As Americans are starting to book their summer travel, the airline stocks are rising better than originally feared.
America’s biggest airlines that lost between 40%-68% of their stock value till the end of May, all posted significant gains lat week. Industry leader American Airlines showed a rise of 77% and Southwest a gain of 19%.
Bank of America raised its recommendation on two smaller airlines, which is causing the airline stocks to go up. The airlines supported by Bank of America are Jetblue, to neutral from sell and Alaska Air, to buy from neutral. However, on trading Monday, the majority of the airline stocks raised up between 5% and 11%.
Analyst Andrew Didora wrote, “The recovery had to start at some point. Airlines were not going to have zero revenues forever. And our base case has revenues recovering from down 90% early on to down 55% in the second half of this year. On top of the recovery, we think the airline trade has been driven by a reduction in bankruptcy risk across airlines. This was never our thesis.”
Traffic at Airport
US airports saw a great flow of passengers, which reached up to 400,000 on Friday and again on Sunday. This is the highest number of travelers since March 22. Consequently, this news is also causing the stocks of airlines to rise.
Screenings at the airport were subsequently down by 84% as compared to last year. But, this is better than the drop of 90% that was in May and a 95% drop in screenings in April.
American Airlines has also added more flights, which were grounded. The airline announces that it plans to fly 55% of its normal schedule in July. This is a substantial increase from 20% of the schedule it is flying in June.
However, the airline stocks are still down by 20% this year. Therefore, many investors are still not sure if they should invest in the airline industry for now.
Investor Warren Buffett, whose Berkshire Hathaway held among the largest stakes in the four major US airlines heading into a crisis, disclosed earlier this year he has sold all of those stakes. He expresses concern they faced a long, unavoidable downturn in demand.
The rise in Stocks of other Industries
However, it’s not just the airlines that’s has seen an increase in demand leading to stock gain.
Similarly, Boeing gained 41% in its shares last week and an 11% rise in trading Monday. Boeing planned to lay off 10% of its staff due to cancellation and delay in orders for new planes.
Norwegian Cruise Line and rival Carnival Corp, has not announced yet when they will resume operations. But, they saw again in shares by 43% and 37% respectively last week. On Monday trading each was up by another 11%.
Hotel giants Hilton and Marriot showed more modest gains. so did online travel site Expedia.
Airbnb is also getting more bookings than expected. In the US, Airbnb got more bookings between May 17 and June 3. However, the company’s eagerly awaited initial public offering could still come this year because of the rise in business. The CEO of the company predicts that the revenue for this year will be half of what it was last year.