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Airline Stocks Have Soared. They're Not In The Clear Yet...

Date: June 14, 2021

By Julie Horowitz, CNN Business

Air travel in the United States is back. That's great news for airline stocks, which have rallied this year on hopes that domestic trips would make a return.

What's happening: The Transportation Security Administration said over the weekend that it screened more than 2 million passengers on Friday — the highest number since early March 2020. Before the pandemic, TSA screened an average of 2 million to 2.5 million travelers per day.

"The growing number of travelers demonstrates this country's resilience and the high level of confidence in COVID-19 counter measures, to include ready access to vaccines," acting TSA chief Darby LaJoye said in a statement.

US airline stocks have jumped in 2021 on growing optimism about the return of travel. American Airlines' stock is up 49% since the start of the year and 64% in the past 12 months. Delta Air Lines(DAL) has climbed 16% this year and 71% since June 2020. The S&P 500, meanwhile, is up 13% year-to-date.

Carriers are still under significant financial duress, however.
      American Airlines (AAL) disclosed earlier this month that net bookings were at roughly 90% of 2019 levels. The company expects leisure bookings to "approach or exceed the corresponding 2019 levels during the peak summer travel period" if current trends continue.

      But revenue for the second quarter is still expected to be down about 40% compared to the same period in 2019.
      The problem: Demand for business travel and long-haul flights, a crucial source of income, is still extremely depressed.

      "Corporate travel is improving, [but] still not where it needs to be by any means," Delta CEO Ed Bastian told analysts at a conference earlier this month.

      Rising oil costs also pose a headwind. Crude prices hit their highest levels in more than two years on Monday thanks to expectations for growing fuel demand. Brent crude futures, the global benchmark, rose as high as $73.64 per barrel.

      Bastian thinks corporate travel will start to pick up in the coming months, with executives eager to hit the skies again.

      But the global picture for air travel remains murky, especially as new Covid-19 variants spark rising alarm in Europe.

      Shares in British Airways owner IAG, which has seen its stock rise 27% in 2021, dropped 3% in London on Monday following news that UK Prime Minister Boris Johnson could delay the further easing of restrictions over fears about the Delta variant first detected in India. Budget airline Easyjet (ESYJY), which is up 13% this year, fell 2%.

      Johnson and US President Joe Biden discussed the opening of a US-UK travel corridor when they met in England last week, a move that would be cheered by airlines eager to ramp up popular routes. But virus uncertainty in the United Kingdom could hinder those plans.

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