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CDC's New Guidance Makes the Skyline Sunnier for U.S. Airlines

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·5 min read
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The significant job additions in March (the highest since August 2020) are the latest proof that the U.S. economy is getting healthier by the day. The gradual resumption of economic activities following the relaxation of restrictions naturally contributed to the uptick in air-travel demand.

In fact, it is already widely circulated that air-travel demand (particularly for leisure) is on the upswing in the United States as more and more Americans get vaccinated against coronavirus. Reportedly, 32% of America’s population received at least one dose of an FDA-approved vaccine as of Apr 2 while 18.5% was fully vaccinated. Notably, the Centers for Disease Control and Prevention or CDC considers people — after two weeks of receiving the second dose of Pfizer PFE/BioNTech or Moderna vaccines or the single-dose Johnson & Jonson JNJ vaccine — to be fully vaccinated.

The scenario bodes well for the U.S. airlines with summer, which is usually a busy season for them, fast approaching. Driven by the improved air-travel scenario, airlines like Delta Air Lines DAL, Southwest Airlines LUV and others announced plans to broaden their networks during the upcoming hot spell. The impending additions that include routes to favorite tourist spots are aimed at facilitating connectivity apart from meeting the anticipated demand surge during the imminent summer months.

Both the above-mentioned carriers currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Owing to improved better air-travel demand scenario, United Airlines UAL announced plans to resume pilot recruitment, thus becoming the first U.S. carrier to take that initiative. Delta management also informed about plans to sell the middle seats from May 1 after a one-year pause in response to the demand uptick.

Amid such a rosy scenario, CDC’s updated travel guidance was icing on the cake. Per the federal agency’s latest travel guidance, people who are fully immunized with an FDA-authorized vaccine can travel safely within the United States. They neither need to get tested before or after travel (unless required by their destination) nor do they need to go into self-quarantine. However, they still have to follow CDC’s safety guidelines like masking up properly (covering face and nose) during travel. Notably, this code of conduct is applicable to tours within the United States and territories.

The updated guidance provides a further shot in the arm for those airlines which are seeing some brighter days after being pummeled by coronavirus-induced low passenger revenues in 2020.

The enthusiasm surrounding the new CDC guidance is reflected in the statement released by Hawaiian Airlines, which says: "We are pleased to see today's CDC determination that fully vaccinated people can safely travel domestically without testing or needing to quarantine. We are hopeful the state of Hawai'i will update the Safe Travels program to align with these recommendations. The CDC's guidance underscores the effectiveness of vaccinations, as well as the comprehensive health and safety protocols adopted by the airline industry. While we must all continue to take personal responsibility to protect ourselves and each other, it's time to restore freedom of travel to allow families and friends to reconnect and generate crucial economic activity." Notably, Hawaiian Airlines is the wholly-owned subsidiary of Hawaiian Holdings HA.

The CDC’s fresh travel guidance is no doubt a big boost to the U.S. airlines. Backed by the tailwinds, shares of airline heavyweights like American Airlines AAL, Delta, United Airlines and Southwest Airlines have performed exceptionally well on the bourses so far this year, gaining 55.1%, 25%, 38.1% and 36.3%, respectively, so far this year. The rallies are much higher than the 7.4% year-to-date appreciation of the S&P 500 Index.

U.S. airlines will be hoping that the current demand surge stays through summer, thereby attracting huge traffic and boosting their top lines and eventually, leading to a further stock price upturn. Apart from the uptrend in domestic travel, U.S. carriers are looking to rebuild international demand. To this end, Delta recently announced that it intends to add routes to destinations in Iceland from its U.S. hubs. Notably, Iceland is the first site in Europe to welcome Americans who are fully vaccinated against COVID-19.

Watch this space for more updates to ascertain whether this renewed optimism revolving around the airlines following the current swell in air-travel demand is viable or not

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Southwest Airlines Co. (LUV) : 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

Hawaiian Holdings, Inc. (HA) : Free Stock Analysis Report

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