5 Reasons Aviation Stocks Can Do Better this year


Frank Holmes – CEO US Global Investors – leads 5 factors that can influence the decision to invest in aviation stocks this year.

The number of new Covid-19 infections decreased globally

After the highest number (more than 1.7 million new infections as of January 20), the number of Covid-19 infections is decreasing globally. In the US, the number of hospital admissions has also decreased gradually since the beginning of January.

Immunization programs are working to prevent epidemics. In Israel, for example, when conducting a trial between 600,000 people who had two doses of the vaccine and 600,000 people who were not vaccinated, the results showed that the rate of symptomatic infection decreased by 94% and the rate of severe symptoms decreased. 92%. The effectiveness of the vaccine was maintained in all age groups, including those aged 70 and older.

However, there are still some hot spots of Covid-19 such as Southern and Central Europe (especially Portugal, Spain, Italy), and South America. At the same time, new variants of the Covid-19 are also of interest and could delay the recovery of the aviation industry longer.

Immunization plans are accelerated

President Biden is pushing the vaccine distribution with a goal of 300 million Americans will be fully vaccinated by the end of this summer.

Asian countries also started receiving the first batch of vaccines. Singapore is rolling out a more extensive vaccination campaign for health care workers, and the vaccine will be available to all by the end of the year.

In Vietnam, in February, it will import 200,000 doses of the first vaccine to serve the needs of anti-epidemic. The health sector has prepared conditions to store this vaccine in accordance with recommendations from the manufacturer.

These are positive signals for the summer tourism season in general and commercial aviation demand in particular, when people are vaccinated and can travel safely.

Aviation ancillary revenue increased

The ancillary revenue of the previous airlines is the fees that passengers choose to pay for additional utilities such as extra luggage, seats … For the 2010-2019 period, the revenue from these services It continues to increase year by year as people are willing to pay more for a more comfortable flying experience. However, the Covid-19 pandemic caused this source of revenue to decline sharply.

But there is an interesting paradox that ancillary revenue per passenger has increased over the past year. In which, United Airlines achieved the highest growth rate – 59%. Other carriers such as Alaska, Southwest, Air Canada, Ireland’s Ryanair and Hungary’s Wizz Air also saw double-digit growth.

VietJet Air – one of the rare airlines reporting profits in 2020, also recorded ancillary revenue contributing to its profit. VietJet Air has an after-tax profit of $ 3 million after moving to improve its capacity to transport goods and ancillary services.

Vietjet is one of the airlines making profits in 2020 due to its business shift to cargo transportation. Image: VietJet Air.

Rehabilitation tourism in epidemic control countries

China is the only major economy to report economic growth in 2020. Its domestic commercial aviation industry has recovered from shutdowns early last year. In addition, domestic entertainment tourism in Australia is also happening actively.

Indian low-cost airline IndiGo also expects demand to return to pre-pandemic levels by the end of this year.

The Vietnam National Administration of Tourism statistics, the number of domestic tourists in 2020 will reach 56 million. Last year, Vietnamese airlines opened more new domestic routes to meet the travel needs of people.

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Vietjet automatic check-in kiosks at the airport allow check-in without going to the check-in counters. Image: VietJet Air.

Some firms expand their investments

There are many airlines that cut spending, but there are a few units that have expanded investment.

Some airlines added new routes to their networks to take advantage of the gaps left by competitors due to the pandemic. This is the strategy of Southwest. The Dallas-based airline is stepping up into two major airports: O’Hare International Airport (Chicago) and George Bush Intercontinental Airport (Houston) – which is the home of rivals United and American.

Several US airlines have recruited new pilots, including PSA Airlines and Frontier Airlines. Meanwhile, other carriers are investing capital, including accepting new aircraft or introducing new high-end services.

Previously, according to an investment strategy report in 2021, VNDirect Securities Joint Stock Company also assessed that Vietnam’s air transport and tourism were gradually recovering.

Thao Trang (follow Forbes)

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