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Pandemic Stimulus Lends Further Cushion to Airlines: An Analysis
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Although the coronavirus-induced weakness in air-travel demand crippled the stocks in the airline space, the same has an impressive run on the bourses so far this year. Evidently, the Zacks Airline industry has gained 19.2% so far this year, comfortably outperforming the S&P 500 Index’s 5.3% appreciation in the same time frame.
The upbeat price performance despite the persistence of the pandemic is primarily owing to the market availability of vaccines. To date, more than 50 million people have been vaccinated in the United States. Immunization drive is in full swing in other countries as well. This is a huge positive for the airline companies, which would be hoping that air-travel demand will improve this year from the horrendous lows experienced last year as more and more people take to the skies without the fear of being infected.
The recent uptick in air-travel demand can be gauged from the data provided by the Transportation Security Administration (TSA). Notably, the TSA reported that 1,034,514 and 1,151,420 passengers passed through the TSA checkpoints on Feb 11 and Feb 12 (the Thursday and Friday before the holiday weekend due to Presidents' Day and Valentine's Day), respectively. Notably, this was the first time that the TSA has screened more than 1 million passengers on successive days since the beginning of the New Year (Jan 3 and Jan 4). The uptrend continued with 1,284,271 being screened on Mar 11. In a bid to take advantage of this uptick in air-travel demand (particularly on the leisure front), the likes of Spirit Airlines (SAVE - Free Report) , Southwest Airlines (LUV - Free Report) and Allegiant Travel Company (ALGT - Free Report) announced plans to widen their network by adding routes.
The stimulus package protects airline jobs through Sep 30, 20201. Akin to the earlier packages, this time too airlines must not furlough workers through Sep 30 as a condition for receiving the aid. Owing to the successful passage of the latest stimulus package, United Airlines (UAL - Free Report) and American Airlines (AAL - Free Report) intimated 27,000 workers (13,000 at United Airlines and 14,000 at American Airlines) that the warnings about furloughs received earlier are no longer valid. Notably, the concerned employees were warned about potential job losses following the expiry of the current package on Mar 31.
That President Biden’s stimulus package became a reality can be gauged from the commentary of Doug Parker and Robert Isom (CEO and president, respectively, of the currently Zacks Rank #3 (Hold) American Airlines) that suggests that the warnings about furloughs are "happily canceled -- you can tear them up!"
Even though passenger revenues are likely to improve in the current year as more and more people opt for air travel after getting vaccinated, it is unlikely that the same will return to the pre-coronavirus levels in the near term.
This implies that the aviation space will continue facing the problem of overstaffing as recovery to the pre-pandemic era is going to take some more time. This means that continuous federal aid to protect jobs might be the need of the hour at least going forward.
5G Revolution: 3 Stocks to Make Your Move
With super high data speed, it will make current cell phones obsolete and unlock the full potential of big data, cloud computing, and artificial intelligence. In the next few years this industry is predicted to create 22 million jobs and a stunning $12.3 trillion in revenue.
Today you have an historic chance to pursue almost unimaginable gains like Microsoft, Netflix, and Apple in their early phases. Zacks has released a Special Report that reveals our . . .
Smartest stock for 5G telecom Safest investment in 5G hardware Single best 5G buy of all!
Image: Shutterstock
Pandemic Stimulus Lends Further Cushion to Airlines: An Analysis
Although the coronavirus-induced weakness in air-travel demand crippled the stocks in the airline space, the same has an impressive run on the bourses so far this year. Evidently, the Zacks Airline industry has gained 19.2% so far this year, comfortably outperforming the S&P 500 Index’s 5.3% appreciation in the same time frame.
The upbeat price performance despite the persistence of the pandemic is primarily owing to the market availability of vaccines. To date, more than 50 million people have been vaccinated in the United States. Immunization drive is in full swing in other countries as well. This is a huge positive for the airline companies, which would be hoping that air-travel demand will improve this year from the horrendous lows experienced last year as more and more people take to the skies without the fear of being infected.
The recent uptick in air-travel demand can be gauged from the data provided by the Transportation Security Administration (TSA). Notably, the TSA reported that 1,034,514 and 1,151,420 passengers passed through the TSA checkpoints on Feb 11 and Feb 12 (the Thursday and Friday before the holiday weekend due to Presidents' Day and Valentine's Day), respectively. Notably, this was the first time that the TSA has screened more than 1 million passengers on successive days since the beginning of the New Year (Jan 3 and Jan 4). The uptrend continued with 1,284,271 being screened on Mar 11. In a bid to take advantage of this uptick in air-travel demand (particularly on the leisure front), the likes of Spirit Airlines (SAVE - Free Report) , Southwest Airlines (LUV - Free Report) and Allegiant Travel Company (ALGT - Free Report) announced plans to widen their network by adding routes.
Biden’s Stimulus Package: Another Tailwind
President Joe Biden yesterday signed the $1.9 trillion worth COVID-19 relief bill, also known as the American Rescue Plan Act of 2021, into law. This massive stimulus package includes $14 billion for airlines and an additional $9 billion for airports and other operations.
The stimulus package protects airline jobs through Sep 30, 20201. Akin to the earlier packages, this time too airlines must not furlough workers through Sep 30 as a condition for receiving the aid. Owing to the successful passage of the latest stimulus package, United Airlines (UAL - Free Report) and American Airlines (AAL - Free Report) intimated 27,000 workers (13,000 at United Airlines and 14,000 at American Airlines) that the warnings about furloughs received earlier are no longer valid. Notably, the concerned employees were warned about potential job losses following the expiry of the current package on Mar 31.
That President Biden’s stimulus package became a reality can be gauged from the commentary of Doug Parker and Robert Isom (CEO and president, respectively, of the currently Zacks Rank #3 (Hold) American Airlines) that suggests that the warnings about furloughs are "happily canceled -- you can tear them up!"
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
What Lies Ahead?
Even though passenger revenues are likely to improve in the current year as more and more people opt for air travel after getting vaccinated, it is unlikely that the same will return to the pre-coronavirus levels in the near term.
This implies that the aviation space will continue facing the problem of overstaffing as recovery to the pre-pandemic era is going to take some more time. This means that continuous federal aid to protect jobs might be the need of the hour at least going forward.
5G Revolution: 3 Stocks to Make Your Move
With super high data speed, it will make current cell phones obsolete and unlock the full potential of big data, cloud computing, and artificial intelligence. In the next few years this industry is predicted to create 22 million jobs and a stunning $12.3 trillion in revenue.
Today you have an historic chance to pursue almost unimaginable gains like Microsoft, Netflix, and Apple in their early phases. Zacks has released a Special Report that reveals our . . .
Smartest stock for 5G telecom
Safest investment in 5G hardware
Single best 5G buy of all!
Download now. Today the report is FREE >>