Airline Stocks Remain the Best Recovery Betting Instruments

American Airlines (AAL) announced on Sunday that it was obliged to cut approximately 950 of its scheduled flights –including 296 last weekend alone – to tackle potential overheating, the Wall Street Journal reported. Accelerated vaccination in the United States resulted in a significant increase in the number of travel and flight bookings. In a statement, the airline noted that it is facing "incredibly rapid growth in consumer demand." This story is worth digging into detail.

It looks like American airlines are suddenly faced with a shortage of manpower, and the surge in demand in the first few weeks of June "brought an unprecedented load on the largest transport hubs, which greatly impacted our operations and led to delays, cancellations and disruptions in flight schedules." - according to the statement of AAL representatives.

The airline also said that this "led to the fact that some of the scheduled flights have been adjusted until mid-July." The changes will affect about 1% of the scheduled flights for the first half of July.

The aviation industry is an explicitly highly competitive segment of the economy, where the laws of the market work to the fullest. The situation with a sharp rise in demand with a shortage of supply will result in an increase in the cost of tickets, which will bring a positive impact on the semi-annual and subsequent quarterly results of air carriers’ shares. Although the company remained unprofitable during the pandemic and built up about $48 billion in debt, of which $4 billion is in short-term loan commitments, this recovery story is sure to attract the energetic attention of market bulls.

Bottom line: Reportedly, in the United States this summer, Americans plan to fly almost as much as before the coronavirus pandemic. American Airlines remains the world's largest airline with far more flights than its closest competitors, United Airlines (UAL) and Delta Air Lines (DAL). In July, American Airlines is planning 20% ​​more flights than Delta and United, respectively, when measured by the number of available seats, so these are the stocks that are recommended to be kept in portfolios as a tool for betting on post-pandemic growth. The rapid increase in travel is also providing an upward momentum for vacation rental operators (think AirBNB stock) and car rental companies (HYRE, LYFT and the likes).