COVID-19 Sector Impacts: Airlines

China declared its first reported case of COVID-19 in January. The first diagnosis outside of Asia was announced February 24. Since that time, global asset markets have entered a period of turmoil, with year-to-date losses of the S&P 500 at 25.8% through March 18.

Unprecedented moves by central banks and governments have done little to quell investor fears. How much longer will the pandemic last, and how much further will stocks fall, before markets can start to return to normal?

What sectors have been the hardest hit by this crisis, and which will have the most to gain from a return to normal?

Airlines

While the overall trend is down, some of the harder hit sectors include airline stocks, which are down 56.6% through March 18. Travel restrictions and reduced business activity have forced nearly all airlines to cut routes as the demand for travel falls precipitously.

Airlines are currently asking for nearly $60 billion in aid, including $29 billion in direct assistance. When travelers return to the skies, which airlines will be in the best shape to benefit?

A return to a ‘new’ normal

At some point, the spread of COVID-19 will slow, self-quarantines will end, and investors will return to markets. But what will that look like?

The number of new cases in China has continued to decrease, and no new cases were reported for the first time on March 19. If we turn to China for guidance on how companies are moving forward after the virus, we are starting to see a slow return to activity. China Airlines has seen a resumption of travel after it was dramatically reduced in February, as the peak of the crisis passed in March.

China’s supply chain has also started to come back online, and retailers are beginning to see foot traffic again. Apple has reopened 42 stores. Over the next few weeks, all eyes will be on China to determine the full impact of the virus and how their economy recovers.

Markets are in constant flux, and the only thing certain is continued uncertainty. Follow for continued updates, and if you enjoyed this analysis, and would like to be more involved in the market, come visit quantumeconomics.io.

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