The Market’s Fear of Flying ✈️

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The Market’s Fear of Flying

Unpaid leave for crew members, Italian bookings “collapsing to near zero,” and half of all planes empty due to passenger no-shows. The coronavirus outbreak has hit airlines and travel head-on.

Director-General on-high at the International Air Transport Association (IATA), Alexandre de Juniac, says “these turn of events as a result of COVID-19 are almost without precedent.” It’s tough to cut capacity (available seats) after you’ve made the investments to increase them, and when systemic economic busts brew, airlines are always the first to go.

It’s bad, but some think the market’s overcooked it still. Southwest has done well to lose only 20%. United Continental has lost a third of its value, and American Airlines is down almost half. Domestic markets would need obliterating to justify those prices, especially with depressed Brent Crude prices making jet fuel cheaper right now.

Air travel rebounding is one of the inviolate laws of nature; people need to get places. The International Air Transport Association (IATA) has explicitly said airlines can recover by the summer or early fall, and that’s great and all, but don’t wait.

Stock prices always front-run fate. Expectations of the future drive traders’ present-day motivations to buy and sell. Granted, surprise contagions and containments are capable of anything in the short-term. But you get paid for making the call now that everyone else will make tomorrow! What will it be?

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