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Frank Holmes Time to take off

Back in May 2020, legendary investor Bill Miller made a strong case for airline stocks, saying that, if you’re not buying them, “you’re making a bet against the vaccine”.

I believe it’s safe to say that Miller has been vindicated. Since making that comment — a not-so-subtle jab at Warren Buffett for dumping his entire stake in the big four domestic carriers — the NYSE Arca Airline Index [XAL] soared 88.3% between 18 May and close on 31 December. The UK began administering the vaccine against COVID-19 at the start of December, with the US following suit not too long after.

As the vaccine rollout commenced, carriers began rushing to address demand for a safe travel experience. Some, including American Airlines Group [AAL], are expanding pre-flight coronavirus testing. In many countries, to fly internationally, you are required to show that you’ve recently been tested or vaccinated.

These efforts have appeared to ease many Americans’ concerns, as we’re seeing passenger volume numbers steadily increase. During the Thanksgiving holiday weekend, some 1.18 million people brushed aside the Centre for Disease Control and Prevention’s travel warnings and boarded commercial flights in the US. Sunday 29 November was the biggest day for domestic air travel since mid-March, near the beginning of the pandemic.

Passenger volume was expected to be even greater at the end of December, with more than a million people projected to fly every day for several days around Christmas. That’s according to David Pekoske, administrator of the Transportation Security Administration.

To be clear, it will take some time before carriers return to 100% capacity. The US was still some 1.4 million passengers below where it was in December 2019. But with the vaccine being deployed, and lawmakers considering another round of payroll support, I remain highly bullish on the industry into 2021 and beyond. 


Frank Holmes is the CEO and CIO of US Global Investors, a boutique investment firm in San Antonio, Texas, specialising in gold and precious metals, emerging markets and global resources and purveyors of the only pure-play US airlines ETF [JETS].


This article was originally published in our Opto Magazine. You can purchase copies on our Opto Shop.

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