Today, airline stocks are once again in focus for investors. Among the largest U.S. carriers to see declines is United Airlines (NASDAQ:UAL). At the time of writing, UAL stock has dropped approximately 3% from yesterday’s close.
This move appears to be tied to a wave of flight cancellations across the U.S. Today, more than 700 flights have been cancelled, with nearly 860 flights cancelled yesterday. As people look to travel to see family for this upcoming Independence Day, airport congestion is picking up as uncertainty reigns supreme in this high-demand season.
Notably, Delta Air Lines (NYSE:DAL) has led the major airlines with more than 200 flight cancellations today. United has seen approximately 196 flights cancelled as of early this morning, with its peers also seeing higher-than average cancellations.
Let’s dive into what’s behind these cancellations and what they mean for investors.
UAL Stock Continues to Be Hit by High Cancellations
Industry-wide concerns about air traffic control appear to be a key pain point for airlines as well as consumers. The Federal Aviation Administration (FAA), the organization which provides staffing for air traffic control, has been hit hard by labor shortages. Without enough staff, airlines have been forced to cancel flights amid a surge in travel demand.
This key bottleneck, as well as weather-related concerns, have led certain airports to temporarily cut off flights. Disruptions caused by these moves have reverberated throughout the industry, causing obvious frustration for travelers.
For investors, these hiccups couldn’t come at a worse time. This is peak travel season for airlines, with many investors banking on a return to profitability in the near-term. The thing is, this investment thesis is based on the ability of airlines to operate their fleets at or near capacity. Accordingly, these sector-specific headwinds are painful for airlines, passengers and investors.
It’s unclear how long this turmoil will continue. However, for now, investors appear to be taking the view that there are better opportunities elsewhere in this market.
On the date of publication, Chris MacDonald 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.