As airlines struggle during the on-going pandemic, should investors see this as a crisis or an opportunity?
At the beginning of 2020, COVID-19 started to spread around the world. As an increasing number of countries began reporting cases, governments started to close their borders and heavily restrict movement within their countries.
Many airlines, preparing for the usual influx of bookings towards the Spring and Summer, now faced mass cancellations and were forced to deactivate numerous routes. Airplane manufacturers were also in dire straits, as orders were delayed or cancelled and manufacturing was brought to a halt due to lockdowns.
Airline-related stocks registered double-digit losses, some plummeting to prices not seen in several years. While this could be seen as a crisis, some investors see this as an opportunity.
Taking Flight Again
As Q1 of 2020 ended, the beginning of a recovery was seen in global markets. After the horrific declines during the first three months of the year, April proved to be the best month on Wall Street in more than 30 years, as many companies began to recoup some of their losses suffered due to the pandemic.
The crisis is still far from over, and even as many countries around the world begin to remove lockdown measures, it will still take some time until the airline industry, and the industries related to it, recover completely. Unfortunately, it is also very possible that several companies may go as far as shutting down or going bankrupt.
But the sector is strong, containing some of the largest, most well-established players in the travel and heavy industry segments. As badly as this crisis may have impacted them, there are companies that have weathered the storm and are poised to regain their greatness.
One of the most familiar companies in the aerospace industry, Boeing’s 100+ years of history show that it has endured the hardest financial crises in modern history. Initially, it was widely believed that the planemaker would seek government aid. However, in late April, Boeing announced that it had independently raised a mammoth $25 billion bond from investors, which would help it maintain stability despite the coronavirus crisis. At the same time, Boeing’s main rival, French company Airbus, also reported losses of $515 million for Q1, 2020 and may seek government aid.
While both companies suffered massive losses, they are most likely here to stay and may resume their previous size and profitability when the crisis is over.
Perhaps the heaviest toll of all during the COVID-19 pandemic was paid by airlines. These behemoths have massive operational costs, even without flying a single plane. It is no wonder, then,