Topline
Amid a flurry of good news for the embattled travel sector, United Airlines on Monday said it expects to stop burning cash this March, becoming the first airline expecting a positive cash flow since the coronavirus pandemic tanked travel demand one year ago.
A Boeing 737 from United Airlines at the Punta Cana International Airport (PUJ), in Dominican … [+]
Key Facts
While the broader market struggles to stay afloat, shares of United are surging 9% after the firm in a Monday morning regulatory filing said recent weeks have ushered in a better-than-expected improvement in customer demand.
As a result, United now expects its core cash flow for March–and the rest of the year–to be positive for the first time since last March, assuming the current trajectory of bookings is sustained.
Though United didn’t give a specific reason for the uptick (or provide updated earnings projections), Southwest Airlines on Monday lifted its revenue guidance for the year, citing “an improvement in leisure passenger bookings with beach and other nature-inspired destinations continuing to outperform other regions.”
Southwest still expects March revenue will come in about 20% lower than last year, but that’s down from expectations of a 30% decline, and the firm says it now expects it should be able to increase its flight capacity by approximately 118% in May, year over year.
JetBlue Airways issued similarly positive guidance in its own filing, saying that “although booking trends remain choppy,” the firm has experienced an improvement in bookings for leisure and by passengers visiting friends and family.
While the broader index is virtually flat, the S&P 500 Airlines Index is up 5% Monday, reaching its highest level since last February and now less than 10% off pre-Covid levels.
Big Number
$7.1 billion. That was United’s net loss last year–a decline of $10 billion from the $3 billion profit posted in 2019 as passenger traffic fell by a staggering 65% year over year. Last quarter, United was burning an average of nearly $20 million a day to run its business.
Key Background
With the coronavirus pandemic stunting travel, shares of United plunged about 65% in the first few months of last year–in line with others in the industry. Though experts are bullish that an economic recovery can help the travel industry mint a stark turnaround, the average analyst price target for Southwest remains about 15% below current levels. Earlier this month, Wolfe Research analyst Hunter Keay upgraded the airlines sector to neutral from underweight, citing “powerful market forces at work,” including “limitless cash” from Congress (thanks to stimulus) and bullish capital markets (United and other airlines raised billions in debt last year to stay afloat).
Surprising Fact
More than 1.3 million airline passengers were screened by the Transportation Security Administration on Sunday, the highest level since March 15, 2020.
Tangent
There’s more good news for the travel industry on Monday. Private equity firm Starwood Capital and Blackstone Real Estate Partners said they will acquire hotel chain Extended Stay American in an all-cash transaction valued at approximately $6 billion–marking a nearly 15% premium to trading prices from Friday.
Further Reading
Dow Jumps 150 Points, Adds To Record High Despite Threat Of Increased Taxes (Forbes)
