Airline stocks jumped for a third day yesterday as travelers seem to be rushing to book a trip to enjoy the upcoming spring break in the United States, with multiple companies in the sector stating that demand has picked up lately as people feel safer to travel now as millions are being vaccinated.
During an event hosted by JP Morgan, the heads of United Airlines, American Airlines, and Delta Airlines all pointed to a recent spike in demand, with Doug Parker, American’s boss, mentioning that the last three weeks have been the best for the company since the pandemic started.
Meanwhile, the Chief Executive for Delta Airlines, Ed Bastian, indicated that his company will probably break even during the month of March amid this surge in summer spring bookings.
Moreover, Scott Kirby, the head of United Airlines, pointed to a strong recovery in the demand for travel in the long run as vaccines should become the end-game that everybody has been expecting, even though industry associations and leaders have all been quite cautious in forecasting how long it will take for travelers to jump back on planes at a rate similar to those seen before the pandemic stroke.
On the other hand, the impact of vaccinations has not been yet felt by the demand for air travel in the United States, as the volume of daily screenings performed by the Transportation Security Association (TSA) indicates that the number of passengers that have moved through airports remains 57% down since this year started compared to the same period in 2020 and 2019.
In this regard, approximately 64.5 million individuals have gone through these screenings since the beginning of 2020 compared to 150.37 million during the same period a year ago.
That said, the number of passengers screened by the administration in the past 5 days has stood above 1.2 million – which indicates a strong pick up compared to the daily levels seen since the World Health Organization (WHO) categorized the health emergency as a pandemic in mid-March last year.
Shares of the US Global JETS ETF (JETS) surged 3.7% during yesterday’s stock trading session at $28.71, reaching a fresh post-pandemic high after ticking 2.7% higher the day before.
So far this year, the exchange-traded fund (ETF) has delivered a 28.3% gain to investors although it is still trading 9% below its pre-pandemic levels.
Among US-based airlines, American and Spirit Airlines have seen the best performance this year, with both carriers delivering a 60% gain since 2021 started followed by JetBlue and United, which have popped more than 40% during the same period.
What’s next for airline stocks?
With more than 109 million vaccine doses already administered to US residents, the future now looks brighter ever for American airline stocks – even though the ultimate impact of the massive amounts of debt that they had to take to survive the pandemic remains a concern in the long run.
For now, the industry as a whole will probably recover at a faster pace than expected on the back of pent-up demand.
If that were to be the case, chances are that JETS could surge to its pre-pandemic levels on short-notice, although it would be hard to argue that the situation for the industry looks as stable as it did back then.
Meanwhile, surging fuel prices could also weigh on the advance of airline stocks, which means that traders should keep an eye on the situation in the oil market since a steady rise in fuel costs could cap the recovery of airlines during the next few quarters.
For now, the latest price action seen by JETS shows a bullish structure, with the RSI jumping to its highest level since June 2020 accompanied by a golden cross in the ETF’s short-term moving averages.
Additionally, yesterday’s price action left behind a bullish gap that could act as support for further upside movements, with a first target set at $32 per share – the ETF’s pre-pandemic high.
Once and if we get there, it would be hard to support further upside as this particular level has served as a strong resistance before the pandemic stroked. In this regard, given that the situation for the commercial aviation industry continues to remain uncertain, the chances of moving above those levels are particularly low.