced costs as much as possible. Moreover, they adapted the business to the best of their ability.
2021 for Airlines
The proliferation of vaccines has given new hope that international travel will resume. It happened to some extent. However, the growth of the new Delta option and travel restrictions do not yet allow for a full recovery of the tourism sector.
It is noteworthy that more and more countries are gradually easing travel restrictions to strengthen the tourism industry. One of the countries that have announced the easing of travel rules is Thailand, one of the most popular holiday destinations. The country has lifted quarantine requirements for some vaccinated visitors since November 1. The government has published a list of 63 countries, including the United Kingdom, Australia, Belgium, Germany, France, Singapore, China, and more.
Although air traffic has increased relatively this year, it remains at a pre-pandemic level. According to the industry body, the number of passengers should reach 2.3 billion in 2021 and 3.4 billion in 2022. However, this number is still below 4.5 billion in 2019. With the decline in airlines, industry losses could be reduced to $51.8 billion in 2021. This will be almost half the number compared to last year. By 2022, the loss may decline to $11.6 billion.
According to Walsh, despite the current situation, a recovery trend is observed. However, when global tourism reopens, will the airline stock be restored?
Airline Business
In terms of the recovery trend, the airline industry is leading in North America. The region showed the most robust financial performance this year. According to IATA, North America will turn a $5.5 billion loss in 2021 into a $9.9 billion profit before profit. All other regions should reduce losses in 2022.
According to Motley Fool, an investment guide, the company is still in the first stage of recovery. Against this background, the situation is unlikely to return to pre-pandemic levels by 2024. International flights and business travel are the most profitable for airlines. Surviving airlines are focused on recovery. However, given the damage done, it will take time to profit and improve the situation. Here are some head US airline shares:
American Airlines
According to Motley Fool, the airline has strong ties with European partners. However, it will be more difficult for American Airlines to avoid pandemic issues because of the status.
The company earned $169 million in the third quarter. However, according to the company, this is related to financial assistance, which is implemented by the agreements of the support program. The company’s net loss was $641 million. According to American Chairman Doug Parker, the team continues to operate. Although the growth of the Covid-19 Delta variant has somewhat hampered revenue recovery, progress has not stopped.
Delta Airlines
The airline announced its first quarterly profit in the third quarter. Delta CEO Ed Bastian said that while demand is more active, rising fuel prices put pressure on the company to be profitable in the December quarter.
The company’s revenue for the third quarter rose to $216 million. In April 2012, Monroe Energy, a subsidiary of Delta, acquired a processing complex in Philadelphia. Purchases included transportation assets and pipelines. This provides the aircraft fuel supply network for Delta operations in the United States. The plant covers 80% of Delta Aircraft Fuel needs. The integration of aircraft fuel sources has given the airline an advantage this year, given its high oil prices.
Southwest Airlines
The airline’s third-quarter operating income increased 161% more than during the pandemic period. In total, it rose to $4.7 billion. However, this figure is 17% lower than in the pre-pandemic period. This resulted in a loss of $135 million.
According to Gary C Kelly, CEO of Southwest Airlines, the fourth-quarter revenue outlook for 2021 is much more reliable. However, in parallel, recent operational challenges continue. In addition to higher fuel prices, the results for the fourth quarter of 2021 are better than the third quarter.
According to Motley Fool, the South West has the best balance in the industry despite the challenges. It is a favorite of investors because of its ability to survive. The most important question that the investor has during this period is – in the light of the increase in travel and revenue growth, is it a good time to invest in the shares of the airline?
According to most analysts, the IBD rating of airlines is weak. Currently, it’s not the best time to invest in airline shares. Maybe next year? Let’s see.
The IBD rating is a points system for stocks that ranges from 1 to 99. The rating reflects the performance of the shares in terms of overall technical strength or fundamental and technical strength.
