Aerospace: Airlines struggled ahead of July Fourth weekend. Their stocks didn’t


During the period of June 24 to July 2, U.S. airlines experienced a significant increase in flight disruptions. Approximately 30% of scheduled flights, totaling over 63,000, were delayed, and 4.2% (over 9,000 flights) were canceled. These percentages exceeded the disruption averages observed earlier this year, as reported by flight-tracking site FlightAware.

Temporary Relief, Lingering Challenges

On Tuesday, flight disruptions slightly diminished, with approximately 2,500 flight delays reported in the United States. This figure represents half the number of delays experienced the previous day. However, thunderstorms continued to cause flight disruptions at major airports, including Newark and Denver.

Causes of Delays

The recent surge in delays can be attributed to a combination of factors. Rolling storms played a significant role, alongside issues such as a shortage of air traffic controllers in congested airspace, particularly around New York and other high-traffic areas. These challenges disrupted travel plans for numerous customers, upending the previously smooth spring travel season.

Strong Demand Boosts Airline Stocks

Despite the widespread flight disruptions, airline investors have remained largely unfazed. High demand for air travel has propelled airline stocks to multi-year highs. On Sunday alone, the Transportation Security Administration screened nearly 2.9 million people—a single-day record—indicating a continuous and robust demand for air travel. Passengers are eager to book flights, redeem rewards points, and make up for lost travel opportunities due to the Covid pandemic.

Positive Outlook for Airlines

Major airlines, including American Airlines and Delta Air Lines, have raised their profit outlooks due to strong bookings. Additionally, the industry has benefited from lower fuel prices compared to the previous year. Investors eagerly await the second-quarter results and a full-summer outlook, which will be provided starting in mid-July. These reports are expected to detail the financial impact of the disruptions experienced in late June and early July.

Airline Stocks Outperform the Market

The stock performance of major U.S. carriers has far exceeded the broader market this year. United Aerospace and Delta have seen their stocks rise by 46% each, while American Aerospace has witnessed a 42% increase. In contrast, the S&P 500 has gained only 16% during the same period. Delta and United recently reached their highest stock levels since June 2021, reflecting investor confidence in the airline industry.

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