Airlines bracing for another drop in air traffic

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Delta Airlines

Stocks ended up stabilizing on Thursday after some better-than-expected job numbers came in. Despite the ongoing increase in Delta variant cases, unemployment and layoffs have continued to improve. While that’s good news for the markets, it doesn’t change the larger, underlying trend that’s taking place with the steadily increasing number of cases. A number of companies are now bracing for the worst, including those in the aviation sector. Airline companies across the board warned yesterday that the industry is going to go through another brutal quarter or two.

A number of airlines came together to issue a warning regarding the future of air travel. Major carriers said that new travel bookings have been slowing down in recent weeks, and cancellations have gone up. While some companies thought the industry would make a complete recovery, virtually every airline has since changed its tune.

The crystal balls have been a little bit foggy to say the least, as we’ve gone through the crisis,” said United Airlines executive Andrew Nocella. “People are still traveling. It’s probably about a 90-day pause in return to travel for that next leg up that we were expecting to see, but it’s coming,” commented Delta Airlines CEO Ed Bastian. “We’re all hopeful that we have bottomed out in terms of the impact,” concluded Southwest’s upcoming CEO, Bob Jordan.

All three airlines, during their respective conference calls yesterday, warned that they will be expecting financial losses in the coming months. Last year, most big airlines managed to receive government support from the Trump administration. It doesn’t seem like that’s going to be the case this year with the Biden government.

Instead, Biden has doubled down on insisting Americans get vaccinated. On Thursday, he issued a statement mandating all federal employees get a Covid vaccine, with no option to opt-out for regular testing instead. Additionally, all Medicare and Medicaid staff will have to be fully vaccinated as well.

Regardless of this, many economists are expecting that these mandates aren’t going to do much to increase the current vaccinated rates across the country. For the airline industry, that means there’s little they can do to change what’s probably going to be a challenging quarter for the industry.

Despite these announcements, most airline stocks were actually in the green yesterday. United, Delta, and Southwest all were up between 2-4% yesterday, with additional gains being reported right now in pre-market trading. However, it’s a different story when you take a long-term view. Shares of all three airlines have been steadily plummeting over the past six months. Considering the rest of the stock market has continued to scratch new all-time highs, most growth investors are staying clear of anything related to the aviation sector right now. That’s probably not changing anytime soon.

 

United Airlines Company Profile

United Airlines is the world’s third-largest airline by scheduled revenue passenger miles. United’s hubs include San Francisco, Chicago, Houston, Denver, Los Angeles, New York/Newark, and Washington, D.C. United operates a hub-and-spoke system that is more focused on international travel than legacy peers. – Warrior Trading News

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