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The resurgence of COVID-19 cases and renewed restrictions in some parts of Europe, in addition to the rise in pandemic-led hospitalizations in a few sections of the United States dampened the airline stocks. However, we expect the U.S. airline stocks to recover and perform well in the Thanksgiving week. The anticipated travel surge during the Thanksgiving week is likely to bolster the top lines of airlines like Delta Air Lines DAL, United Airlines UAL, American Airlines AAL among others and aid their recovery process.
Let’s delve deeper.
It is no longer news that airlines were hit hard in 2020, with passenger revenues shrinking drastically due to COVID-19. However, things improved in the current year. The latest example in this regard is the performance of airlines in the recently concluded third quarter of 2021. In the said period, passenger revenues of most airlines improved significantly year over year as more and more people are again opting for air travel armed with vaccination.
The northbound air-travel demand is likely to get a further boost in the Thanksgiving holiday period. That traffic will be significant in the period can be made out from the U.S. Transportation Security Administration’s (TSA) forecast that it expects to screen about 20 million passengers during the Thanksgiving holiday period (Nov 19-Nov 28).
The enthusiasm can be gauged from the commentary of TSA’s administrator David Pekoske who said that “We anticipate that travel may be very close to pre-pandemic levels this holiday, and we are staffed and prepared for the holiday travelers. We have deployed technologies that enhance detection capabilities and reduce physical contact, and it’s equally important that passengers are prepared with travel tips for the most efficient checkpoint experience,” said TSA. In the event of passenger volumes actually touching the anticipated highs, the top line of U.S. airlines is likely to improve even further in the December quarter.
Airlines are gearing up to meet the anticipated demand surge. The carriers are also hoping for the weather to remain favorable, which will allow more and more people to opt for air travel.
Delta, currently carrying a Zacks Rank #4 (Sell), expects to transport up to 5.6 million passengers during the Thanksgiving period. The projection implies a significant increase from the actual number of passengers (2.2 million) flown by DAL over the Thanksgiving period last year. With friends, families and relatives expected to connect at this time of the year, leisure travel is expected to get a huge boost.
To drive operations during the busy spell, Delta made additional hirings in customer service and reservations. DAL also reinforced its strength concerning flight attendants to meet the anticipated spurt in the number of flights in operation. The elevated passenger volume during the period is likely to perk up its top line that increased more than 100% year over year in third-quarter 2019.
United Airlines, currently carrying a Zacks Rank #3 (Hold), expects to ferry more than 4.5 million passengers during the Thanksgiving travel phase. The forecast turns out to be roughly 88% of passengers transported by UAL in 2019 (pre-coronavirus era). UAL is expanding its domestic network by 700 flights during the Thanksgiving week. By doing so, the airline aims to operate around 87% of its 2019 domestic schedule.
United Airlines’ CEO Scott Kirby is very confident of meeting the anticipated surge in travel volume this Thanksgiving week. UAL expects to fly maximum passengers (since the commencement of the pandemic) on the Sunday following Thanksgiving. The likely upbeat passenger volume over the Thanksgiving period is expected to aid UAL’s passenger revenues that increased more than 300% year over year in the third quarter of 2021.
American Airlines, currently carrying a Zacks Rank of 4, did not provide any Thanksgiving projection with respect to passenger volumes unlike Delta and United Airlines. This might be due to the carrier’s multiple flight cancellations of late, compelled by headwinds like unfavorable weather and shortage of staff. Per AAL’s CEO Doug Parker, “It’s going to be a busy holiday season. We’re ready for it.”
To manage the likely buoyant demand during the holidays, American Airlines took various measures like offering bonus to its staff. Reportedly, AAL is offering its flight attendants 50% higher pay for working on holiday trips. Despite the headwinds, AAL aims to operate 5,000 flights a day during the Thanksgiving week. The anticipated schedule is only 8% below the capacity recorded two years ago during the same time period.
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