Shares of American Airlines are up 10% today after the company reported better-than-expected first-quarter results and forecast a second-quarter profit on rising travel demand.
America’s results come days after Delta Air Lines (NYSE:DAL) issued a similarly rosy outlook for its second quarter. These developments have improved investor sentiment toward airline stocks with shares of most major carriers up today. United Airlines, Southwest Airlines (NYSE:LUV) and Delta Air Lines are each up more than 4% today. Other U.S.-based carriers are experiencing similar gains.
What Happened With Airline Stocks
American Airlines reported a net loss of $1.6 billion in Q1 on revenue of $8.9 billion, more than double its $4 billion from 2021.
However, while the Q1 earnings showed improvement, AAL stock is largely rising after American Airlines forecast a pretax profit in the current second quarter. It seems that while rising fuel costs are hampering the carrier, strong travel demand will help it come out on top in Q2. Related, the carrier also said that March was the first month since the pandemic began in which revenue surpassed 2019 levels. American added that it anticipates flying 94% of its 2019 schedule in Q2.
The forward guidance was welcomed by analysts and investors.
Importantly, American Airlines’ outlook comes just days after Delta Air Lines reported that it too expects to return to profitability inQ2 due to increases in bookings and fare prices. Delta said in its first-quarter earnings release that it expects “unit revenues to rise double digits during the second quarter compared with 2019″ and that sales should recover to as much as 97% of pre-pandemic levels. Separately, a federal judge in Florida earlier this week struck down the President Joe Biden’s mask mandate for airplanes.
Why It Matters
The forecast return to profitability is a welcome relief for the airline industry following two devastating years. The pandemic destroyed travel demand and left many aircraft sitting idle on airport tarmacs around the world. The International Air Transport Association (IATA) estimates that the pandemic cost carriers around the world more than $200 billion in lost revenue. Most airline stocks have fallen sharply since March 2020 when the pandemic hit. At $21 a share, AAL stock remains 35% below its pre-pandemic level. DAL stock is still 30% below the level it was at in February 2020.
What’s Next for UAL, AAL, DAL Stocks?
Airline stocks are getting a nice lift today due to improving sentiment on Wall Street. Whether this is the start of a meaningful recovery remains to be seen. But, the positive forward guidance has the share prices of carriers turning higher after a prolonged slump, which is good news.
On the date of publication, Joel Baglole 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.