The U.S. Centers for Disease Control and Prevention (CDC) provided new fuel for the so-called "reopening trade," and airline stocks are taking flight as a result. Shares of American Airlines Group (NASDAQ:AAL), United Airlines Holdings (NASDAQ:UAL), Delta Air Lines (NYSE:DAL), Spirit Airlines (NYSE:SAVE), and JetBlue Airways (NASDAQ:JBLU) are leading the way, all up more than 5% on Friday.
Few sectors were hit harder by the pandemic than airline stocks, and the industry endured a miserable 2020 as demand for travel all but vanished. But 2021 has been a different story. With vaccines available and vaccination rates climbing, so have airline stocks on hope for a strong summer vacation season.
The stocks of late have been choppy, with investors worried about new COVID-19 variants and fears of a new wave. But late Thursday, the CDC took a big step toward signaling the all-clear, announcing that people who are fully vaccinated against COVID-19 do not need to wear masks or practice social distancing.
There are a lot of caveats in the announcement, and by no means is the pandemic over. But the announcement was the most optimistic statement out of a federal health agency in a long time. It seems sure to encourage more people to travel this summer, and airline stocks are up as a result.
Spirit, with its industry-low costs and focus on leisure travel, is viewed as a likely beneficiary of an uptick in demand. Delta, United, and American are three of the nation's largest airlines and have some of the most complex balance sheets and route networks. They both need a recovery, and thanks to their scale, should soak up a lot of the traffic that comes back this summer.
There is still reason for caution. Despite the CDC's new guidance, there is still the risk of a new wave of the pandemic. And even if travel does come back, the uptick in demand is arguably already priced into the share prices.
For buy-and-hold investors able to ignore any near-term turbulence, I think Delta is the best investment among these choices today. The company was the best-run major airline prior to the pandemic and a good bet to power through whatever headwinds might be ahead.