Southwest and Other Airlines Take Off as Travel Rules Ease

Southwest Airlines shares' rating was raised to buy from neutral by UBS on "clearer path for domestic travel recovery."
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Shares of Southwest Airlines  (LUV) - Get Report and other airlines were surging Tuesday as investors took hope in the easing of travel restrictions enacted to slow the spread of the coronavirus pandemic.

Southwest shares at last check were climbing nearly 11% to $32.

UBS analyst Myles Watson said in a note to clients that he was upgrading the Dallas air carrier to buy from neutral "as we see a clearer path for domestic travel recovery."

"Moreover, unlike many other airlines, the balance sheet position of LUV is remarkably clean (near-net cash balance sheet), which provides protection from any step backward in demand under another wave of covid-19," said Watson, who also raised his price target from $37 to $41 a share.

Watson said Southwest "has the best trajectory at getting back to pre-crisis earnings and cash flow in '23/24."

In addition to Southwest, Delta Air Lines  (DAL) - Get Report and American Airlines  (AAL) - Get Report were climbing more than 9%.

Germany-based travel operator  (TUI) , which operates hotels and resorts under the Robinson, Riu, TUI Blue, Blue Diamond, and TUI Magic Life brands, helped kick off the rally by saying it planned to resume overseas flights and holidays by the end of June.

TUI American depositary receipts were recently more than 50% higher.

Governments were also easing travel bans. Spain said it intended to lift a two-week quarantine on foreign visitors from July 1, while Germany said recently it would lift its border controls on June 15.

Deutsche Lufthansa AG  (DLAKY)  ADRs advanced more than 14% after the German government said it would offer the airline a $9 billion bailout deal.

Various U.S. states have begun easing their social-distancing restrictions.

Transportation Security Administration data showed that more than 340,000 travelers went through TSA checkpoints Monday. While this is down sharply from roughly 2.5 million a year earlier, the numbers have been increasing.

Airlines have been battered by the economic shutdown resulting from the coronavirus pandemic. 

Earlier this month, the industry trade group Airlines for America said U.S. airlines were collectively burning more than $10 billion in cash a month and averaging fewer than two dozen passengers per domestic flight due to the coronavirus outbreak.