Airlines could receive billions more in relief, but it may not be enough, traders say

Airline stocks have taken off again with fresh hopes of additional relief for the beaten-down group.

United Airlines, Southwest, Delta, American Airlines and JetBlue moved higher this week as several Republican senators called for another $25 billion in stimulus. They joined President Donald Trump and more than 200 House lawmakers in support for more funds for the industry to offset plummeting demand tied to the pandemic.

Travel stocks also got a boost after the State Department lifted a global health advisory for U.S. citizens traveling internationally.

“The airlines are of strategic importance to the nation, and I think you’re seeing policymakers reflect that,” Federated Hermes portfolio manager Steve Chiavarone said Thursday on CNBC’s “Trading Nation.”  

He said improved air traffic in recent months is a plus but noted that it is far lower than normal.

More than 20 million travelers passed through TSA checkpoints in July, according to agency data. However, that was roughly a quarter of traffic from a year earlier.

“You don’t want to have such permanent damage [to the companies] … that when you do get back to normal you can’t operate the airlines and then that further restricts your recovery. So I think it makes sense [to provide stimulus]. Is $25 billion enough? Who knows? You may have to come back for another round,” said Chiavarone.

Airlines had already been allocated $25 billion in stimulus through previously passed relief funds. That round restricted layoffs through the end of next month.

Matt Maley, chief market strategist at Miller Tabak, said the charts highlight a wild ride for the group over the past few months.

“Look at the XAL which is a broad index of the airline stocks,” Maley said during the same “Trading Nation” segment. “The group got hit obviously a lot more than everything else, and so when it bounced back — for instance, Delta rallied 90% — everybody thought, ‘Oh my God, what a great opportunity,’ but then it settled back into kind of a sideways range.”

The same pattern repeated in early June when the group broke higher but has since settled into another sideways range, he said.

“The thing that’s positive is that this range that we’re in now, the second range we’ve been in, is at a higher level. So we’re seeing a higher low and that bodes well for it,” Maley said. “If the group can move above its July highs, that’s going to be positive … and if it can break above its June highs, it’s going to give it a lot of momentum.”

The XAL airline index hit a peak of 74.46 in early June. It currently trades at 54.47.


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