This article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe
Friday, March 5, 2021
Vaccinations are having the biggest impact on airlines.
As we noted on Thursday, investors are fully onboard the re-opening train.
But these trades aren't only anticipating what might happen when the masses are vaccinated and the economy is fully re-opened — they are also responding to real-time changes in data.
In a note to clients published Thursday, economists at Bank of America Global Research led by Michelle Meyer flagged the massive surge in spending on airlines the firm is seeing from its Bank of America cardholders who are most likely to be vaccinated.
And this chart makes clear that it seems there is one thing people are most inclined to do once they get the vaccine: fly.
"We focus on spending trends amongst traditionalists which are aged 73-92 and are therefore most likely to have received the COVID vaccine," Bank of America writes. "In particular, spending on airfare surged for traditionalists as compared to other generations — [the chart above] shows the indexed level of average spending by cohort to June 2020; traditionalists spending is now 4X the level in June."
The firm adds: "We do not see the same [spending] pattern for lodging which may suggest that traditionalists are traveling to see family rather than take vacations. Spending at restaurants and bars increased modestly for this cohort recently relative to other age cohorts but there was little difference in brick & mortar retail spend."
All of which sounds like great news for airlines. The market, of course, has anticipated some of the specific trends that will play out as the economy re-opens with air travel being one of them. And while airline stocks were caught up in Thursday's sell-off, shares of major U.S. airlines like United (UAL), American (AAL), and Delta (DAL) are just a few percentage points off their 52-week highs.
Bank of America's report, then, serves as confirmation of what investors have expected from consumer behavior as the economy re-opens. And whether Millennials start hopping on planes with the enthusiasm of their grandparents once their turn to get a vaccine is up remains to be seen.
One imagines that this cohort might change its behavior to a slightly more muted degree given the elevated risk COVID infections pose to the elderly. Then again, if there is a place consumers tend to draw the line on which risks they are willing to take during the pandemic, air travel is a popular one.
The big takeaway from this data, however, is that as we move into the second quarter things will move quickly. The rapid ramp in airline spending BofA sees in its data won't be the only economic activity chart that soars up and to the right. And this chart may serve as a harbinger of how fast behaviors change once people are vaccinated and give themselves the all clear.
Yahoo Finance Highlights