Airlines are still losing money but you wouldn't know it by looking at their stock prices this year. United Airlines ' shares are up nearly 35%, Southwest Airlines ' are up about 38%, Delta Air Lines ' have gained 22% and American Airlines ' have surged 44% on Wednesday morning. Airline investors have reasons to be optimistic. Travel demand, at least from U.S. vacationers , is bouncing back after a difficult start to the year when Covid-19 cases peaked. Airline CEOs are upbeat about spring and summer bookings, too as millions receive coronavirus vaccines, quarantine orders are lifted and tourist attractions reopen . Add to that, in the latest Covid-19 stimulus package Congress set aside a third round of payroll support: $14 billion—in the form of mostly grants that don't have to be paid back—to cover costs of their labor force, which airlines already reduced during the pandemic through buyouts and other incentives. That brings the total payroll support Congress approved for the sector to $54 billion in exchange for not involuntarily furloughing workers or cutting pay rates. But airlines have plenty of challenges ahead, even though coronavirus cases have dropped. Revenue is depressed, and international and business travel are still hampered. Airline executives this month will provide more detailed outlooks about how they're preparing for the spring and summer travel season and what it will take to return to profitability. Delta kicks off reporting on Thursday before the market opens. Here's what investors should watch. Revenue Business travel is still stalled and international travel is depressed due to a web of travel restrictions, depriving big network carriers of high-yielding customers they depended on before the pandemic. American Airlines on Tuesday said first-quarter revenue will be down 62% from the same period of 2019, at the mid-point of its previous guidance. A day earlier United said it expects to post sales of $3.2 billion for the quarter, down 66% from 2019, toward the lower end of an older estimate. Last month, Delta forecast revenue would be down at the lower end of its estimate for a 60% to 65% decline in first-quarter sales compared with the same period of 2019. Demand After a dismal start to the year, already a weak period for carriers, travel demand is bouncing back. The Transportation Security Administration has screened an average of 1.46 million people a day this month. That's still down more than 37% from the same period of 2019, but it's more than 13 times the just 108,000 people that passed through airport checkpoints in the first 12 days of April 2020 at the depths of the crisis. Airline management teams will detail the pace of bookings for the summer, generally the most lucrative season for carriers. Because international travel still remains severely limited, more travelers will be taking shorter, and cheaper, trips . Investors should also look for any details about business travel demand coming back, though that is likely to take longer. Fares and capacity Where are airlines adding capacity and how much? Budget carriers like Spirit Airlines and Allegiant Air have been investor darlings (up 55% and 34% this year, respectively) because they lack the sprawling international networks or corporate customers that large airlines had to go without during the pandemic. With domestic leisure air travel still the main event, pay close attention to whether airlines oversaturate certain popular markets, which could drive down fares—a trend that customers cheer but analysts boo. Costs What is the cost of airlines' revival? Jet fuel, airlines' largest cost after labor, is on the rise . That might not necessarily be a bad thing because it points to higher demand. U.S. jet-fuel prices rose more than 20% this year through April 12 to $1.62 a gallon, according to S & P Global Platts. U.S. demand is expected to rise to 1.402 million barrels a day this year, up from 1.086 million a year ago but still below the 1.75 million in 2019, according to S & P Global Platts Analytics. "Domestic traffic is returning nicely, some quicker than other regions, but it's the international and commercial business travel ... on commercial airlines, that has to pick up," said Alan Struth, senior advisor, of global oil analytics at the firm. "There has been a noted pickup in private business jet traffic, which has been a big supporting factor, but of itself, isn't sufficient to return conditions to normal." Airline executives are also likely to discuss their labor costs, particularly as they shift their focus toward a longer term recovery, which at the very least, will require more pilots .
