What happened
2020 was a miserable year for airline stocks, with the pandemic causing travel demand to plummet and forcing the carriers to scramble to survive. But American Airlines Group (AAL 0.94%) managed to stick the landing, with the stock gaining 11.6% in December, according to data provided by S&P Global Market Intelligence.
So what
Airlines around the world saw revenue dry up in 2020, and American was no exception. In years past that would have led to a large number of bankruptcies, but a combination of government assistance and private fundraising efforts have kept the industry airborne.
Image source: American Airlines.
American and other airlines continue to lose money, with American saying in early December it expects to burn through upwards of $30 million per day in the fourth quarter. But the stocks got a lift in December based on news that a COVID-19 vaccine was at hand.
Even if the vaccine rollout goes to plan, it will still be years before travel volumes return to pre-pandemic levels. And American is going to be more focused on paying down debt as customers return, than plotting expansion. But the vaccine news, if nothing else, provided a light at the end of a very dark tunnel. American has ample cash to survive until next summer, when the vaccine should be widespread, and that's reason enough for investors to take a fresh look at the shares.
Now what
American gained more than most in December in part because it had fallen more than most airlines in the months prior. Even after a strong final month the stock still ended down 45% for the year.
American is a survivor, and the stock likely has further room to gain from here. But investors need to understand that it could take years to reach this destination, and there are other airlines, including Southwest Airlines, that are already in the early stages of a recovery. I'd be careful climbing on board American right now.
