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by Seth Parker on May 5th, 2020

Coronavirus kills the airline industry: what about global airline stocks?

The losses of passenger airlines during the coronavirus period have reached alarming proportions. At the moment, it is believed that the level of losses may exceed $250 billion. In this case, experts are considering two options for the development of events. An optimistic forecast indicates the resumption of passenger flights at the end of May 2020. In this case, the losses will remain at the level of 160-218 billion dollars. The pessimistic scenario assumes a gradual resumption of flights, which will begin only in the 3rd quarter of this year.

If the solution to the problem situation drags on, the number of losses will exceed $ 250 billion, according to financial analysts.

In addition, experts predict a significant increase in airfare after the removal of strict quarantine measures. Most likely, airlines will raise the cost by 2 times. It is expected that passengers will have to adhere to the rules of social distance, so the aircraft will not be able to fill completely.

Airlines massively lay off workers

The International Air Transport Association reports that more than 25 million airline jobs are at risk. Some analysts believe that the restoration of the aviation industry will take several years. During the epidemic, airlines are forced to stop passenger traffic, as a result of which many of them are already on the verge of bankruptcy. Representatives of the association predict that a return to normal operation is possible in months or even years.

In this situation, financial losses threaten not only people in business but also ordinary workers who previously served the air transport sector. Due to the massive spread of the coronavirus epidemic, thousands of people will lose their jobs. At the beginning of the year, aviation companies could count on a reserve fund, but this money is only enough for a couple of months.

If we remember history, large airlines are quickly recovering from economic crises. For example, the terrorist attack of September 11, 2001, dealt a serious blow to business, but returning to normal activities did not take much time. Now the situation is developing a little differently because panic among passengers is adding to the global economic downturn. Having survived a pandemic, people will be wary of flights for a long time.

How do airlines get out of the situation?

Aviation companies are going through a difficult period, and each of them is forced to make important decisions:

  • The European giant Airbus is one of the largest representatives of this industry. In the period from January to March this year, the business recorded a loss of 480 million euros. The pandemic sharply reduced the number of orders and planned deliveries are massively cancelled. Airbus described to its workers a rather gloomy picture. The head of business turned to thousands of employees, warning of layoffs. At the same time, the decline in production was not the worst-case scenario. If company representatives do not take urgent measures, then the business will quickly go bankrupt. Over the past 6 months, Airbus stock quotes have fallen almost twofold (from 130 to 60 euros apiece).
  • American aircraft manufacturer Boeing is working on a financing package. In an effort to strengthen the balance against the backdrop of falling demand, the company is considering a large-scale bond issue. Boeing Co will offer securities to potential investors should market conditions prove favourable. At the moment, exact dates and proposals have not been determined. The corporation plans to raise more than $10 billion. Besides, company representatives are considering the possibility of seeking help from the US Treasury Department.
  • The Russian company Aeroflot plans to issue vouchers instead of money. So the carrier will pay off those customers whose flights were cancelled due to the epidemic. The airline offers vouchers for the amount of the return and a bonus in the form of a discount. The client can use these funds for 3 years. It is also noted that compensation will be received not only by those passengers whose flights were cancelled. Vouchers will be issued to people who made an independent decision to cancel the trip due to a difficult epidemiological situation. For six months, Aeroflot quotes fell from 105 to 76 rubles.

Conclusion

The novel coronavirus has severely disrupted the normal operation of the world and various fields of business. Thus, large aviation companies plan to minimize the resulting damage. For the most part, the shares of aviation companies have fallen sharply, but a trader can make a profit regardless of the direction of the courses. Many market participants have postponed leave during the pandemic. They are forced to stay home in anticipation of the recovery of the industry and improvement of the epidemiological situation, but this does not prevent them from successfully trading and making money in such difficult times for everyone.

By Seth Parker

Seth is a professional trader with over 10 years of experience. He specializes in the technical analysis. His main focus is on the pure Price Action. In his trading, Seth used the trends, supports and resistances and technical formations. Always, the most important thing in his strategy is the money management. Seth reached a proficiency in trading and for the past three years is doing that for a living enjoying the sun and lovely beaches of the Spanish coast.

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