Is The Worst Over For Airline Stocks?
Airline stocks have been smashed by the coronavirus pandemic as global travel demand came to a sudden halt. As a result, all airline stocks have lost at least half their value during the market sell-off in March. We can all agree that all travel-related stocks took a huge hit during the early days of the pandemic. With the coronavirus storm raging at an unprecedented rate, some had to file for bankruptcy e.g. Hertz (HTZ Stock Report). But we are also aware that many travelers are looking ahead to their next holiday trip despite the uncertainty among travel operators. For instance, cruise-line stocks have been soaring recently as many are making reservations for their upcoming cruise rides during the summer.
Shares of most US airline stocks have been showing some uptrend recently, with many rising by double-digit percentages. That’s a positive sign for now as the industry is regaining some stability. This owes much to the private fundraising efforts and cash provided as part of the CARES Act stimulus plan. We all know the added liquidity will only provide a temporary buffer for airlines. However, for the airline and broader travel industry to truly recover, we are going to need to see demand returning. Until then, it is reasonable to assume that most share price movements of airlines are speculative at its best. We never know if there’s going to be a second wave, and if there is, how much is it going to weigh down airline stocks again?
Whether you think it’s speculative or the economy is ready to roll again, many investors are asking why airline stocks are going up? With domestic flights seeing demand recovering this summer, let’s take a closer look at the following airline stocks worth adding to your portfolio in the coming weeks.
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Best Airline Stocks To Buy Or Sell: American Airlines
First, up the list, American Airlines (AAL Stock Report) is leading the broad rally for airline stocks on Thursday. This came after the carrier indicated it was boosting capacity amid coronavirus lockdown being lifted and surging demand. For the first time since the pandemic, we will be seeing more than half of the airline’s domestic capacity in service again. With this piece of news, AAL stocks shot up 41% to $16.72, reaching the highest level since late Match.
American said it averaged 110,330 passengers per day in the last week of May, more than triple the 32,154 daily passenger average for April. This brings some hopes back for AAL stock investors. But, you know it, there’s still a long way to go to normal. That’s because the airline will only fly 4,000 flights per day in July as compared to 6,800 prior to the pandemic. As for international travels, the demand is still weak as countries implement mandatory quarantines for travelers to curb the spread of Covid-19. With that in mind, can the rally continue throughout this month for AAL stock?
Best Airline Stocks To Buy Or Sell: Spirit Airlines
The ultra-low-cost carrier Spirit Airlines (SAVE Stock Report) saw more than 80% of its market capitalization evaporate from the coronavirus induced market sell-off. Despite seeing the shares up more than 20% on Thursday, Spirit Airlines is still far from out of the woods. Up until this point, no one can be entirely sure if this airline could survive. But hey, with great risks comes great return right? Let’s dive in deeper to see if the investment of SAVE stock is worth the risk.
Spirit expects revenue to be down 95% this current quarter compared to a year ago. Surely, this is not going to be sustainable indefinitely and the fear of bankruptcy is inevitable. But, the airline does have the cash cushion to buy some time. Many bigger airlines are adding flights back during this summer. Would Spirit do the same and compete for some revenue? The good news is, the demand for Spirit services appears to be slowly rebounding along with other airlines.
Strong Demand For Budget Travel To Benefit SAVE Stock
Should travel really be picking back up in the months to come, Spirit is well-positioned to be one of the top beneficiaries. Most travelers who return are usually vacationers and those visiting their families. These groups of flyers are most easily lured back by low prices and that is where Spirit could benefit. The competitive pricing it adopts could fill its seats faster than bigger airlines. Of course, Spirit will not be able to pack people onto planes like how it used to before the pandemic. That said, Spirit will have to fly planes half full and that could hurt the cost advantage somewhat. For investors who understand the risks, is SAVE stock worth it? Comment below and let us know what you think.
