Shares of Sabre (SABR -6.64%) rallied along with airline stocks on Monday on hope that travel patterns might slowly be returning to normal. The airlines were hit hard by the COVID-19 pandemic, and with them companies that rely on air travel like Sabre, but investors are seeing signs that the worst might finally be over.
Sabre, a former American Airlines Group subsidiary that runs airline ticketing and reservation systems, has lost two-thirds of its value in 2020 on a decline in airline business and regulatory issues that blocked a planned acquisition.
Last week, in a regulatory filing Sabre said it "experienced a rapid decline in our airline and hotel bookings, exacerbated by significant cancellations," pulling its guidance as a result. April and May results have remained "severely depressed," though Sabre did say "we have seen modest initial signs of recovery." Still, gross bookings remain down 90% year over year.
Airlines were rallying Monday on data from the Transportation Security Administration that would suggest daily travel volumes, while still just a fraction of where they were this time last year, are well above April lows. Last week airlines reported some initial indications that the worst might be behind them. If that's the case, it would be good news not just for the carriers but also for companies like Sabre that serve the industry.
For the airlines, and Sabre, there is still a long, turbulent journey ahead. Even in the best-case scenario, where there is no second wave of the pandemic and the economy holds up in the months to come better than feared, it will likely take years for travel to return to pre-pandemic levels.
Sabre could also face difficulties if domestic travel on discounters is what returns first, as adding to its business serving low-fare airlines was the goal of that acquisition that regulators scuttled. It's a difficult time to be investing in airlines and the companies that rely on them. Investors need to be careful not to get ahead of themselves in buying into this rally.