United Airlines stock price has been rallying at a massive pace over the last week amid prospects of improving demand in the coming months as governments all over the world have partially resumed domestic operations along with signs of relaxing travel restrictions.
Trader’s optimism is supported by Spain’s announcement of allowing tourists into the country from July. Meanwhile, airlines also came up with new protocols to reduce the risks of virus spread, with measures like a strong focus on cleaning procedures and limiting passenger capacity.
Data coming out of airline companies are adding to sentiments. For instance, Southwest Airlines indicated some improvement in demand, trip cancellations, and bookings in May compared to the estimates. Its May load factor is likely to stand around 25% and 30%, up 10% from earlier estimates as new bookings are topping cancellations, which is resulting in a lower cash burn rate.
The cash burn rate at Delta Air Lines declined by $10 million in May from earlier estimates as the load factor is likely to hit about 35% to 40% this month.
United Airlines is among the biggest gainers of the latest bull-run of airline companies, thanks to increased demand along with deep cost-cutting announcements. The airline also scrambled to take measures like raising debt along with sale-leasebacks of some planes to preserve cash.
United Airlines stock price rallied close to 16% on Tuesday, up 25% in the last five days alone. Its shares are currently trading around $30, down almost 70% year to date.
The new CEO Scott Kirby says he will try to avoid layoffs despite the desperate need for lower cost structure in the wake of a substantial decline in demand.
“We’ll be taking time in the months ahead to work with our union partners on creative ideas that would involve reduced hours and leaves of absences instead of furloughs,” said Kirby,