Stocks react to plans to lift travel restrictions
The U.S. plans to ease COVID-19 pandemic-related travel restrictions that have barred people from around the world from traveling to the United States since early 2020.
While the US Centers for Disease Control and Prevention (CDC) still must issue a formal order that will provide details on the new rules and when they will begin, the Biden Administration has already laid plans to ease restrictions in early November.
Airlines stocks have risen in the recent past in response to reports that pandemic-era travel restrictions, including a travel ban on Europeans, will be lifted.
Here is a look at the U.S. travel restriction policy and how airline stocks are responding.
Who can travel to the United States?
Restrictions will be lifted on 33 countries including China, India, Brazil, Iran, South Africa, and most of Europe for travelers who are fully vaccinated against COVID-19 that were imposed starting in early 2020. But travelers will still need to provide proof of a negative COVID-19 test within three days of departing for the United States.
Until the new rules take effect, most foreign nationals who have been in the 33 countries for 14 days before departure cannot travel to the United States. Foreign nationals from all countries, with few exceptions, will need vaccinations to travel to the United States by air.
The CDC has not yet said whether foreign nationals who recently had COVID-19 and are not currently eligible to be vaccinated will be allowed to travel to the United States.
Which vaccines are accepted?
It is not clear what vaccines the CDC will accept beyond the three already authorized in the United States - Pfizer/BioNTech, Moderna, and Johnson & Johnson - or what proof must be presented. The Biden administration told airlines on Tuesday that it was still deciding what vaccines will be accepted.
But the CDC pointed to its prior guidance when asked by Reuters what vaccines it will accept. “The CDC considers someone fully vaccinated with any FDA-authorized or approved vaccines and any vaccines that (the World Health Organization) has authorized”.
Airlines are expected to play some oversight role in the implementation of the new policy. For example, it is expected that travelers will need to sign a form attesting to their vaccination and airlines will check passengers’ documents to certify compliance with the vaccine rules. Airlines currently check for proof of a negative COVID-19 test before travelers depart.
How did Airline stocks respond?
Airlines stocks have risen in the recent past in response to reports that pandemic-era travel restrictions, including a travel ban on Europeans, will be lifted.
The U.S. Global Jets ETF slipped 0.6%, while the S&P 500 shed 1.4% early this week. Among the more active U.S. air carriers, shares of American Airlines Group Inc. rose 0.9%, Delta Air Lines Inc. eased 0.5% and United Airlines Holdings Inc. slipped 0.5%.
International Consolidated Airlines Group was the biggest gainner in the STOXX Europe 600 Index on reports that vaccinated passengers will be permitted to travel to the U.S. from European Union nations and the U.K. in November.
Should I buy Airline stocks?
While airline stocks seem to present a great buying opportunity, they may not return to last year’s lows sooner. The buying opportunity is likely to come at lower levels sometimes at the end of the year or early next year.
For example, U.S. airline bookings and traffic trends have slowed slightly as corporate demand lags the recovery in leisure travel. And while airlines seem to have found a way to operate or co-exist with the present Covid environment, investors should be aware there is still a long journey ahead for the passenger air travel sector. For the most part, it has been tourists who fueled 2021’s rally, and with summer vacation season over, the segment is likely headed for a lull until the holidays.
Many airlines won’t fully recover until business travelers return and given that many large employers don’t plan to even reopen offices until late this year or 2022, a resumption of robust corporate travel still seems a long way off. For long-term-minded investors, the best strategy is to buy and hold top airlines like Delta and Southwest. Just be prepared for some turbulence on the journey.