At a quick glance, most traders believe you can’t go wrong with airlines if you are satisfied holding your position to Q1 of 2021. Yes, it is possible to have 50-100% gains in early 2021 but it is a double edge sword with the Corona Virus.
In one hand, as a leisure traveler, we all are aware that we are plotting our next four trips as we speak. The world has been locked up and we are ready to celebrate the end of this debacle. A leisure traveler accounts for 88% of total passengers!
However, airlines on average receive only about 60% of their revenue from consumers, I know it’s hard to believe; the other 40% comes from frequent-flier miles from credit card companies. Patrons traveling for business account for 12% percent of total passengers, but here is the key number, they are typically twice as profitable. In fact, business passengers can represent 75% of an airline’s profits on some flights.
So as we ponder riches in the market with airline stocks skyrocketing, it is important to remember that possibly the DNA for businesses have changed. They are cutting costs by sending employees home to work satellite and understanding the value of Zoom meetings over the costly expenditure of airline travel.
Will the shift in the workplace create a lasting impact on the travel industry, or will they reinvent themselves? Time will only tell and until then keep a careful eye on the big three domestic airline companies: Delta, United and American Airlines.
All three companies have a performance outlook of bullish in short term and mid-term, but bearish in the long term. All stalwarts of the airline industry have similar charts and technical, as you would expect. The upside is also equally running in the range of about 100% for a resurgence of the 52-week highs. In my humble opinion, airlines are not going anywhere and baring another pandemic it appears likely for a total recovery in 2021.