Airline stocks are significantly higher today on strong earnings reports and bullish forecasts from both American airlines (NASDAQ:AAL) and United Airlines (NASDAQ:LAU).
Shares of American Airlines rose 10% today after the company reported better-than-expected first-quarter results and forecast a second-quarter profit on growing travel demand.
America’s results come days later Delta Airlines (NYSE:DAL) released a similarly optimistic outlook for its second quarter. These developments have improved investor sentiment towards airline stocks, with shares of most major carriers rising today. United Airlines, South West Airlines (NYSE:LUV) and Delta Air Lines are each up more than 4% today. Other US-based carriers are seeing similar gains.
What happened with airline stocks
American Airlines reported a net loss of $1.6 billion in the first quarter on revenue of $8.9 billion, more than double its $4 billion in 2021.
However, while first-quarter earnings showed improvement, AAL shares are rising broadly after American Airlines forecast a pre-tax profit in the current second quarter. It looks like if rising fuel costs are hampering the carrier, strong travel demand will help it out on top in the second quarter. On a related note, the carrier also said March was the first month since the start of the pandemic in which revenue exceeded 2019 levels. American added that it plans to fly 94% of its 2019 program in the second quarter.
The forward guidance has been well received by analysts and investors.
Importantly, the outlook for American Airlines comes just days after Delta Air Lines announced that it also expects a return to profitability in the second quarter due to increased bookings and fares. . Delta said in its first-quarter earnings release that it expects “unit revenue to grow double-digit in the second quarter versus 2019” and sales are expected to recover up to 97% of pre-pandemic levels. Separately, a federal judge in Florida earlier this week overturned President Joe Biden’s mask mandate for airplanes.
why is it important
The expected return to profitability is a welcome relief for the airline industry after two devastating years. The pandemic has destroyed travel demand and left many planes idle on airport tarmacs around the world. The International Air Transport Association (IATA) estimates that the pandemic has cost carriers around the world more than $200 billion in lost revenue. Most airline stocks have fallen sharply since March 2020 when the pandemic hit. At $21 per share, AAL stock remains 35% below its pre-pandemic level. DAL stock is still 30% lower than it was in February 2020.
What is the next step for UAL, AAL, DAL actions?
Airline stocks rallied today on improving sentiment on Wall Street. Whether this is the start of a meaningful recovery remains to be seen. But positive forecasts have carrier stock prices rising after a prolonged recession, which is good news.
As of the date of publication, Joel Baglole had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.