United Airlines Holdings Inc UAL shares are trading higher by 4.9% to $58.39 Friday afternoon. Shares of airline companies are trading higher following a report suggesting that Spirit Airlines is considering bankruptcy.
What’s Happening: United Airlines shares rose Friday as news broke that budget carrier Spirit Airlines was engaging in bankruptcy talks with bondholders, potentially signaling a major shift in the competitive landscape of the U.S. airline industry.
Spirit, grappling with $3.3 billion in debt and facing the possibility of a Chapter 11 bankruptcy filing, has seen its stock plummet by more than 40% in pre-market trading, leading investors to reassess the future of low-cost carriers and the broader implications for major airlines like United.
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Spirit’s financial troubles come at a time when the airline industry is already dealing with challenges stemming from rising operational costs, ongoing labor disputes and the post-pandemic recovery.
However, for United Airlines, one of the largest full-service carriers in the U.S., the potential exit or significant weakening of a key low-cost competitor could have beneficial implications.
What Else: Spirit's troubles are multifaceted. The airline has not posted an annual profit since the pandemic, is burdened by maturing secured bonds, and has been forced to cut capacity due to engine recalls and pilot furloughs.
These operational setbacks could further benefit United Airlines, as travelers—especially those on routes affected by Spirit's capacity cuts—may seek alternatives, increasing demand for United's domestic and short-haul international flights.
In particular, Spirit’s struggles could give United an opportunity to expand its presence in key markets, especially those where Spirit had significant operations.
In addition to Spirit's market share becoming more vulnerable, United Airlines is also better positioned financially to withstand current industry headwinds. United's balance sheet, access to capital and ability to maintain its fleet give it an edge in absorbing additional demand without compromising service levels or customer experience.
United's recent focus on enhancing its operational performance, expanding its fleet, and improving its profitability further solidifies its position as a key beneficiary of Spirit's potential bankruptcy.
How To Buy UAL Stock
Besides going to a brokerage platform to purchase a share – or fractional share – of stock, you can also gain access to shares either by buying an exchange traded fund (ETF) that holds the stock itself, or by allocating yourself to a strategy in your 401(k) that would seek to acquire shares in a mutual fund or other instrument.
For example, in United Airlines Holdings’ case, it is in the Industrials sector. An ETF will likely hold shares in many liquid and large companies that help track that sector, allowing an investor to gain exposure to the trends within that segment.
According to data from Benzinga Pro, UAL has a 52-week high of $60.23 and a 52-week low of $33.68.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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