Travel's Bait-And-Switch Recovery

It has been a wild ride for potential travelers and airline investors alike this year. The rapid distribution of Covid-19 vaccines in the spring was followed by a short-lived wave of travel plans, with everyone anxious to visit friends and family, attend conferences, and close deals the old-fashioned way. 

Stocks of airlines, hotels, cruise lines, and other travel stocks surged in line with the optimism.

Then came the more-contagious Delta variant of Covid-19. It's all made investing in the travel industry a serious challenge. Here's Barron's Lawrence Strauss, who has a feature on what comes next for travel stocks: 

'The optimism of hey, it was going to be a quick and easy recovery from the pandemic, completely went away,' says Ravi Shanker, North American airlines analyst at Morgan Stanley. 'Everyone knew that the so-called rebound trades were going to have a problem if the Delta variant became a pretty big issue.'

And it did.

In a Sept. 9 filing, for example, Southwest Airlines said that it 'continues to experience softness in bookings and elevated trip cancellations, especially close-in' due to the Delta variant. It added that 'the softness in leisure bookings has continued, thus far, for September and October,' while business-travel bookings were estimated to remain 'relatively stable' versus last month.

Shares of Southwest, American Airlines Group, United Airlines Holdings, and Delta Air Lines have all posted double-digit losses since the end of May. From Dec. 31 of last year through May 28 of this year, Southwest was up 32%, United 35%, Delta 19%, and American 54%.

Even assuming that the Delta variant eventually fades, the outlook for business travel remains uncertain. Major companies including Google-parent Alphabet have extended work-from-home policies, and some formerly in-person meetings will forever be conducted over Zoom in the post-pandemic future.

That's a bigger deal of course for the hotels and airlines who catered to the business crowd than leisure travelers. Lawrence has much more on how to invest in the travel sector here.