American Airlines stock soars to lead sector higher, on increasing signs that the worst is over

American Airlines stock soars to lead sector higher, on increasing signs that the worst is over
Published: June 4, 2020 at 3:03 p.m. ET American’s shares head for biggest one-day gain on record volume after upbeat flight outlook for July Getty Images Shares of American Airlines Group Inc. were headed for a record gain on Thursday, to lead a broad rally in the airline sector, after the carrier said it was…

American’s shares head for biggest one-day gain on record volume after upbeat flight outlook for July


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Shares of American Airlines Group Inc. were headed for a record gain on Thursday, to lead a broad rally in the airline sector, after the carrier said it was boosting capacity amid increasing signs that the worst of the COVID-19-related crisis was over.

The stock
AAL,
+43.46%

rocked 45% in afternoon trading, which puts on track for the biggest one-day percentage gain since it started trading in its current form in December 2013. That would pass the previous record rally of 35.8% on March 24, in anticipation of the passage of a government bailout package.

Trading volume soared to 302.3 million shares, surpassing the previous record of 138.1 million shares on April 7, and more than four-times the full-day average of about 71.7 million shares.

The stock led the 29 of 33 components of the U.S. Global Jets exchange-traded fund
JETS,
+11.46%

that rose Thursday.

American said Thursday that it expects to fly in July about 55% of the domestic capacity that was flown during July 2019, as load factor improved 55% at the end of May from 15% for the month of April.

“We’re seeing a slow but steady rise in domestic demand,” said Vasu Raja, senior vice president of network strategy. “After a careful review of data, we’ve built a July schedule to match.”

American’s stock has now rocketed 44% this week amid a four-day win streak, which would be its biggest-ever weekly gain, topping the previous record of 35.3% for the week ended March 27.

The increasing demand American has seen is in sync with other industry data points, which suggest a continued bounce in travel demand off a bottom seen in April. The Transportation Security Administration (TSA) said that the daily average per week (through Sunday) of travelers going through its checkpoints has improved for six straight weeks, according to a MarketWatch analysis of government data.

An average of 305,358 people went through TSA checkpoints a day during the week ended May 31, or more than triple the low of 97,799 seen during the week ended April 19, as the COVID-19 pandemic resulted in shelter-in-place orders and travel restrictions.

And on Wednesday, the International Air Transport Association (IATA) said daily flights increased by 30% between April 21 and May 27. The IATA said the improvement in the data suggests “the industry has seen the bottom of the crisis, provided there is no recurrence.”

The Jets ETF shot up 13% in afternoon trading, and has now gained 28% amid a four-day win streak. In comparison, the Dow Jones Transportation Average
DJT,
+1.19%

, which includes six airline components, has climbed 6.6% this week and the Dow Jones Industrial Average
DJIA,
-0.23%

has tacked on 3.2%.

Among the ETF’s other more-active components, shares of United Airlines Holdings Inc.
UAL,
+15.70%

shot up 16%, Delta Air Lines Inc.
DAL,
+13.10%

powered up 14%, Spirit Airlines Inc.
SAVE,
+20.62%

vaulted 22% higher, JetBlue Airways Corp.
JBLU,
+15.12%

climbed 16% and Southwest Airlines Co.
LUV,
+5.40%

advanced 7.0%.

“Unless we get another wave of coronavirus, we think it is safe to say that April’s virtual lockdown of global aviation activity was the trough for RPMs,” wrote analyst Robert Stallard of Vertical Research Partners, in a note to clients.

RPM refers to revenue passenger miles, or traffic. Capacity, or available seat miles (ASMs), divided by RPMs equals load factor.

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