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Airline stocks bounce back this week as economies restart

Mohit Oberoi
Author: Mohit Oberoi

Last Updated: June 5, 2020

Airline stocks have had a good week jumping with American Airlines stock gaining 59%, as carriers — among the hardest hit by pandemic lockdowns — bid to bounce back in the second quarter.

So far in June other big three Delta Airlines is up 28% and is up 11 in premarket trading on Friday at just over$36. United Continental is up 39% and is 14% higher in premarket trading on Friday at around $45. American Airlines is up 20% in premarket trading at just under $17.

However, stay-at-home advice by governments as a result of the coronavirus, has left stock in American Airlines, Delta and United 41%, 45% and 57% down this year, respectively.

The opinion has been mixed over airline stocks. In May, billionaire investor Warren Buffett disclosed that he has exited all airline companies in April. However, in April, retail investors were net buyers in the sector.

Some of the airline companies had to file for bankruptcy as the pandemic took a toll on air travel. Egyptian billionaire Naguib Sawiris also saw an opportunity after the massive sell-off in airline stocks.

Why airline stocks are rising

Economies are now reopening gradually which should support the demand for the aviation sector. Airline companies plan to increase their flights. American Airlines intends to fly 55% of its normal schedule in June, compared to 20% in May,

The Transportation Security Administration said 353,261 travelers went through its checkpoints on Monday, the highest since 22 March.

In a client note, Cowen analyst Helane Becker wrote: “We expect trends to continue to improve as states ease stay at home restrictions and leisure activities resume. Airlines with whom we’ve spoken have seen modest green shoots with improvement coming in beach and mountain destinations.”

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Mohit Oberoi

Mohit Oberoi is a freelance finance writer based in India. he has completed his MBA with finance as majors and also holds a CFA charter. He has over 13 years of experience in financial markets. He has been writing extensively on global markets for the last six years and has written over 6,500 articles. He mainly covers metals, electric vehicles, asset managers, and other macroeconomic news. He also loves writing on personal finance and topics related to valuation.