Airline stocks are set to take off Wednesday after American Airlines (NASDAQ:AAL) issued a forecast for better-than-expected quarterly results. AAL stock was up more than 4% in premarket trading after yesterday’s announcement by the Dallas-based carrier, which is due to report next week.
Meanwhile, shares of Delta Air Lines (NYSE:DAL) look to reverse Tuesday’s losses after the Atlanta airline reported a narrower-than-expected loss in the second quarter, with “accelerating demand” putting the airline back on a path to profitability.
United Airlines (NASDAQ:UAL) stock was up 1.44% after losing more than 4% on Tuesday. The company is due to report earnings on July 20. Ahead of the report, the Zacks consensus estimate forecasts a quarterly loss of $4.25 per share, which would be a 54.4% improvement over the same period last year.
“We are clearly moving in the right direction,” American CEO Doug Parker said in a note to employees, MarketWatch reported. “Our revenue and expense performance in the quarter came in better than expectations, and this was achieved while bringing the operation back up to full capacity and safely transporting a record number of travelers.”
Hard-Hit Airline Stocks Battling Covid Comeback
The entire aviation industry breathed a sigh of relief after data showed that air travel in the U.S. reached a new peak during the Memorial Day weekend at the end of May, hitting its highest level since the Covid-19 pandemic began in March 2020.
“Domestic leisure travel is fully recovered to 2019 levels and there are encouraging signs of improvement in business and international travel,” said Delta CEO Ed Bastian.
However, the travel economy may not be out of the woods just yet. In the months ahead, it all comes down to whether the outbreak of the Covid-19 delta variant gets worse. The variant has so far spread to more than 90 countries, including the U.S. Furthermore, millions in the U.S. are not vaccinated. The highly transmissible variant now accounts for more than 50% of new Covid-19 cases. There’s also uncertainty over the effectiveness of the current vaccines against this variant.
Airline stocks are still priced based on pent-up demand, and a fast return to normal may be in for big declines in the second half of 2021.
On the date of publication, Robert Lakin did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
InvestorPlace contributor Robert Lakin is a veteran financial writer and editor, including previous stints with Bloomberg News and as a buyside equity research editor. His Substack newsletter, TLV Strategist, covers the Israel business scene.