Every Single Airline Stock Fell In 2022, But Let’s Look Forward

U.S. airline executives may be brimming with optimism about 2023, but their exuberance follows a year when not a single major airline recorded a stock market gain.

Rather, in 2022, the best performing airline shares were Spirit’s. They declined 13%. Meanwhile, shares in merger partner JetBlue fell 56%, the industry’s biggest decline.

JetBlue spent the months from April to July bidding up the price it would pay for Spirit, seeking to break up a deal with Frontier: its shares fell 44% during the period. It emerged bloodied and blue and committed to spend $3.8 billion, largely for access to Spirit’s pilots, planes and geographical reach.

Maybe JetBlue will pay too much, but at least it will no longer be a carrier that can be virtually shut down by bad weather at two Northeast airports.

As for competitors, some have offered positive outlooks for 2023, but they too all suffered stock market declines in 2022, when the S&P 500 index fell 19.4%, its worst year since 2008. United fell 17%; Delta fell 18%, Alaska fell 21%, Southwest fell 23%, Frontier fell 27%, American fell 32% and Hawaiian fell 47%.

The year was characterized by an uneven recovery from the pandemic. Demand surged in March; On March 14, Bank of AmericaBAC
analyst Andrew Didora wrote in a report, that “leisure demand is insatiable.” Ironically, the demand surge – which continued throughout the year – brought a series of unforeseen problems to an industry that had spent two years downsizing, leaving it with shortages of pilots, aircraft, airport workers and air traffic controllers. Several times, summer storms nearly paralyzed airlines’ always fragile networks. Then the year ended with longtime industry darling Southwest paralyzed by winter storms that exposed flaws in its outdated technology.

Nevertheless, key carriers seem optimistic about 2023. Ahead of a mid-December investor day presentation, Delta CEO Ed Bastian declared, “Demand for air travel remains robust as we exit the year and Delta’s momentum is building.” He projected 2023 revenue growth between 15% and 20% with margin expansion that will double earnings per share. Delta will report fourth quarter earnings in 10 days, on Jan. 13.

Meanwhile United CEO Scott Kirby told CNBC’s Squawk Box in early December that while business demand has “plateaued,” United is benefitting from continued strong demand and capacity constraints.

Despite widespread recession fear, Kirby said, “If I didn’t watch CNBC in the morning … the word ‘recession’ wouldn’t be in my vocabulary, just looking at our data.”

Kirby’s remarks came a few days after Cowen analyst Helane Becker declared, “We are staying with United Airlines as our top pick for 2023,” Becker wrote in a note that United “has been a star performer in 2022, significantly outperforming the S&P 500 and NYSE ARCA Airline indexes YTD. The carrier’s network and alliances position it to benefit from the recovery in international travel. It has a strong liquidity buffer that should allow it to continue paying down debt and navigate any macro choppiness.”

At the time, Becker noted that “Airlines are better positioned for 2023 than investors believe. Airline shares are not far off pandemic lows, but revenues are above pre-pandemic levels and are keeping pace with costs.”