Why airline stocks are up even as disruptions mount

Travelers are seen ahead of the fourth of July holiday weekend at Hartsfield-Jackson Atlanta International Airport on June 30, 2023, in Atlanta, Georgia.

Elijah Nouvelage | AFP | Getty Images

Flight disruptions piled up at airports around the country ahead of the July Fourth weekend, but airline investors have largely shrugged them off.

More than 63,000 flights operated by U.S. airlines, or 30% of their schedules, were delayed between June 24 through July 2. More than 9,000, or 4.2%, were canceled. Both of those percentages are above disruption averages so far this year, according to flight-tracking site FlightAware.

On Tuesday, disruptions lessened with nearly 2,500 U.S. flight delays, half the number that were delayed on Monday, though thunderstorms continued to disrupt flights at major airports like Newark and Denver.

The recent delays were driven mostly by a series of rolling storms coupled with other issues like a shortage of air traffic controllers in congested airspace around New York and other areas, derailing travel plans of thousands of customers. It upended what has been a mostly calm spring for travelers.

But sky-high travel demand continues to keep airline stocks aloft, with several reaching multi-year highs.

The Transportation Security Administration said it screened nearly 2.9 million people on Sunday, a record for a single day. It’s the clearest sign yet of unrelenting demand for air travel, as passengers book flights or cash in on rewards points and make up for lost time after the Covid pandemic halted trips.

A Delta Airlines and American Airlines plane are seen ahead of the July 4th holiday, at Ronald Reagan Washington National Airport in Arlington, Virginia, on July 1, 2023.

Stefani Reynolds | AFP | Getty Images

American Airlines and Delta Air Lines have recently raised their profit outlooks thanks to strong bookings. Lower fuel prices from last year continue to be a tailwind for the industry, too.

Airlines release second-quarter results and will offer a full-summer outlook starting in mid-July, reports that will likely include the financial impact of the late June and early July disruptions.

Airline stocks rise

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The NYSE Arca Airline Index, which tracks mostly U.S. airlines, is up 51% year to date through Monday, outpacing the S&P 500’s 16% gain.

Even over the past week as travel chaos hit operations, many airline stocks topped the S&P 500. United Airlines was an exception. Its stock dropped 1.7% as the carrier struggled to stabilize its operation while storms kept rolling through its hub at Newark Liberty International Airport.

Southwest Airlines aircraft are seen past travelers ahead of the July 4th holiday, at Ronald Reagan Washington National Airport in Arlington, Virginia, on July 1, 2023. 

Stefani Reynolds | AFP | Getty Images

From June 24 through July 2, United had the biggest share of delays of U.S. carriers, accounting for 42% of its mainline schedule, according to FlightAware.

Snowball effect


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