Shares of airline stocks got a lift on Tuesday following the release of data from the Transportation Security Administration (TSA) showing a recent rebound in travel volumes. The industry still has a long way to go to fully recover from the COVID-19 pandemic, but during a difficult period every bit of added revenue is a plus.
Discounter Spirit Airlines (NYSE:SAVE) led the way, up 8.9% as of 11:30 EDT, with shares of American Airlines Group (NASDAQ:AAL), United Airlines Holdings (NASDAQ:UAL), Delta Air Lines (NYSE:DAL), JetBlue Airways (NASDAQ:JBLU), and Southwest Airlines (NYSE:LUV) all solidly in the green.
More than 737,000 passengers were screened by TSA airport staff on Monday, the fifth straight day the number topped 700,000 after posting declines and daily numbers falling below 600,000 on many occasions over the past two weeks.
Those late July declines were interpreted as bad news for an airline recovery. We're solidly off of the lows of less than 100,000 passengers screened daily in late April, but investors had feared that a combination of spiking COVID-19 cases in travel hotspots including Florida and California and concerns about the economy were destroying whatever momentum airlines had.
Spirit is outperforming because, although the small airline remains a risky stock to buy, it is seen as one of the best able to benefit from a period of slow growth. Spirit's costs are lower than any of its domestic competitors', meaning it should be able to make money on lower fares than its rivals. In a bleak travel market where airlines are likely to use fare sales to try to stimulate demand, Spirit is well positioned to win.
It's important to note that Monday's travel throughput figures, while better than late July's, still only represented 28% of the total screenings done on Aug. 3, 2019. And with most of the current demand tied to tourism, it is likely to fade as summer ends. Indeed, airlines appear more likely to shrink than to grow in the months to come.
In the meantime, airlines are likely to trade up and down based on progress in containing the pandemic and sentiment on the overall economy. For those with the patience to ride through the turbulence, there are opportunities to buy into the industry's top names, but be warned that even in the best of circumstances those investments are likely to take years to pay off.