Airlines are seeing a heavy reduction in the number of customers that patronize them, leading to a crash in their stocks.
The coronavirus outbreak has seriously impacted a few industries, especially in the last few weeks. Of them all, airlines have probably been hit the hardest. Because of the nature of the outbreak, it’s near impossible for any of these companies to have prepared for it as much as needed. Around the world, many airlines have stocks that have plunged and are still taking a beating. However, this might give investors and traders a good opportunity to buy in.
Airlines Stocks Affected
In many cities and countries all over the world, governments have placed several restrictions to try to contain the spread. Many businesses are on lockdown and others are asking their staff to work remotely. Recently, Google recommended that all North American employees work remotely, joining companies making similar moves. In addition, many events where a large number of people will have gathered are canceled. Air travel, which is easily preferred especially over long distances, is no longer being patronized. This is simply because people are just not moving around anymore.
Because of a plunge in patronage, airline stocks have crashed significantly. United Airlines Holdings Inc. (NASDAQ: UAL) lost 24.85% yesterday, closing at $37.08. UAL has lost over 53% in the last month and has shed close to 58% in 2020.
For American Airlines Group Inc. (NASDAQ: AAL), it closed at $13.45 yesterday after losing 17.28%. It has also lost close to 54% in the last month and more than 53% year-to-date (YTD).
The market conditions have also not spared Delta Airlines Inc. which lost 21% yesterday, closing at $33.71. With a 50% loss over the last month and more than 42% YTD losses, Delta airlines isn’t doing much better.
These airlines have stocks that are bleeding and might do so continuously.
How Airlines Are Bracing The Plunge
As soon as things began to get worse, airlines began taking some action to reduce losses on their stocks as much as possible. Some of them have begun cutting costs and suspending large expenses until further notice. In addition, many airlines that planned to employ more staff have also discarded said plans.
Also, and surprisingly enough, the current plunge oil prices might be a significant boost for these airlines. A lot of them are now very likely to save money from reduced costs of oil. If oil prices don’t return to recent prices, airlines might have a field day.
Another point is that some of these companies reportedly have more than enough in liquid assets, to keep them running for a while. According to a Yahoo Finance report, Delta Airlines has $20 billion in debt-free assets, with $5 billion liquidity projected for the end of 2020. American Airlines has over $7.3 billion with United Airlines at $8 billion.
All of these could help stocks of these airlines control their losses for a while. Analysts think that while there might be some turmoil at the moment, these stocks are still generally safe in the long run.