The Extreme Distress of Airline Stocks as Shown in Three Charts
The Extreme Distress of Airline Stocks as Shown in Three Charts
(Bloomberg) -- Airlines are arguably among the hardest hit sectors in the global coronavirus pandemic as they are highly exposed to travel restrictions and have a strong correlation to the state of the overall economy.
Earlier this week, multiple U.S. airlines said they would cut capacity and withdrew their forecasts for the year. Then matters took a worse turn Wednesday when U.S. President Donald Trump said he will significantly restrict travel from Europe for the next 30 days. Meanwhile, cities and companies have continued to encourage working remotely and conferences, entertainment and sporting events have been shut down.
“At this point, we see duration as the biggest factor in a potential recovery versus intensity of the virus,” Cowen analyst Helane Becker wrote in a note, adding that there are similarities with the demand-shocked environment that followed the 9/11 terrorist attacks.
The pain facing airline stocks can be summed up in these three charts:
The nine-member S&P Supercomposite Airlines Industry Index has never before seen a plunge this deep and quick. As the chart shows, all the prior drops of comparable or bigger magnitude took much longer to play out. On Thursday, the index sank as much as 17%, its biggest intraday drop since September 2001. The top decliners were SkyWest, United, Hawaiian and Delta.
While airlines around the world are feeling the pain, shares of U.S. carriers are taking the biggest hit. The S&P Supercomposite Airlines index has fallen 43% over the past six months.
The widespread meltdown that is threatening to tip the world into an economic recession has also changed some familiar rules, at least for now. Jet fuel has historically been one of the biggest costs for the aviation industry, which is why airline stocks and oil prices are typically on an opposite trajectory - when oil goes up, airline shares suffer, and vice versa. However, the massive crash in oil since Saudi Arabia kicked off a price war last weekend hasn’t bolstered airline shares, suggesting uncertainties about the virus outbreak are now the biggest investor concern.
To contact the reporter on this story: Esha Dey in New York at edey@bloomberg.net
To contact the editors responsible for this story: Courtney Dentch at cdentch1@bloomberg.net, Catherine Larkin
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