Delta Airlines (DAL) reported Q1 2022 earnings yesterday and the stock ended the day up more than 6% on a smaller-than-expected loss and a forecast of first-ever quarterly profit since pre-pandemic era. CEO Ed Bastian also stated that during the past quarter, they saw a record-high number of travelers, and that's not compared to pandemic or anything, but in the company's history. This was great news for the stock specifically but to the airlines sector overall, as many airline stocks traded well. One could also argue that this positive commentary was uplifting for the whole market, as the broader market ended up.

We don't own any airline stocks because we do not see a strong fundamental case, or as strong as other investments that we currently own. We don't see any substantial growth for the airline business, as we view the total addressable market (TAM) is limited, with also a lot of competitors. During the pandemic, the earnings have been zero because nobody was flying, and one argues that as the world reopens, people will fly again. Sure, the earnings will improve, but it will max out once the airline can meet travel demands. This is in contrast to our investment thesis in Ford, which is an electric vehicle maker, as the market for this type of vehicle is only in its infancy; also, Ford is integrating smart products and subscription services that will drive revenue growth. Simply put, the airlines would have to tap into space travel for us to start considering them as an investment, because then they would be getting into a new market and new opportunities for growth.

Another factor why we're not directly involved with airlines is because it's very volatile to unpredictable, sometimes natural causes. The pandemic was one example. We're now relatively free of travel restrictions, but what if tomorrow there's a new vaccine-resistant strain that sends the world into lockdowns again. What if tomorrow, Putin declares war with the West and the entire world's airspace becomes unflyable. The airlines would be the first to get hit.

But what if we want to still be involved in the travel/ re-opening/ new-normal investment thesis. Delta's CEO said "Over the last five weeks we've experienced the highest level of sales and booking activity at any time in our history." Think about where are the customers going? Think about who's making the planes that they are flying on?

The first question gets us to Disney (DIS), a travel-entertainment stock that has been hit endlessly since the middle of last year due to weak growth in its streaming Disney+ service. If you take a look at the chart of Disney's stock, it has effectively negated all the gains that it made in November-December of 2020, when Disney+ became a thing to investors. But Disney+ is not dead. Travel will be picking up. When you're buying Disney here, you're getting two things (travel + streaming) for the price of one (travel).

The second question gets us to Boeing (BA), a travel-industrial name that has also been hammered since the middle of last year due to the company's poor execution. The stock is trading in the $180, a price it has not seen since November 2020. This was before a successful roll-out of Covid-vaccines. This was before a certain future of a pandemic transitioning to epidemic or ultimately endemic. This was before news of Boeing 737Max approval in China. Lastly, this was before the company expected to turn cash flow-positive, which is expected in 2022. The stock price of Boeing has negated all of the good news that has come out during the past 1.5 years. If you take the rise in travel demands seriously, you must ask where are the airlines getting the new planes to meet the demands? The answer is either Boeing or Airbus, which the latter is maxed-out of capacity and will not take any orders for the coming years. 

Bottom line, positive commentary about travel demands from Delta Airlines today ignited hope in the market. We don't want to participate in the airlines because they don't have a strong investment thesis. We like the destination that airlines are taking passengers to - Disney (DIS). We like how the airlines are transporting their passengers - Boeing (BA).