Airline investors are bullish because of the reasons mentioned.
After a rough start to the year when Covid-19 cases hit a high, travel demand is coming back. The CEOs of airlines are also optimistic about reservations in the spring and summer months since millions have been inoculated against the coronavirus, quarantine restrictions have been removed, and tourist destinations are reopened.
Due to a tangle of travel restrictions, business travel is still halted, and foreign travel is down, depriving large network carriers of high-yielding clients they relied on before the epidemic.
American Airlines said on Tuesday that first-quarter revenue would be 62 percent lower than in the same time last year, at the midpoint of its earlier projection.
United had previously said that it anticipated revenue of $3.2 billion for the quarter, a 66 percent decrease from 2019, and at the bottom end of an earlier prediction.
Delta forecasted last month that revenue would be down at the lower half of its prediction for a 60 percent to 65 percent drop in first-quarter revenues compared to the same time in 2019.
Travel demand is rebounding after a bad start to the year, which was already a difficult time for airlines.
This month, the Transportation Security Administration has inspected an average of 1.46 million individuals every day. This is still down more than 37% from the same period in 2019, but it is more than 13 times the 108,000 persons who went through airport checkpoints in the first 12 days of April 2020, when the crisis was at its worst.
Airline management teams will discuss the speed of reservations for the summer, which is often the most profitable season for airlines. Because foreign travel remains highly restricted, more people will choose for shorter, less expensive vacations.
Investors should also keep an eye out for any new information on business travel demand, though this is likely to take a little longer.
Fares and available space
Where and how much capacity are airlines adding?
Budget carriers like as Spirit Airlines and Allegiant Air have been investor darlings (up 55% and 34% this year, respectively) because they lack the vast international networks and business clients that bigger airlines had to forego during the epidemic.
With domestic leisure air travel being the major event, keep an eye on whether airlines oversaturate specific popular areas, which might push down fares—a tendency that consumers love but experts despise.
What is the cost of reviving airlines?
Jet fuel, the second-highest expense for airlines after labor, is on the increase. That may not be a negative thing since it indicates increased demand. According to S&P Global Platts, jet fuel costs in the United States jumped more than 20% this year through April 12 to $1.62 a gallon.
According to S&P Global Platts Analytics, US consumption is predicted to climb to 1.402 million barrels per day this year, up from 1.086 million last year but still falling short of the 1.75 million in 2019.
“Domestic traffic is rebounding well, some faster than others,” said Alan Struth, senior adviser of global oil analytics at the company. “But it’s international and commercial business travel… on commercial planes that needs to pick up.” “There has been a noticeable increase in private business jet travel, which has been a significant supporting component, but it is insufficient to restore normalcy.”
Airline executives are also expected to examine labor expenses, especially as they turn their attention to a longer-term recovery that would, at the very least, need additional pilots.