Cowen’s analyst explains why airline stocks are still struggling

United Airlines Holdings Inc (NASDAQ: UAL) said on Tuesday it will buy 270 jetliners from Boeing and Airbus. The announcement follows the forecast a day earlier that the Chicago-based air carrier will turn profitable on an adjusted basis in July.

Helane Becker’s comments on CNBC’s “Squawk on the Street”

According to Cowen’s senior research analyst, Helane Becker, United’s optimism hints at the travel demand picking up after an unprecedented hit last year from the Coronavirus pandemic.

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The COVID-19 restrictions have been easing in recent months, with governments from around the globe enabling limited travel and tourism to resume. Passenger airlines, however, have continued to struggle in the stock market. Commenting on the possible reasons for that, Becker said on CNBC’s “Squawk on the Street”:

“One of the reasons is that the worldwide reopening hasn’t occurred yet. Europe, in particular, is lagging. Asia is likely to take another 18 months to return as a prominent international destination. And there’s a lot of concerns about this new delta variant. Even when economies reopen, investors are concerned about whether or not these are going to be sustained openings, or are we going to go back and forth between opening and closing for a few more years.”

Investors are selling the news

The analyst also highlighted that airline stocks go down whenever they update guidance. Because these companies expect profitability to take until 2023 to return to the pre-pandemic levels. The wait might also be contributing to keeping the stocks under pressure.

Lastly, Becker highlighted that to increase the current 2 million passengers per day to 2.5 or 3 million passengers per day, airlines need ‘international’ to recover more significantly. “And that, we think, is a 2022 event.”

United Airlines is currently more than 10% down on the 30-day chart.