People move through New York's LaGuardia Airport on November 24, 2020 in New York City.
Spencer Platt/Getty ImagesCommercial air traffic remains in a deep depression, and not even Thanksgiving moved the needle all that much. The lack of travel isn’t good for airline stocks, even though it might be a good thing to help slow the spread of Covid-19.
As of Wednesday, nearly 7 million travelers have gone through TSA checkpoints over the past seven days. That is up 22% from the week-ago period. An increase in air travel is always expected around Thanksgiving. But traffic is still way down year over year: Nearly 17 million people traveled over the comparable seven-day period in 2019.
Wednesday was the busiest day leading up to the holidays, with more than 1 million people passing through TSA checkpoints. Regardless of the pre-Thanksgiving boost, commercial air traffic is expected to be down roughly 60% year over year during this year’s holiday.
That means, of course, that airports won’t be as full, and planes shouldn’t feel as full either. Southwest Airlines (LUV), for instance, says it is operating at about 65% of 2019 capacity. That is down 35%, far less than the decline in demand: Travelers probably won’t have to squeeze into a middle seat.
That isn’t what airline investors want. Airlines, of course, make more money when more people fly on planes, which amount to a very large fixed cost. The pandemic has hammered airlines’ financial statements, and the four largest U.S. airlines are expected to lose roughly $27 billion in 2020.
Shares of those four airlines—Southwest, Delta Air Lines (DAL), American Airlines (AAL), and United Airline Holdings (UAL)—have declined almost 30% on average in 2020, far worse than comparable returns of either the S&P 500 or Dow Jones Industrial Average. Southwest stock has done the best of the four, falling about 11%.
There is hope some hope for the sector, mainly because of promising vaccine data. The four airline stocks are up almost 30% since Nov. 6, the last trading day before Pfizer (PFE) announced positive preliminary data regarding its vaccine.
A vaccine could help many things get back to normal by the end of 2021. Now investors have to decide how long it will take for air travel patterns to do the same.
Write to Al Root at allen.root@dowjones.com
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Here’s How Many People Flew for Thanksgiving, and the Impact on Airline Stocks - Barron's
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