Travelers Ebb But China, US Expand Flights: Airlines in Focus

Per a recent Airlines for America (A4A) study, the number of air travelers being screened by the Transportation Security Administration (TSA) plummeted nationally. On average, there has been a 50% reduction in flight departures with states like New York, Hawaii, Washington DC, Vermont, Massachusetts and New Jersey reporting more than 80% decline in the TSA checkpoint volumes.

Low Traffic

The latest total traveler throughput as of Aug 17 was 773,319. Prior to the ongoing global health crisis, U.S. airlines were transporting a record 2.5 million passengers and 58,000 tons of cargo each day. As travel constraints and stay-at-home orders were implemented, demand for air travel dropped sharply. In short, the estimated COVID-19-triggered loss outbreak is at least more than $98 billion in the first half of 2020.

Majority of the airline stocks have depreciated over the past week, causing the NYSE ARCA Airline Index to decline 5.6% to $55.94, showing that the coronavirus pandemic took a heavy toll on the airline industry.

A4A further noted that the industry has a long road to recovery ahead. Air travel took three years to rebound from the 9/11 terror attacks and more than seven years to see a revival from the Global Financial Crisis of 2008. Market pundits believe that it may take at least two years or longer this time for the aviation industry to bounce back to its pre-COVID levels.

Additionally, the spike in the cases of COVID-19 infection in some European countries will further foil passengers’ travel plans. Earlier during the week, Germany joined the U.K. in imposing a two-week quarantine on flyers returning from Spain.

Revenue declines and losses forced some airliners to suspend their dividend payouts and seek a relief under bankruptcy protection code. Companies like Alaska Air and Ryanair will be trimming respective capacities due to lower forward bookings.

Increase in US-China Flight Frequency

However, the news by The U.S. Transportation Department that U.S. and China agreed to double the number of airline flights between the two countries to eight per week bodes well for the concerned industry. Prior to the COVID-19 outbreak, there were more than 300 flights a week between the two countries. But the flight frequency took a hit as demand for international air travel dried up.

he deal marks a further easing of a standoff between the world’s two biggest economies over the pandemic-led travel bans.

Government Aid

Also, another financial stimulus from the Congress augurs well for the airline industry. Possibility of a second airline bailout package strengthened after President Donald Trump backed the proposed extension of the Payroll Support Program under the Cares Act. In fact, a group of 16 Republicans signed a recently,  pleading for another financial relief.

Moreover, travel stocks will get a boost as the State Department removed the warning on U.S. citizens against traveling abroad

Airline Stocks in Focus

Though travel will remain under pressure, the surge in flight operations to and from China, government grants and a gradual resurgence in travel demand put the airline industry on investors’ radar to set sights on.

Though Allegiant Travel had an impressive record of dividend payments and share repurchases, it suspended the same following the coronavirus threat. The company’s efforts to modernize its fleet look impressive, which drive its fuel efficiency in the process.

I’s earnings growth rate for the past five-year period is 12%. Its expected earnings growth rate for the next five-year period is 20.9%, higher than the industry average of 10.8%.

Story continues

Its earnings growth rate for the past five-year period is 3%. Its expected earnings growth rate for the next five-year period is 24%, higher than the industry average of 10.8%.

The company is undergoing a fleet upgrade, which will improve its operating efficiency.

Its expected earnings growth rate for the next five-year period is 13.6%, higher than the industry average of 10.8%.

Breakout Biotech Stocks with Triple-Digit Profit Potential

Click to get this free report
 
Ryanair Holdings PLC (RYAAY) : Free Stock Analysis Report
 
Allegiant Travel Company (ALGT) : Free Stock Analysis Report
 
Copa Holdings, S.A. (CPA) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research” data-reactid=”54″>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Ryanair Holdings PLC (RYAAY) : Free Stock Analysis Report
 
Allegiant Travel Company (ALGT) : Free Stock Analysis Report
 
Copa Holdings, S.A. (CPA) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research