Boeing's 737 Max Certified to Fly: 4 Airline Stocks in Focus
The Boeing Company's BA 737 MAX aircraft, which was grounded worldwide in March 2019 post two fatal crashes, has been recently certified safe for flying by the U.S. Federal Aviation Administration (FAA), after a series of investigations and regulatory interventions.
This news, in turn, is likely to be a blessing for airline companies operating in the United States.
Share Price Impact of 737 MAX’s Return on Airlines
After a long span of grounding, jetliners that used to fly 737 MAX are now expected to benefit. Naturally, jetliners that used to fly these jets are expected to benefit. Notably, since the FAA’s announcement in November, shares of the below-mentioned airline companies have gained more than the market.
What Led to Such Share Price Surge?
The latest clearance given to Boeing has evidently brought a huge sigh of relief to its operators across the globe and particularly to those within the U.S. airspace. This is because the largest operator of 737 MAX Southwest Airlines LUV, hails from the United States and so do other prominent operators like United Airlines UAL and American Airlines AAL. Ever since the grounding of 737 MAX, these operators have been incurring huge parking costs, which in turn have hurt their profitability.
Operating the 737 MAX again, in the near future, will be instrumental in generating increased revenues and mitigating high costs associated with storage and parking for these major U.S. airline companies. Such prospects might have again instilled confidence among investors from the airline industry, which is evident from the surge in the share price mentioned above.
Stocks to Gain
It’s true that, amid the COVID-19 situation, the return of 737 MAX might not be beneficial to airline stocks to the full extent, as passenger traffic is still low around the globe. Nevertheless, over the long run, once air traffic resumes its normal rate, the stocks mentioned below will gain substantially with the enhanced 737 Max jets in their fleets.
Southwest Airlines is in discussions with Boeing for sealing a purchase deal of up to 30 737 MAX jets, as posted by a Bloomberg report in November. Being its largest operator, the return of the 737 MAX jet to service can surely be expected to benefit this stock the most.
American Airlines revealed its intention to start operating five 737 MAX non-commercial flights from Dec 3, following the FAA's approval. The airline company will only be flying its employees in preparation for the 737 MAX’s commercial return to service on Dec 29. Moreover, prior to its scheduled return, American Airlines will be hosting customer tours of the 737 MAX in order to showcase the new safety features and changes made to ensure optimum passenger safety, going forward.
Alaska Air ALK announced its plans on leasing 13 new Boeing 737-9 MAX jets from aircraft lessor, Air Lease Corporation (AL), as part of its fleet modernization efforts. This decision from Alaska Air also came after Boeing received FAA’s approval to fly the 737 MAX aircraft again.
Delta Air Lines DAL so far has been the only major U.S. airline not to fly the 737 MAX planes. Interestingly, following the FAA's approval, Delta Air Lines’ chief executive officer Ed Bastian hinted at possibilities of purchasing Boeing’s 737 MAX, per a Reuter's report. Also, per Reuter’s, Delta Air Lines had discussions with Boeing earlier this year, to purchase 40 of its 737 MAX jets.
United Airlines also plans on resuming Boeing 737 MAX flights in early 2021 after the 20-month long grounding.
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Southwest Airlines Co. (LUV) : Free Stock Analysis Report
The Boeing Company (BA) : Free Stock Analysis Report
Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
United Airlines Holdings Inc (UAL) : Free Stock Analysis Report
American Airlines Group Inc. (AAL) : Free Stock Analysis Report
Alaska Air Group, Inc. (ALK) : Free Stock Analysis Report
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