Sumary of Airline Stocks Shouldn’t All Look the Same:
- No two airlines are the same: Each operates in a different market with different business models that have been differently affected by the pandemic.
- When the Covid-19 crisis first rocked the world in early 2020, investors were quick to figure out that low-cost airlines would do better than full-service players.
- Balance sheets also took center stage: Carriers with large debts, like American Airlines, were punished the worst, whereas healthier budget players were seen as gaining market share once travel recovered.
- Recently, though, the shares of U.S. airlines have followed the same trajectory.
- Budget and legacy airlines alike have lost about 15% of their value since the end of May, even as travelers have returned to airports and the broader S&P 500 has gained almost 4%.
- Vaccines have reduced the likelihood of strict lockdowns in the U.S., and thus the threat for domestically focused low-cost airlines like Southwest Airlines, Frontier Airlines and Spirit Airlines.
- The real impact of Covid-19 variants so far has been keeping trans-Atlantic and trans-Pacific routes shut, which is a blow to the network carriers, particularly United Airlines and Delta Air Lines.
- Low-cost carriers have long traded at a stock-market premium relative to earnings, but the gap has actually shrunk during the pandemic.