Airline Stocks Up Following Strong Memorial Day Weekend Bookings

Investors got their first litmus test for summer travel over the Memorial Day weekend, and the travel numbers are very encouraging for airline stock investors.

What Happened? Bank of America analyst Andrew Didora said pent-up demand for leisure airline travel continued to ramp up heading into Memorial Day. In the week prior to Memorial Day weekend, leisure air travel demand was up 29.5% compared to 2019 levels, according to Didora.

Related Link: Why 2 Spirit Airlines Analysts Are No Longer Bullish After Q4 Results

Why It's Important: System-wide net sales remain down 51.3% from 2019 levels, but Didora said a rebound of leisure demand is likely leading to a significant rebound in business travel demand as well.

Corporate channel airline bookings remain down 58.1% compared to 2019 levels. The most recent week’s numbers marked a sharp improvement over the 66.6% decline reported in the previous week.

For the week ending May 26, Didora reported that U.S. airline website traffic was down just 18% from 2019 levels, up from a 25% decline in the previous week. He said all U.S. airlines were now at or above pre-pandemic website traffic levels except for Spirit Airlines Incorporated SAVE and Delta Air Lines, Inc. DAL. United Airlines Holdings Inc UAL had a particularly strong week.

“The biggest gainer of the week is UAL, which improved to +2% vs 2019 vs -18% last week, likely due to its ‘Your Shot to Fly Sweepstakes’ which offers loyalty program members the chance to win free flights for a year’s worth of travel if they upload their vaccination record,” Didora wrote in a note.

Bank of America has the following ratings and price targets for the “big four” U.S. airline stocks:

• Delta: Neutral rating, $49 target.
• United Airlines: Underperform rating, $43 target.
• American Airlines Group Inc AAL: Underperform rating, $6 target.
• Southwest Airlines Co LUV: Buy rating, $68 target.

Benzinga’s Take: All of the airline stocks have bounced back tremendously from their March 2020 lows as investors anticipate a sharp recovery in 2021 and beyond.

The biggest question marks at this point are just how long will it take for airlines to recovery the majority of their 2019 business and how much of that recovery is already priced into the stocks.