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Airlines will be a major participant in dispersing a COVID-19 vaccine: Analyst

Helane Becker - Cowen Analyst, joins Yahoo Finance to discuss the outlook for the Airline industry.

Video Transcript

SEANA SMITH: Let's talk about airline stocks. They surged earlier this week on Pfizer's positive vaccine news, but for the year, though, the sector has been a massive underperformer.

So let's figure out where the airliner stands seven months into the pandemic. And for that, we want to bring in Helane Becker. She's an analyst with Cowen and joins us now on the phone. Helane, it's great to have you back on the program.

When we take a look at what's going on with the airline sector right now, we're seeing tens of thousands of airline workers that have been furloughed. Congress still has not given the sector the additional aid that it has asked for many, many times. How are the airlines faring at this point?

HELANE BECKER: Yeah, thanks for having me again. So they've done everything they could on the cost side at this point in time, and it's a revenue issue. They're hanging in there. Nobody's going to go-- you know, nobody is in danger of failing, at least not this year. I think most airlines have at least one year of cash available to them and as long as-- Southwest, for example, has up to four years of cash, assuming nothing changes between now and that time. And obviously that won't be the case with the vaccine and whether it's the Pfizer one or another one that comes along or a treatment option. All of this is positive news, obviously, for the industry.

But I think they need-- they need revenue. And in order to generate revenue, things have to open. They have to be able to-- you know, people. We, in general, have to be able to do something when we go where we're going. I think most people want to travel. We think Thanksgiving is going to be a good weekend. You know, but that said, it's a revenue issue now, not really a cost issue anymore.

And obviously the stocks react. It's very binary. The stocks react to good news.

ADAM SHAPIRO: Helane, it's Adam. Good to have you here. You know, it's not the most up to date, but it's close. November fares-- I think at the end of November 2, you had pointed out in a recent note were up to about $303 on average for, like, Delta, United-- it was part of your tracker-- and American. And it's American I wanted to focus in on when you were talking about liquidity because they're coming to market with 38-million-plus new shares of common stock in this effort to increase their liquidity. Is that a danger sign, do you think?

HELANE BECKER: No. No, not at all. In fact, we said this. We expected exactly this to occur. We think that, you know, as the-- I think American was ready for this when there was a vaccine announcement. I think they thought the stock would go up, and it did. And I think they were ready to, you know, pull the trigger, so to speak, on an equity offering, A.

And B, there's only so much debt these guys can add. I mean, at this point, the airlines have to think about the other side of this. We are going to come out of this at some point, whether it's 2021 or 2022. They need to have that cash available, you know, and they can't continue to pile on debt or they'll never get out from under this hole that they've dug, especially without further stimulus.

So we expect equity offerings throughout 2021 as airlines, you know, continue to add liquidity. As you know, in the airline business, you can never have enough liquidity. And if it ends sooner rather than later, I think the way to think about it is they'll pay back that-- you know, whenever they've borrowed sooner rather than later.

ADAM SHAPIRO: So let me ask you about this because we love to talk about the Deltas, the Southwests, Americans, and Uniteds, but then you cover all of them, and there's the cargo-- the freight haulers like Atlas Air, which I believe Cowen has market perform for them. Now, they've got the largest-- what, largest fleet of 747 cargo jets in the world, and they've done well during the pandemic. But what's the outlook for a company like that?

HELANE BECKER: Yeah, so, look, they're going to participate in the vaccine distribution worldwide. We know that to be the case.

American-- just for a second to be off topic, American and United also have cold-storage facilities, American in Philadelphia and United in New York, so they'll be able to participate. We know Ethiopian Airlines will participate in Africa.

This is sort of an all hands on deck, you know, distribution. And I think the airlines and Atlas Air will participate for sure, as will FedEx and UPS. UPS has the largest freezer farms in-- I think in the world. They've got one big one at Louisville, Kentucky, which is their US air hub, and they have one in the Netherlands, and they will participate in distribution.

One of the things I learned earlier today, actually-- we had the CEO of Air Transport Services Group do a fireside chat with us, and we were talking about whether they'll be able to do vaccine distribution. And as you know, as you've been talking about for the past couple of days, the Pfizer vaccine has to be distributed at a temperature of minus 70 degrees Celsius, which is very cold, and it has to be kept in dry ice. And on a 767 which holds 125,000 pounds of cargo, since that's a hazardous material, you can't carry more than 10,000 pounds on a 125,000-pound aircraft. So it's going to be limited, and you're going to need all hands on deck in order to distribute vaccine worldwide. And that's why we think the whole thing has legs.

So yeah, we think Atlas has legs. The stock's really performed well. We were just looking at it today. It's up. Even after it's corrected a little bit, still up more than 100% year to date. Or I guess not year to date but in the past year, I should say.

SEANA SMITH: All right, Helane Becker, always great to have you on the program, an analyst with Cowen. We really appreciate you taking the time.