The COVID-19 pandemic devastated the airline industry, causing 2020 industrywide revenue to fall by more than 60%. The rollout of a vaccine should eventually help spark a demand recovery, but that will take time.

During a Dec. 16 appearance on Motley Fool Live, Motley Fool contributor Lou Whiteman explained to "The Wrap" host Jason Hall that aviation companies could get an early boost by helping to transport the vaccines to all corners of the globe. He also discussed what stocks could benefit the most from COVID vaccine shipments.

 

Jason Hall: Lou, I'm going to ask you to start this off. We had our conversation some back story here. When I run, I listen to Planet Money a lot, which is a great NPR podcast. A couple of weeks ago, they did an episode that I finally just listened to this week. It was looking at vaccine distribution and the global supply chain. One of the things that they addressed was getting vaccines where they need to get. One of the questions is, can this save the airlines? Because the bottom line is that the freight airlines aren't going to be able to meet the demand, and there's some built-in structural things that make this good for airlines. Lou, fill us in here.

Lou Whiteman: Can vaccine delivery save the airlines? The short answer is no, but the long answer is, this is an interesting question, so let's talk about it. A huge part of the challenge of vaccinating the world is getting the vaccine to all corners of the globe, and for that, as you say, we need a lot of airplanes. The International Air Transport Association, which is a trade group, they estimate that over the next two years, we will need to transport the equivalent of 8,000 planes loaded with 100,000 tons of vaccines apiece. That's a lot of airplanes. Now, a lot of it is going to fly on dedicated cargo. Some is even going to fly on military. But passenger airlines do carry cargo, and they're going to play a big role. The companies we're talking about are mostly the network carriers, American Airlines Group (NASDAQ:AAL), United Airlines Holdings (NASDAQ:UAL) and Delta Air Lines (NYSE:DAL), but also Alaska Air Group (NYSE:ALK) and Hawaiian Holdings (NASDAQ:HA) have a big part to play here as far as domestic goes, because they simply go to out-of-the-way places that other transport services don't go to.

Is that enough to save the airlines? No, not by a long shot. Because despite what the airline PR is going to tell you, and every one of these companies has put out a really slick video about their part and as they should. But the vast majority of these shipments will go through FedEx (NYSE:FDX) and United Parcel Service (NYSE:UPS). They're the ones setup for this. American in particular has good subzero storage capabilities, but they just don't have the resources to really do this in bulk. But what we are going to see is, it's going to be incremental revenue at a time when airlines desperately need it, and added cargo demand can help justify flights that may be marginal at best in terms of passenger demand, so you can actually get incremental passenger revenue if you're flying planes because of the cargo. Looking at the big picture, if you couple vaccine transport with the biggest e-commerce holiday season in history, anyone with transport capacity is going to have a great few months on their cargo side, and that includes the airlines. If you look ahead to the first quarter of 2021, which is usually the slowest part of the year for both airlines and cargo companies, we're going to see a sizable boost, thanks to the vaccine. It's going to be the rare year where there isn't a big DIP in the first quarter. I think for me, the investment takeaway is more by the transports, by FedEx, and not by the airlines on this because they're the ones that are going to get the bulk of the business, and this is their bread and butter. But again, this is going to help ensure the survival of the airlines as they wait for the customers to actually get the vaccines and start flying again, so it's definitely a step in the right direction.

Hall: Yeah, it's just really interesting. Because you think about this from the bigger picture, one of the things that they were talking about in Planet Money is like glass like this, because these vaccines for the most part have to be kept super-duper cold. Most glass, when it's super-duper cold gets really brittle, and even you might have a little microscopic flakes and nobody wants to get glass injected into their veins. One of the bigger issues is going to be access to the enough vials to be able to store it because it's also the same glass that gets used for things like cancer medications. It's not like you're going to make less martini glasses. You have to keep supplying life-saving drugs. The applications, it's weird all these little bottlenecks that flow to the system. But I do think it was really compelling how there is some potential for this to help the airlines but it's not a thesis builder.

Whiteman: To use the glass analogy, we're fortunate that we haven't seen, say, a spike in cancer at the same time where there's actually more demand on that side, but because of the nature of the pandemic and the nature of, we've already talked about, the greatest e-commerce year in history, there is actually more cargo demand right now absent to vaccine. It's coming at a time where demand is harder to come by. What that means is pricing power, particularly on the non-vaccine stuff. Because I don't think FedEx or UPS are going to go to the government and say, hike rates. But on the non-vaccine stuff which desperately needs to get there by a certain day for a holiday season, you were really seeing strong pricing power. As I say, you're going to have a rare first-quarter. Usually the Chinese New Year ruins the first-quarter for our shipping stocks. Vaccines are going to be very good for them this year. I think as an investor, that's when it's really going to be interesting in those first-quarter on this.

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