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The U.S. government has been shut down since October 1, with no end in sight. This is the first shutdown since 2019, when political gridlock over how to fund President Donald Trump’s border wall kept federal doors closed for a record 34 days. (Spoiler alert: No funding deal was reached, prompting Trump to reallocate Department of Defense funds to pay for the wall.)

This time, the pain is real for many everyday Americans. Hundreds of thousands of federal employees are either furloughed or working without pay. National parks are operating under limited access. Certain home loans aren’t getting to new homebuyers.  

And at airports across the country, travelers are encountering longer security lines, delayed flights and air traffic control shortages.

But for investors, especially those with an eye on airlines, the story might not be as grim as it looks on the surface.

Airline Stocks Soared During Last Shutdown

Let’s rewind to December 2018 and January 2019, when the government endured the longest shutdown in its history. Some 800,000 workers went without paychecks, and an estimated $3 billion were shaved off GDP in the fourth quarter of 2018, according to the Congressional Budget Office (CBO).

Yet Wall Street told a different story. An index of major airline stocks actually rose nearly 15%, outperforming the market. Southwest Airlines was the top performer, soaring close to 20%. Even though flights were delayed, investors understood that Americans weren’t going to stop flying.

Granted, inbound international travel to the U.S. is expected to decline about 6% this year. But domestic travel—the bread and butter of most U.S. carriers—is still growing nearly 2% year-over-year.

Business travel appears to be rebounding too. A recent Discover Global Network survey found that 74% of companies consider travel essential to their operations, and more than half plan to increase business travel in the coming year.

Airline Resilience

Since the shutdown began, air traffic controllers and TSA agents have been working without pay. Many are calling in sick, leading to longer lines and more flight disruptions. Controller shortages are affecting cities from Boston and Philadelphia to Houston and Dallas. Nashville International alone saw over 40,000 passengers delayed or stranded in a single weekend.

I think the takeaway here is that, even under stress, the commercial aviation system keeps running. I’ve been on flights during past shutdowns, and they’ve always been business-as-usual. Airlines have learned to operate through turbulence, be it a pandemic, fuel price spikes or political gridlock.

Delta Targeting High-Net Worth Customers

No carrier embodies this resilience better, perhaps, than Delta Air Lines. On its Q3 earnings call, Delta executives emphasized the airline’s focus on the premium traveler—the business class passenger, the frequent flyer, the high-net-worth leisure customer.

“We’re not trying to be everything to everyone,” Delta President Glen Hauenstein said. “Our exposure to a higher-income cohort has enhanced our relative position versus carriers catering to a more stressed, lower- to middle-income environment.”

That strategy appears to be paying off. Delta’s revenues associated with premiere seating jumped 9% year-over-year last quarter, handily outpacing growth in its main cabin. CEO Ed Bastian recently told CNBC that operations remain “smooth,” adding that it would take several more days of political stalemate before he expects any significant impact.

The World’s Fleet Expected to Double in Size by 2044

If we zoom out beyond Washington’s dysfunction, I believe the long-term picture for global aviation is nothing short of extraordinary.

According to Airbus’s Global Market Forecast, the world’s passenger and freighter fleet is expected to double over the next two decades, from 24,700 aircraft today to nearly 50,000 by 2044, adding more than 43,000. That growth will be fueled by the rise of the global middle class—an estimated 1.5 billion new travelers, primarily from Asia and the Middle East.

Even if mature markets like the U.S. grow at a slower pace, international and regional traffic flows are set to explode. Airbus forecasts annual passenger growth of 8.9% in India and 8.5% in emerging Asia.

People Will Continue to Travel

During the 2019 shutdown, airline revenues dipped slightly due to staffing and weather issues, but the industry quickly recovered. Even Southwest, which reported a $10–$15 million revenue hit, went on to post record first-quarter sales once the government reopened.

Today, airlines are even better equipped. Their balance sheets are stronger, their loyalty programs more profitable and their premium seats in higher demand than ever before. While the shutdown may temporarily impact operations, it could also create attractive entry points for long-term investors who recognize that air travel is a secular growth story.

If you’re of a certain age, you know that shutdowns come and go. Congress will eventually strike a deal, government workers will be paid and the headlines will move on. But people will keep flying because the desire to explore, connect and move freely is hardwired into human nature.

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