Our attention has been drawn to the aviation industry’s recovery by an article on American Airlines anticipating a rise in passengers for its summer season – https://bit.ly/3iMOtEq – as well as the recent run in aviation stocks (CEB, CEBCP, and MAC).

With the US getting closer to its 70 percent herd immunity target (current levels at roughly 44 – 46 percent fully vaccinated population), we can see in the chart below how passenger traffic in US airports is improving, with current 2021 numbers significantly bettering previous year numbers but still a long way to reach 2019 levels.

We don’t have updated statistics for the Philippines yet, but mobility limitations and airline operations are still restricted in the nation, so it should be closer to 2020 levels than 2019 levels. However, if vaccination rates are comparable, we may expect similar figures, since the Philippine aviation sector stands to recover faster than other international carriers owing to its geographic advantage, which leads to more domestic flights.

Although current pricing levels may reflect this, the sector has additional challenges, particularly as oil prices continue to rise and international travel limitations remain in place.

These equities, in our opinion, are getting ahead of themselves. We anticipate that recovery will begin later this year, but it will take considerably longer to restore profitability to pre-crisis levels. For CEB and CEBCP, we want to wait at lower levels, but for MAC, we wish to accumulate.


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