United Airlines Holdings (NASDAQ:UAL) sees post-pandemic demand returning ahead of schedule, and the forecast is causing the entire airline industry to take flight. Shares of United traded up as much as 5.7% on Wednesday, while shares of American Airlines Group (NASDAQ:AAL), JetBlue Airways (NASDAQ:JBLU), and Spirit Airlines (NYSE:SAVE) are each up 5%.
It has been a choppy week for airline stocks, with sector investors torn between hope that the post-pandemic recovery can continue and fear that new variants could lead to a new wave of travel restrictions and lockdowns. The stocks fell on Monday but recovered nicely on Tuesday, and today the bulls are getting a boost from United's earnings report.
United lost $3.91 per share in the second quarter on revenue of $5.5 billion, beating analyst expectations for a $4.23-per-share loss on revenue of $5.25 billion. But the company said it expects adjusted pre-tax income to turn positive in the current quarter, and forecast business travel would return by 2022 with a "full recovery in demand anticipated by 2023."
The loss was expected, but United's optimism about the future is what airline investors are focusing on. We know traffic has been strong during the summer months but United's optimism about the rest of the year, including post-summer vacation season, is encouraging. And, so far at least, the airline does not see the delta coronavirus variant as a threat to the pace of the recovery.
American has the highest short interest among airlines and tends to move more than most of the industry. The company, though healthy enough to survive, is arguably the airline that most needs to avoid a second wave similar to what happened to travel demand in the spring of 2020. JetBlue and Spirit, meanwhile, are focused on leisure travelers and vacation destinations and should recover sooner than more complex operations like United or American should vacation demand remain strong.
I said earlier in the week that the airlines are safe, as the entire industry should have the wherewithal to survive whatever comes next, but the real question is how quick the recovery will be. There's nothing in United's results to suggest the comeback will be linear, and I expect we'll see plenty more turbulence in the weeks and months to come.
But United, if nothing else, gave no reason to sound fresh alarm bells, and that has investors encouraged.