Airline stocks rally, American cites plan to pay off loan

Monday, March 8, 2021 | The Associated Press

FILE- This Dec. 19, 2017, file photo shows the American Airlines logo on top of the American Airlines Center in Dallas. Airline stocks rose Monday, March 8, 2021 spurred by signs that vaccine rollouts could set up a rebound in travel later this year. (AP Photo/Michael Ainsworth, File)

FORT WORTH, Texas (AP) — Airline stocks rose Monday, spurred by signs that vaccine rollouts could set up a rebound in travel later this year.

American Airlines, meanwhile, announced plans to raise $7.5 billion by borrowing against its frequent-flyer program and using the funds to pay off a federal loan that it received nearly a year ago, in the early days of the pandemic. The airline said the actions won’t increase its overall debt. It follows similar moves by Delta Air Lines and United Airlines.

Fitch Ratings said American’s liquidity has improved more than it expected because of federal loans and money to help cover payrolls — aid that was extended in December and would get another renewal in the COVID-19 relief measure passed by the Senate over the weekend.

“Meanwhile, the rollout of multiple effective coronavirus vaccines has increased the likelihood of a meaningful rebound in air travel starting some time in 2021, lowering the likelihood that American will continue to burn cash for a prolonged period,” Fitch said.

American burned through about $30 million of cash a day in the fourth quarter.

Fitch cautioned, however, that air traffic remains low and the pace of recovery is uncertain.

Airlines have been particularly hard hit by the pandemic, and travel restrictions continue to eliminate most international flying, normally a lucrative part of their business.

But there have been signs of improvement in domestic travel. After a dismal January, the number of passengers has since trended upward. On Sunday, the Transportation Security Administration screened nearly 1.3 million people at U.S. airports. While that was down 41% from the comparable day in pre-pandemic 2019, it was better than the 58% average decline this year compared with 2019.

Shares of American Airlines ended Monday up 5%. United rose 7%, Southwest Airlines gained 6.4% and Delta tacked on 3.6%.

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7 Stocks to Watch When Student Debt Forgiveness Gets Passed

Now that the Biden administration is fully in charge, student debt forgiveness has moved to the front burner. Consider these numbers. There is an estimated $1.7 trillion in student debt. The average student carries approximately $30,000 in student loans.

If $10,000 of student debt were to be canceled, there are estimates that one-third of borrowers (between 15 million to 16.3 million) would become debt-free. Of course, if the number hits $50,000 as some lawmakers are suggesting the impact would even greater.

Putting aside personal thoughts on the wisdom of pursuing this path, it has the potential to unleash a substantial stimulus into the economy.

And as an investor, it’s fair to ask where that money would go. After all, there’s no harm in having investors profit from this stimulus as well.

A counter-argument is that the absence of one monthly payment may not provide enough money to make an impact. However, Senator Elizabeth Warren referred to the effect student loans have in preventing many in the millennial and Gen-Z generations from pursuing big picture life goals such as buying a house, starting a business, or starting a family.

With that in mind, we’ve put together this special presentation that looks at 7 stocks that are likely to benefit if borrowers are set free from the burden of student loans.

View the "7 Stocks to Watch When Student Debt Forgiveness Gets Passed".

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
United Airlines (UAL)1.2$55.87-0.4%N/A-3.40Hold$52.00
Delta Air Lines (DAL)1.4$46.64flatN/A-2.39Hold$47.84
Southwest Airlines (LUV)1.5$62.39-0.9%N/A-22.36Buy$58.95
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