Multiple positive signs and green shoots are emerging for airlines, including Delta Air Lines Stock (NYSE:DAL). As these positive signs and green shoots strengthen, DAL stock will likely rebound.
One of the deterrents to flying, even for people who are ready and willing to do so, has been that there’s been very little to do anywhere in the country for the last month. Why would someone fly if the only places open at his or her destination are grocery stores and Walmart (NYSE:WMT)? Meanwhile, the lack of hotels, many of which have closed, has also been a serious deterrent to traveling.
But the situation looks like it’s changing a bit. A beach in Jacksonville, Florida recently opened, Dallas has opened its craft stores, and Texas has opened its state parks and authorized all retailers to provide curbside pickup service. Even New York, New Jersey, and Connecticut opened their marinas.
At the beginning of May, after the CDC’s novel coronavirus warning expires, the economy will really start to open up. Among the states that look poised to implement the first phase of President Donald Trump’s reopening plan at that point are Texas, Arizona, Alabama, Ohio, Florida, Idaho, Mississippi, Montana, Oklahoma, South Carolina, and Utah.
In the first phase of the reopening plan, restaurants and movie theaters are allowed to welcome customers into their establishments, as long as the establishments implement “strict social distancing” precautions. I assume that beaches, parks, golf courses and many hotels will also be reopened at that stage.
With beaches, parks, golf courses and restaurants open in many states, American consumers will finally have good reasons to travel, and as more hotels open, tourists will have places to stay when they get to their destinations.
Hundreds of thousands of people will escape to warmer climates, visit beaches and lakes, golf, fish, and boat. In order to do so, tens of thousands of Americans will buy tickets from airlines, including Delta. And as Delta reports that its ticket sales are climbing, DAL stock will advance.
The Fear of the Virus Is Easing
Those who are bearish on DAL stock will say that Americans will be too scared to fly on planes. But there are many signs that fears of the virus, which had been very strong among most Americans at the end of March and the first couple of weeks of April, are greatly easing.
Protests have been held in several states, demanding that governors ease up on mass closures. One of the most hardline governors, Michigan’s Gretchen Whitmer, seems to have abruptly reversed course, as she said she would soon release plans to reopen the state’s economy.
Dallas County Commissioners, overruling the county’s strict judge, Clay Jenkins, voted 3-2 to open craft stores and avoid levying fines on those who don’t wear masks in public.
Meanwhile, multiple people on my Twitter (NASDAQ:TWTR) feed are reporting that automobile traffic in their areas is increasing, and traffic in my own neighborhood in a Dallas suburb greatly rose during the weekend of Apr. 18.
In light of a few statistics, it’s not surprising that fear of the virus has eased. First, as of Apr. 18, excluding New York and New Jersey, about 21,000 people had died from the coronavirus in the U.S.
Of course, that’s a tragedy, and the combined 17,000 deaths in New York and New Jersey are also terrible. But in this country, an estimated 40,000 people die every year in car accidents, more than 83,000 people died from diabetes in 2017, and 2.8 million people lost their lives from all causes in 2018.
So in the U.S., 21,000 deaths from an illness (or even, hypothetically, 35,000 deaths) in 48 states won’t cause the majority of Americans (in places outside of the New York City metropolitan area) to continue putting their lives on hold for much longer.
Another statistic is also important; as of Apr. 8, according to a CNN poll, only 20% of Americans knew someone who had tested positive for the virus. Many people who don’t know anyone with the virus will tend to not be very afraid of it.
Meanwhile, more Americans are discovering (as I’ve theorized for weeks) that the virus doesn’t spread quickly in warm weather. And new research is showing that its fatality rate is much lower than previously believed.
Finally, antibody tests, which will allow people to see if they’ve already had the virus and are thus immune to it, are about to become widely available. Of course, people who know they’re immune to the virus won’t be afraid of flying.
Two Green Shoots
On Apr. 15, according to a tweet by CNBC anchor Carl Quintanilla, American Airlines CEO Doug Parker told the network that “we’ve started to see bookings — outside of 90 days — tick up a bit. .. There are indications the world is starting to think about traveling again, but they are very preliminary.”
Meanwhile, my wife’s friend said that her husband, who works at Dallas’ DFW International Airport, reported that the number of people who are coming to the airport started meaningfully increasing in mid-April. Those are both very good signs for Delta.
The Bottom Line on DAL Stock
In a past column on American Airlines, I theorized that airlines would reach capacity levels of 30% in May. After reading Parker’s comment, I think that was probably too optimistic.
Still, I’m confident that, by the middle of May, given reduced fear of the virus, the availability of antibody tests, and the easing of closures by multiple states, Delta’s bookings will bounce at least 20%-30% above their current levels. As a result, DAL stock should jump significantly by the end of next month.
As of this writing, Larry Ramer did not own any of the aforementioned stocks. Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.