Throughout the early days of Covid, daily updates on the number of passengers screened by the TSA at US airports became a key gauge of mobility trends in the US. Early on, daily passenger counts cratered from a range of well over 2 million to less than 125,000 at the height of the lockdowns. From the summer of 2020 to early 2021, passenger traffic improved, but it wasn’t until the summer of 2021 that activity levels approached anything even close to normal. By last summer, passenger traffic had largely returned to its pre-Covid range, and this summer, we’ve seen traffic trends regularly exceed their pre-Covid range. Just yesterday, the TSA screened 3,013,413 passengers which was not only a record high but also the first time that more than three million passengers passed through TSA security checkpoints in a single day.

While air travel trends have returned to and even exceeded their normal historical range, airline stocks have a way to go before recovering. In the year leading up to the Covid outbreak, the US Global Jets ETF (JETS) ETF traded in a range of the high $20s to low $30s, and as air travel cratered so did the price of airline stocks. As air travel trends started to improve, airline stocks followed suit. As shown in the chart below, from the start of 2019 through the end of 2021, TSA passenger traffic and airline stocks tracked each other closely with a correlation of +0.84.From 2022 on, the relationship between the two ended. While passenger traffic steadily improved, airline stocks moved in the other direction with a correlation of -0.16, and the JETS ETF remains around 40% below its pre-Covid high.

Early in the pandemic, investors and traders simply bid up the airline stocks at any signs of improvement in air travel trends. As the industry started to recover, the focus shifted to the massive dilution and debt these companies were forced to incur to make it to the other side. That coupled with the most aggressive Fed tightening cycle in over a generation only exacerbated those concerns.

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