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Why American Airlines Stock Is Up Today

What happened

The White House provided an upbeat vaccine forecast on Tuesday night, pushing airline stocks higher on Wednesday. American Airlines Holdings (NASDAQ: AAL) is leading the charge, up as much as 5% on Wednesday.

So what

American and other airlines suffered through a difficult year in 2020. The pandemic caused demand for air travel to crater, causing the entire industry to lose money last year.

It's hard to make a bull case for the industry without the pandemic ending, and the stocks have soared higher in recent weeks on steady progress rolling out vaccines.

Image source: American Airlines.

The news got even better on Tuesday. President Joe Biden said the U.S. will have enough vaccine supply for every American adult to get a jab by the end of May. That's two months ahead of previous estimates.

Three weeks ago, I announced we would have enough vaccine supply for all Americans by the end of July.

Now, with our efforts to ramp up production, we will have enough vaccines for every American by the end of May.

— President Biden (@POTUS)

If that timeline holds, it should allow for a robust summer travel season. The airline industry believes there's a lot of pent-up demand for leisure travel. Getting people vaccinated in time to do a summer vacation would be great news for the industry.

Now what

American was seen as among the most vulnerable in the industry heading into the pandemic, and the stock fell more than most. It's also getting an outsize reaction to the upside as the news improves.

There's solid reason to be excited, but investors need to be careful not to get ahead of themselves. Factoring in debt, American is actually worth more now than it was prior to the pandemic. That's likely an overreaction, given that some of the more lucrative parts of the industry -- business and international travel -- will take longer to return.

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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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