Why United Airlines stock is losing ground today

What happened

The latest headlines regarding the pandemic are largely negative and airline stocks are under pressure as a result. Actions of United Airlines Holdings (NASDAQ: UAL) led the decline, up 5% on Friday.

So what

Airlines stocks were hit hard during the pandemic, as travel restrictions and lockdowns largely wiped out travel demand. We have seen a gradual recovery in the sector as the global economy pushed to reopen, but airlines are still losing money overall and are in a fragile state.

Image source: United Airlines.

Given the tenuous nature of the recovery, investors have been nervous during times when news about the pandemic turns negative. This is the case on Friday, with the markets dealing with the news that Austria will impose a full national lockdown from Monday in response to the increase in COVID-19 cases. Germany is also planning new restrictions, and in the United States, there is a slight increase in hospitalizations.

The latest headlines threaten the narrative that as the vaccine becomes widespread, the pandemic will take a back seat. This would be bad news for airline stocks, and the industry is trading in response.

Now what

The concern isn’t confined to United, but given United’s historic place as one of the airlines most reliant on international fares, it’s understandable that investors are particularly concerned in light of recent developments. new. When times are good, United’s international reach is the envy of the industry, but at times like this, when further border restrictions are possible, United are arguably poorly positioned to succeed.

It’s too early to say what will happen to this latest wave of COVID-19, or how bad it will get, but there isn’t much evidence at the moment to support a bull case built around it. ‘a quick turnaround. For those who want to overcome the turbulence, I would favor Delta Airlines, which features a better mix of domestic and international exhibitions, a strong balance sheet, and fewer manpower issues than other airlines.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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