Not long ago, United Airlines was watching the arrivals board for a delivery of new, top of the range Boeing 737 MAXs. Now, as those jetliners sit grounded on the tarmac, United is forced to bring in some old bangers. Demand is booming, seats are filling, and an eyebrow-raising cover fleet has passengers and investors tightening their seat belts.
United Airlines investors have their magnifying glass over one number, capacity. That’s how many seats there are available to carry passengers from A-to-B. Market watchers know better than anyone the form of this high flying US economy, so as holidaymakers flood to the price comparison websites, United’s planes are jam-packed.
Without a fleet of Boeing 737 MAX’s to share the load, shareholders are worried that more flight cancellations will leave them and passengers short-changed. And that’s not helped by United refusing to fess up on the financial impact of that grounded fleet. It’s been five months now!
But letting Delta and American absorb its thousands of passengers from canceled flights, won’t fly with United. Keeping its lips sealed, the airline has picked an undisclosed aerospace company from which to buy some second-hand planes. If that undisclosed aerospace company is called Airbus, queue more embarrassment for Boeing.
Many see the airlines as the ugly ducklings of the investment world, with a carrier’s fate so rarely in its own hands. Investors have often been caught in the pincer of high jet fuel costs and sudden dry demand, the prevailing joke being that to make a small fortune in the airline business, start with a large one!
All the moving parts for airline and aerospace stocks are well and truly in motion. One stock’s loss in another’s gain, so don’t touch the remote!