Airline stocks are in focus today as 5G road bumps and lingering omicron concerns continue to hamper the industry. Both American Airlines (NASDAQ:AAL) and United Airlines (NASDAQ:UAL) reported fourth-quarter 2021 earnings recently, and the results have investors abuzz.
What do you need to know about these high-flyers?
Both American and United beat estimates in their quarterly reports this week but provided advanced warning of Q1 2022. American reported losing $1.42 a share, narrowly beating its $1.46 forecasts. On the other hand, United announced a $1.60 loss per share, strongly surpassing its estimated $2.09 per share loss. United has stated that despite consistently growing demand for flights, this quarter will likely only see capacity around 83% of 2019 levels. Staffing was a stated concern, in addition to rising fuel and safety costs.
“The United team has been fighting through unprecedented obstacles to, once again, overcome the new and daunting challenges that COVID-19 is bringing to aviation. While Omicron is impacting near-term demand, we remain optimistic about the spring and excited about the summer and beyond.”
Airlines are in a complicated position at this point in time. While signs of light exist, there remain a plethora of concerns able to bottleneck the rebounding businesses.
Investors Continue to Express Near-Term Doubt in Airline Stocks
The past five days have seen a progressive decline in both UAL and AAL stocks. AAL has fallen from $19.60 earlier this month to its current $17.39 level. UAL went from $48.79 to $44.05 per share. This week’s news spurred a lukewarm response from investors, as United and American are both down slightly so far today.
American has stated it expects Q1 2022 revenue to be roughly 21% lower than the first quarter of 2019. Similarly, United is predicting between 20% and 25% lower revenue than its pre-pandemic equivalent.
This comes in addition to conflicts between 5G network providers and the aviation industry, as 5G towers impacts aviation communications equipment. On Tuesday, CEOs from 10 airlines penned a letter to President Joe Biden’s administration requesting a delayed rollout of certain 5G towers, estimating roughly 1,000 flight disruptions per day from interference. As a response, AT&T (NYSE:T) and Verizon (NYSE:VZ) announced delaying activation of some 5G towers located near airports.
American Airlines COO David Seymour commented on the risk posed to airlines from 5G interference. “Until a long-term technical solution is developed and implemented and as long as 5G is deployed, we anticipate we’ll experience delays, diversions and cancellations that are well beyond our control,” he said.
Airlines have been a volatile industry ever since the pandemic hit. Recent developments seemingly continue to put the aviation industry in cloudy skies.
On the date of publication, Shrey Dua did not hold (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.