American Airlines Group (AAL 1.51%) expects to have most of its fleet airborne in the coming months in response to growing post-pandemic demand.
American and other airlines were hit hard by the pandemic, which caused travel demand to evaporate. But as the vaccine rollout gains pace, the industry is growing more optimistic a rebound is at hand.
The airline in a regulatory filing Monday said, based on anticipated levels of demand, it expects in the months to come to reactivate most of the planes it grounded last year. That would be a stark improvement, as capacity in the first quarter is expected to come in down 45% compared to a year prior.
Image source: American Airlines.
American said it experienced "softness" in bookings at the beginning of the year, but as hospitalization rates have fallen and vaccine distribution has intensified "the company has experienced recent strength in domestic and short-haul international bookings." As of March 26, American said, its seven-day moving average of net bookings is about 90% of the level experienced in 2019.
The optimism is good news for investors, but caution is warranted. For one, the trends could reverse if a new wave of COVID-19 cases emerges. Although the vaccine rollout has gone well, on Monday Centers for Disease Control and Prevention Director Rochelle Walensky said she has a feeling of "impending doom" when she thinks about the potential of an uptick in new cases.
Even if that new wave doesn't happen, it remains questionable how much further airline stocks can soar. American and other airlines are going to need years to repair their balance sheets after taking on more debt during the crisis, and more lucrative segments of the market, including business and international travel, could take time to return. But Wall Street is currently valuing the airlines at a premium to where they traded prior to the pandemic.
