Sunday, June 13, 2021

Is Air Travel Coming Back Soon?

Its been 1.5 years since COVID-19 struck us. Air travel had completely come to a halt when many countries announced border closures. Airports were left empty and airlines had to cut flights and retrenched staff as a result. 

However, things seem to changed recently with higher rates of people being vaccinated. In the US, their government have started to relax measures and air travel is definitely back in the United States. Their airports are full again and flights are also full.

This is a stark contract from last year where airports are empty and flights were relatively empty too. Studies have shown that higher vaccination rates reduces COVID-19 infection rates significantly as seen in the chart below.

Minister Lawrence Wong has also said that "With a higher vaccination rate, compliance with social distancing and safe management measures, regular testing, and faster and more comprehensive contact tracing, Singapore will ease restrictions and gradually restore "our normal lives, both within Singapore and at our borders", said Mr Wong, who is co-chair of the multi-ministry task force tackling Covid-19. Mr Wong said: "As we progress through these stages (of reopening), we will ease our restrictions and gradually restore our normal lives, both within Singapore and at our borders. Then we will move to phase three, and even beyond phase three, to a new normal phase of living with endemic Covid."" This was reported in the Straits Times article here. We have a chance of going into endemic mode once we achieve vaccination rates of above 75% in October, which is the target set by the government. 

Shares of US airlines such as Delta Airlines and United Airlines have went up steadily in the past 1 year. It may still have some run up over the next 1 year as air travel progressively resumes. 

Here's a video on the situation of US airports and its airlines where we can see clearly how packed and crowded it is currently:

Elsewhere in Singapore and Asia, it doesn't seem that air travel is resuming soon as COVID-19 infection rates is still high in countries such as Malaysia. But, as vaccination rates pick up, more air travel bubbles will be formed in the next few months and we will see some form of air travel and tourism back in action. 

As an investor, it may probably be a good time to accumulate some travel related stocks such as Hospitality REITs. Their prices are still depressed and those who are early in the game may be able to reap some rewards in the future. We shall see how situation develops from here on. 

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