Things Are Looking Up for Commercial Airlines

Airline stocks are on track to record their third straight month of gains on hopes that the coronavirus vaccine will help normalize commercial air travel sooner rather than later. Investors are also betting that U.S. carriers may be in line to receive additional relief in the stimulus package currently being negotiated in Congress.

As of December 16, the NYSE Arca Airline Index was up nearly 4.5% for the month. This follows a spectacular 41.9% increase in November—airline stocks’ biggest monthly jump on record—and 1.6% increase in October.

A Congressional relief package has seen delay after delay, but a bill may be headed for President Donald Trump’s desk as soon as this week, according to reporting by Politico.

Such a bill would “probably” include between $17 billion and $25 billion for domestic airlines, write Bloomberg analysts Nathan Dean and Eric Kazatsky. Even if the current spending package doesn’t include airline relief, Dean and Kazatsky say they expect aid to come as early as the first quarter of next year, after President-elect Joe Biden takes office.

Billionaire investor Warren Buffett believes another round of fiscal stimulus is crucial to help U.S. businesses get to the end of the pandemic.

“We need another injection to complete the job,” the Berkshire Hathaway chief told CNBC this week. “Congress is debating that right now, and I hope very much that they extend the PPP (paycheck protection program).”

Buffett Still Wrong to Have Exited Airlines

If you recall, Buffett announced in early May that he had dumped his entire position in the big four domestic airlines, following a collapse in share prices due to the pandemic.

Within three weeks, the decision cost him a cool $2.7 billion, according to Investor’s Business Daily (IBD). That amount has only increased since then. For the year, class A shares of Berkshire are down 1.6%, significantly underperforming the S&P 500, up 16.5%.