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Why Shares of United Airlines Are Up Today

By Lou Whiteman - May 20, 2020 at 11:35AM

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The airline is doing what it can to encourage travelers to return.

What happened

Shares of United Airlines Holdings (UAL 2.35%) climbed more than 5% on Wednesday after the airline outlined enhanced safety guidelines in an effort to get travelers flying again. The initiative comes a day after United and other airlines said they are seeing signs that consumers are once again beginning to think about travel.

So what

Airlines including United have been hit hard by the COVID-19 pandemic, with United seeing gross bookings fall 95% year over year in April. The company has raised cash to help weather the crisis, but it and the other airlines will have to see revenue return in the months to come to avoid liquidity issues.

A United Airlines 787 Dreamliner landing.

Image source: United Airlines.

United on Tuesday said it is beginning to see a reduction in cancellations and "a moderate improvement" in demand for travel.

The airline on Wednesday introduced "United CleanPlus," its effort to reassure passengers that they can travel safely. United is partnering with Clorox and the Cleveland Clinic to sanitize airports and airplanes as well as develop cleanliness and social distancing policies.

United is a top performer on what is so far a solid day of gains for airlines. The airline was among the worst performers last week, pressured by some company-specific headlines, and the shares are likely benefiting now from a bit of a rebound following those declines.

Now what

The news flow out of airlines this week has been positive, but it is important to note that at best we are in the early stages of what is likely to be a multiyear recovery. Investors need to tread carefully and assume other sectors of the economy will recover much faster than even the best-run airlines.

There is still a lot we don't know about how long the pandemic will affect travel patterns and what shape the economy will be in once the crisis is contained. Based on what we know right now, I do think it is safe to invest in airlines, but would advise sticking with top operators best positioned to survive an extended downturn. For me, at least, that list does not include United right now.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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