Why American Airlines Gained Altitude in March | The Motley Fool

What happened

Shares of American Airlines Group (NASDAQ:AAL) gained 14.1% in March, according to data provided by S&P Global Market Intelligence, as the market responded to clear signals by the airline that the worst of the pandemic is now behind it.

So what

Airlines were hit hard in 2020, and American was no exception. The pandemic caused demand for air travel to decline significantly, forcing carriers to scramble to raise money and avoid running into liquidity issues.

The industry, and the stocks, have been on an upswing in 2021 as optimism builds that vaccines will unleash a lot of pent-up demand for travel. American did its part, making moves in March that clearly indicate it is in recovery mode.

The airline on March 8 said it was tapping private debt markets to raise money to pay down a loan issued by the U.S. Treasury last year. That loan, which was authorized under the CARES Act, was designed to get the industry through the worst of the pandemic, and repaying it is an important step in American’s effort to move on.

Later in the month, American said it intends to have most of its fleet airborne again in the coming months, responding to growing post-pandemic demand. Airlines grounded significant numbers of jets in 2020, but American in a regulatory filing said, “the company has experienced recent strength in domestic and short-haul international bookings.”

Now what

Investors have good reason to be excited. A year ago at this time the discussion was centered around whether American would end up in bankruptcy. Now, we’re talking about surging demand and excitement.

The worst clearly seems to be over, but some amount of caution is still required of investors. With stocks surging in 2021, some airlines are now valued higher now than they were pre-pandemic. Given the continuing threat posed by COVID-19, and fears that international and business travel could take years to fully recover, it’s possible the stocks have now gotten ahead of the recovery.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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