Airline Stocks: Is it the Right Time to Dive Into?

Delta Air Lines (DAL) President Glen Howenstein said recently at the Wolfe Research conference that "the pace of recovery was faster than expected." In its turn, United Airlines (UAL) followed suit by reporting that bookings for summer vacations and trips jumped 214% from the 2020 average booking levels. In addition, the air carrier has added “over 400 daily flights to its July schedule” and will “increase the number of flights to newly opened European destinations” to add more capacity to meet deferred demand. In a similar vein, American Airlines (AAL) stated that "there are more signs of an increase in business travel in the United States this year."

Britain's JetBlue Airways (JBLU) announced last week that it will begin operating flights from New York to London in August. Its CEO Robin Hayes told Bloomberg that the initial surge in airline ticket sales was "significant." Southwest Airlines (LUV) also said a few days ago that booking trends for June are now "more like normal." The company also noted that demand for entertainment events over the past month are starting to look more like pre-pandemic levels.

Approximately in the same months last year, airlines were losing billions of dollars and could not do anything about it. For example, at some point, it was the very Delta that "was burning" $60 million every single day – just to keep itself afloat. Fearing that airlines would go bankrupt before they could have a chance to recover, investors left the industry. Even inveterate optimists such as Warren Buffet reluctantly abandoned airline shares.

In the current situation, of course, it would be interesting to watch for the comments of the most influential investors – including the above-mentioned Buffett. With their willingness to catch up, they can boost this market tremendously. However, one should not forget that these companies still bear colossal debts to banks, and in the coming months they are unlikely to be able to dramatically increase the level of dividend payments to shareholders. However, the depth of their share price drops over the past year suggests that, if the scenario proves successful, their growth potential can be truly mind-blowing and can easily beat performances of most classic growth stocks at the end of the day.