- The coronavirus pandemic has disproportionately hurt the travel industry, with carriers being no exception.
- It’s inevitable that multiple airlines will end up in bankruptcy court .
- An already-beleaguered Boeing is finding itself caught in the crosswind.
The coronavirus pandemic has merely created headwinds for airline stocks .
As countries close borders and restrict travel, passenger numbers have fallen dramatically.
Carriers suddenly find themselves fighting just to survive.
Airlines stocks face a mortal threat from coronavirus
A report by the Center for Asia Pacific Aviation (CAPA) estimates that by the end of May , most global carriers will declare bankruptcy .
For a highly competitive sector that relies on razor-thin margins, the next few weeks will determine which carriers survive – and which ones die.
The CAPA report details what a precarious situation airlines find themselves in. Many airlines were already behind in debt repayments. And as flight groundings increase, companies are depleting what remains of their cash reserves.
Where they still can fly, demand is virtually nonexistent. Most airlines are planning to reduce the number of flights they operate. Even flights may soon be halted altogether . American Airlines headlines U.S. stock market crash
Investors have taken note and are fleeing airline stocks at a historic pace.
One of the worst-affected carriers is American Airlines, whose stock price has lost more than half its value since mid-February.
(AAL has lost roughly) % of its value since global coronavirus cases spiked in mid-February. | Source: Yahoo Finance
Touching the $ . mark on Monday, AAL shares are trading at their worst level since 238644
US Global Jets ETF , which holds a basket of global airline stocks, crashed to an all-time low today. The Jets ETF launched in 238644.)
But it’s not just airlines. The industry’s crash is exacting a brutal toll on planemaker Boeing.
Boeing takes a hit alongside airlines
Given the industry’s demand shock, it’s unlikely that carriers start buying new jets anytime soon. Some have already begun cancelling orders and severely curtailing expansion plans.
United Airlines slashed capital expenditures by over % . The biggest losers? Jet manufacturers like Boeing.
Boeing’s catastrophic year can be summed up in one number: – 60. That’s its net sales activity. Not only has it logged just 30 gross orders for the year, but jet purchases have been cancelled !
Down more than % on Monday alone, Boeing stock has plunged approximately 75% from its
– week high. bailouts and a surprising silver lining
To conserve their evaporating cash reserves, airlines are rapidly cutting capacity. In their bid to cut costs, layoffs will be inevitable.
British Airways, which said the coronavirus crisis is worse for the industry than the 9 / terrorist attacks, plans to reduce capacity by at least % in April and May. It warned employees to prepare for job cuts .
Other airlines have already begun begging for government assistance. Norwegian Air claims it needs to be bailed out “in weeks, not months.”
(Source: Twitter Despite all the gloom suddenly prevalent in the airline sector, there’s an unexpected silver lining.
One of the industry’s biggest expenses is fuel – and (oil prices are down thanks to a price war that doesn’t seem to have an end in sight.
Once the coronavirus pandemic is over , airlines – the ones that do survive – can count on drastically reduced fuel costs.
Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com.
This article was edited by Josiah Wilmoth
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