All airline stocks should not look the same

Not two airlines are the same. Each operates in a different market, and there are different business models with different pandemic impacts. But looking at the stock market doesn’t tell you that.

When the Covid-19 crisis first rocked the world in early 2020, investors quickly realized that low-cost airlines would outperform full-service players. The latter relies on a profitable and carefully designed network for businesses and long-haul travelers to pay extra for flights. The balance sheet also became a central stage. Airlines with large debts, such as American Airlines, received the worst punishment, but as travel recovered, healthier budget players were considered to have gained market share.

Recently, however, share American Airlines It follows the same orbit. Budget and legacy airlines have also lost about 15% of their value since the end of May, even though travelers have returned to the airport and the wider S & P 500 has increased by almost 4%. The sale itself is not necessarily strange, as the spread of delta variants is eroding hopes for recovery. What doesn’t make sense is that all types of carriers are considered to be equally affected.

Vaccines have reduced the possibility of strict blockades in the United States and, therefore, reduced the threat of domestically focused low-cost carriers.

Southwest Airlines,

Frontier Airlines


Spirit Airlines..

The real impact of the Covid-19 variant so far has been to keep the transatlantic and transpacific routes closed.This is with network carriers, especially United Airlines

Delta Air Lines..

Low-cost airlines have long traded on stock market premiums compared to earnings, but during the pandemic the gap actually narrowed. This is also true when using the 2023 profit forecast, which is expected to recover the entire aviation market.

Southwest Airlines shares fell further on Thursday, dropping nearly 4% in the morning trading after reporting that second-quarter fares were weaker than analysts expected and the cost of launching the business was high. .. This led to a loss of $ 206 million, taking into account items such as government bailouts.

However, Southwest CEO Gerry Kelly said, “Based on current bookings, leisure passenger traffic and fares in July are expected to be higher than in July 2019.” As stated, capacity could be at levels prior to the third Covid-19. Fourth quarter. Other airlines have also confirmed that domestic leisure travel in the United States has normalized, which is far more important than small revenue mistakes and situational cost overruns.

On the other hand, despite the early signs of life, how far corporate and international flights will recover remains a mystery. In a world where the travel market remains bifurcated for uncertain periods, investors also need to be more discriminatory.

Write to Jon Sindreu at

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All airline stocks should not look the same

Source link All airline stocks should not look the same

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