Why Current Airline Stock Prices Could Be Attractive?
The airline industry has taken a nose-dive since the wake of the coronavirus. The top four major U.S. airlines are losing a combined $100 billion dollars per day as their fleets rests on the tarmac.
We are in truly unprecedented times and all of the airlines are in trouble. Can these airlines weather the situation. That is the big question. We don't know how the long the current situation will last. Will the U.S. be on lockdown for a few more weeks? months? Years?
Airlines are in a different position than a decade ago. Despite a round of bankruptcies-including American Airlines filing in 2011-and a few actually going out of business, the industry has fundamentally transformed.
Over time, with planes becoming more compacted, fuel efficient, better revenue management, more efficient route scheduling, airlines are in a better position.
Another activity that is helping the airline industry at the moment is the free fall in oil prices. There is much more supply than demand in oil and that sets the stage to lower prices. And as Americans begin to get back to normalcy and dying to get out of the house and the demand for air travel increases, lower oil prices will be a good thing .
When the coronavirus began to take its toll on the U.S. stock markets around February 19, 2020, most companies stock prices plummeted. For example, Delta Airlines nose-dived from $58.50 to $22.78 as of yesterday's market close, Spirit Airlines from $42.59 to $12.66, American Airlines, from $28.33 to $11.07, and finally Southwest Airlines, from $57.11 to $30.68.
What we really don't know is how long the impact of the coronavirus will be felt in the airline industry (or the global economy around the world). Most of these major airlines are still in trouble right now but can you imagine if we get a small glimpse of hope and things get back to somewhat normal (that may take a while). Hey, just maybe their stocks will improve also.