Lingering COVID Concerns Slow Airline Recovery Takeoff
Continued pandemic fears have mispriced the risk in Delta and Southwest.
The airlines have been one of the industries most negatively affected by the COVID-19 pandemic, as people and businesses canceled air travel plans to protect themselves and others from the virus. A year and a half after the pandemic began wreaking havoc on the industry, we think the world is starting to slowly return to normal. We see the pandemic as an extended one-time event for the airlines, not the beginning of a new norm. We expect domestic leisure travel to recover to 2019 levels in 2022, business travel to reach 80%-90% of 2019 levels in 2023-24, and international leisure travel to hit 2019 levels in 2024. We think the longest-lasting effect of the pandemic on the airlines will be the efficiency measures those companies took to conserve cash, which we expect will lead to margin expansion as demand normalizes.
Burkett Huey does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.