Explore our ETFs

  • $FIVG
  • $QTUM
  • $SPAK
  • $HDRO
  • $PSY
  • $CRUZ
  • $BIGY
  • $NFTZ
Post-covid air travel recovery, or not?

Post-covid air travel recovery, or not?

After a tough year and a half, airline stocks are showing signs of recovery. Investors with commitments in travel stocks are eager to know whether they can bank on this upward swing continuing, or if it’s just a flash in the pan.

The worst appears to be behind us

There’s a general feeling that travel stocks are now past the worst, with Willie Walsh, director general of the International Air Transport Association (IATA), saying “We are past the deepest point of the crisis. While serious issues remain, the path to recovery is coming into view.”1

JP Morgan’s Jamie Baker appears to agree, upgrading Southwest Airlines stock from neutral to overweight, and raising his price target to $70 from $64. Baker pointed out that JP Morgan’s internal travel spending data is positive and the US is easing travel restrictions2. Likewise, IATA’s October report forecasts that global airline financial performance will recover by the end of 2022, and regain profitability in 2023. The organization expects that 2022 will see total passenger numbers rise to 3.4 billion people, from 2.3 billion this year, and global revenue-passenger kilometers (RPKs) improve by 51% to 61% of pre-crisis levels.3

There are many positive signs. JetBlue signalled confidence by adding a New York—London route in August4. Three out of the US’s “Big Four” air carriers reported a profit in Q2 2021, with the fourth, United Airlines, expecting to join them by the end of the year5. Hotel stocks are also perking up as hotels mirror the recovery of air travel6. Air freight has rebounded strongly, with IATA reporting that air cargo already exceeded 2019 levels and is likely to continue in 20227.

But the recovery is not expected to be linear

Despite general optimism, insiders caution that there will be many bumps on the road to recovery. Jozsef Varadi, CEO of European airline WizzAir, noted “Clearly we are on an upward trend, but I am not sure it is going to be a straight line like we all wish for.8

In fact, we’ve already seen turbulence on the journey. In the US, air travel rose in June and July with over 2 million people passing TSA checkpoints every day, but late August and September saw daily passenger volume drop far below the 2 million mark9. The Airports Council International (ACI) noted that it had expected that Q2 2021 would be the “pivotal point” for the start of the real recovery, but “those expectations did not materialize.10

This was partly due to the Delta variant, but also the failure of the hoped-for return of business travel. Leisure travel in the US typically falls off in September as children return to school, to be replaced by business travel. Although June saw an upbeat atmosphere, with close to 80% of people surveyed saying they expected to book a trip within 3 months, Delta changed the mood. Mid-September saw corporate ticket sales at just 38% of 2019 levels.11 CNN analysts say they’ve revised their projections for US domestic air travel and now expect recovery by summer 2022, “essentially on the same timetable as before vaccinations took off.12

Regional recovery may vary tremendously

It’s widely agreed that domestic travel is recovering faster than international travel and regional travel is outpacing interregional travel, which is resulting in uneven recovery rates around the world.

Source: “Air Travel Forecast: When Will Airlines Recover from Covid-19?” October 13, 2021 https://www.bain.com/insights/air-travel-forecast-when-will-airlines-recover-from-covid-19-interactive/
Projections are based on estimates and subject to change.

Unsurprisingly, passenger rates are linked strongly to vaccine rollout and local consumer confidence, as well as government policies and travel restrictions, fueling the imbalance between different parts of the globe. “The airline industry is facing an uneven recovery from the pandemic. Regions with large domestic markets, faster vaccination rollout and less restrictive government policy will continue to recover faster than the other parts of the world.” says IATA13.

IATA forecasts that only airlines in North America will turn a profit in 202214. Bain & Company’s predictions for passenger volume in July 2022, as a percentage of the levels in 2019, paint a similar picture, varying from 57% for India and 62% for Australia, to 80% and up for the EU, US, and Russia, and 100% for China.15

Source: “Air Travel Forecast: When Will Airlines Recover from Covid-19?” October 13, 2021 https://www.bain.com/insights/air-travel-forecast-when-will-airlines-recover-from-covid-19-interactive/

Global coordination can speed up the rebound

Thought leaders emphasize that much depends on the extent of international coordination. As shown in the graph below, Bain & Company’s prediction for a “Coordinated recovery” scenario, which puts 2021 revenue at $240 billion, is much more optimistic than for “Drifting,” which considers a disparate global response and predicts $222 billion in revenue16.

Source: “Air Travel Forecast: When Will Airlines Recover from Covid-19?” October 13, 2021 https://www.bain.com/insights/air-travel-forecast-when-will-airlines-recover-from-covid-19-interactive/

The ACI sounds a similar note. While it is optimistic about long-term growth and recovery, it points out that “Critical to this will be a harmonized and risk-based approach to travel restrictions underpinned by government action to promote safe travel with a coordinated approach to testing and vaccination.17

Initially, we saw highly dispersed efforts to address post-COVID air travel, with no common approach to vaccine acceptance, the type or timing of tests, or quarantine periods. However, there are now signs of improvement. The EU, for example, recently introduced a vaccine passport accepted by all member states.

Airline stocks could be taking off

Despite the many hiccups that they are likely to encounter, the last couple of months have brought strong indications that the airline sector is on the road to recovery, and airline stocks are feeling the uplift. The CRUZ airline, hotel, and travel ETF offered by Defiance reflects this, showing sustained growth of $20.45 on August 19th to $22.03 on October 28 , a rise of 7.7%. (Click here for current standardized performance).

The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted. Performance current to the most recent month-end can be obtained by calling 833.333.9383. Short term performance, in particular, is not a good indication of the fund’s future performance, and an investment should not be made based solely on returns.

While it’s impossible to predict how many ups and downs we’ll see over the next few years, there are reasons for investors to feel positive about the long-term trajectory of the market. With individual airlines and travel stocks still showing volatility, many investors are giving more attention to a travel ETF like CRUZ, which spreads investment across a number of promising travel stocks and thus can help mitigate risk.


1 “Global airline industry is expected to cut losses in 2022 by 78% to $12 billion in slow pandemic recovery” October 4, 2021 https://www.cnbc.com/2021/10/04/airlines-covid-recovery-2022-losses-to-fall.html

2 “Why Airline Stocks Are Flying High Today” October 1, 2021 https://www.fool.com/investing/2021/10/01/why-airline-stocks-are-flying-high-today/

3 “Economic Performance of the Airline Industry” 2021 End-year Report, IATA https://www.iata.org/en/iata-repository/publications/economic-reports/airline-industry-economic-performance—october-2021—report/

4 “JetBlue to launch NY-UK flights despite pandemic” August 10, 2021 https://www.bbc.com/news/business-58156118

5 “Clouds lift as confidence returns to battered airline industry” August 2, 2021  https://www.ft.com/content/9214f0a8-cc60-4511-be5d-4362462e1896

6 “JetBlue to launch NY-UK flights despite pandemic” August 10, 2021 https://www.bbc.com/news/business-58156118

7 “Economic Performance of the Airline Industry” 2021 End-year Report, IATA https://www.iata.org/en/iata-repository/publications/economic-reports/airline-industry-economic-performance—october-2021—report/

8 “Clouds lift as confidence returns to battered airline industry” August 2, 2021  https://www.ft.com/content/9214f0a8-cc60-4511-be5d-4362462e1896

9 Cited by “The airline recovery has been put on hold as Covid-19 strikes again” September 24, 2021 https://edition.cnn.com/2021/09/24/perspectives/airline-recovery-domestic-international-business-travel/index.html, figures taken from TSA checkpoint travel numbers https://www.tsa.gov/coronavirus/passenger-throughput

10 “The impact of COVID-19 on the airport business and the path to recovery” July 14, 2021 https://aci.aero/2021/07/14/the-impact-of-covid-19-on-the-airport-business-and-the-path-to-recovery-2/

11 “The airline recovery has been put on hold as Covid-19 strikes again” September 24, 2021 https://edition.cnn.com/2021/09/24/perspectives/airline-recovery-domestic-international-business-travel/index.html

12 “The airline recovery has been put on hold as Covid-19 strikes again” September 24, 2021 https://edition.cnn.com/2021/09/24/perspectives/airline-recovery-domestic-international-business-travel/index.html

13  “Economic Performance of the Airline Industry” 2021 End-year Report, IATA https://www.iata.org/en/iata-repository/publications/economic-reports/airline-industry-economic-performance—october-2021—report/

14  “Economic Performance of the Airline Industry” 2021 End-year Report, IATA https://www.iata.org/en/iata-repository/publications/economic-reports/airline-industry-economic-performance—october-2021—report/#:~:text=Airline%20industry%20is%20recovering%20gradually,pre%2Dcrisis%20levels%20in%202021.&text=The%20industry%20is%20forecast%20to,31%25%20in%202021%20vs%202019.

15 “Air Travel Forecast: When Will Airlines Recover from Covid-19?” October 13, 2021 https://www.bain.com/insights/air-travel-forecast-when-will-airlines-recover-from-covid-19-interactive/

16 “Air Travel Forecast: When Will Airlines Recover from Covid-19?” October 13, 2021 https://www.bain.com/insights/air-travel-forecast-when-will-airlines-recover-from-covid-19-interactive/

17 “The impact of COVID-19 on the airport business and the path to recovery” July 14, 2021 https://aci.aero/2021/07/14/the-impact-of-covid-19-on-the-airport-business-and-the-path-to-recovery-2/