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Airline Stocks Plummet as Airline Industry Faces ‘Worst Year in History’

Stocks of major airline companies plunged for the third trading session in a row on Thursday. The drop resulted mostly from fears of a second coronavirus wave. Despite the slow traveling recovery, the industry is still vulnerable. If the revenue of airline companies does not continue to go upward in the upcoming months, some of them will face liquidity issues.

Shares of United Airlines Holdings Inc (NASDAQ: UAL) fell by 16.11% to $33.32. American Airlines Group Inc (NASDAQ: AAL) stock lost 15.51% to close at $14.38. Further, shares of Alaska Air Group Inc (NYSE: ALK) ended 14.2% down at $35.59, Spirit Airlines Incorporated (NYSE: SAVE) stock tanked by 17.41% to $16.08 per share. Next, Delta Air Lines Inc (NYSE: DAL) stock plunged by 14.03% to close at $27.20, Hawaiian Holdings Inc (NASDAQ: HA) stock fell by 16.14% to $14.96 at the close, and Allegiant Travel Company (NASDAQ: ALGT) shares lost 12.27% and ended at $106.97. 

However, today the majority of these stocks are in the green in the pre-market. For example, United Airlines stock is 12% up, at $37.59, while American Airlines stock is at $15.90 (+10.57%).

According to the International Air Transport Association (IATA), airlines worldwide are expected to lose $84.3 billion this year because of the COVID-19 pandemic. Therefore, 2020 may become “the worst year in the history of aviation”.

IATA’s Director General and CEO Alexandre de Juniac said:

“Financially, 2020 will go down as the worst year in the history of aviation. On average, every day of this year will add $230 million to industry losses. In total that’s a loss of $84.3 billion. It means that—based on an estimate of 2.2 billion passengers this year—airlines will lose $37.54 per passenger. That’s why government financial relief was and remains crucial as airlines burn through cash.”

Further, Juniac added:

“In 2021, losses are expected to be cut to $15.8 billion as revenues rise to $598 billion.”

Currently, travel restrictions are “slowly improving”. if all goes well and we steer clear of the second COVID-19 wave, travel demand will fully return and airline companies will roar back, with their stocks rebounding.

Alexandre de Juniac said:

“A key to the recovery is the universal implementation of the re-start measures agreed through the International Civil Aviation Organization (ICAO) to keep passengers and crew safe.”

But the risk still remains.

On Thursday, Europe’s largest carrier Deutsche Lufthansa AG (ETR: LHA) announced it would cut 22,000 full-time jobs, half in Germany, because of coronavirus. Besides, the company expects to have about 100 fewer aircraft after the crisis. By June 22, it hopes to agree on the measures with unions.

Lufthansa labour director Michael Niggemann said:

“Without a significant reduction in personnel costs during the crisis, we will miss the opportunity of a better restart from the crisis and risk that the Lufthansa Group will emerge from the crisis significantly weakened.”

Following the announcement, Lufthansa stock fell from 11.07 EUR to around 10 EUR. However, today the stock is 3.69% up.

Airline Stocks Plummet as Airline Industry Faces ‘Worst Year in History’

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