The coronavirus epidemic has obviously been bad for airlines. Warnings from health officials, capacity cuts and more lenient cancellation policies have raised concerns among investors. But how bad things will go – and when they will improve – is still pending.
Cowen analyst Helane Becker took a swing looking past. He compared the coronavirus to the demand for shock for what followed the 9/11 terrorist attacks: a sudden drop caused by fear rather than economic factors.
“The period 2001/2002, when the events of 11 September caused a serious drop in the demand for air travel, shows a trend similar to that of the initial downward peak that the industry is now experiencing with travel restrictions and fear of pressure on demand / reservations, “she wrote.
At the time, US carriers experienced 12 consecutive months of year-on-year decline in boarding. It took 22 consecutive months of year-over-year growth to reach pre-9/11 levels. In comparison, the financial crisis and recession led to year-over-year traffic declines for 18 months, which took two years to recover.
Becker thinks that a coronavirus recovery could come faster, citing a rebound already seen in China’s air travel. Since China was the source of the epidemic and has taken unified measures to control it, it is now ahead of the rest of the world.
However, states airlines with increased exposure to international flights and corporate travel – like
Group (ticker: AAL),
(UAL): More complex recovery may occur.
“In the United States, we expect a V-shaped pickup in leisure travel and a U-shaped pickup in corporate travel as employers resume conferences and move travel,” he wrote.
Airline stocks fell on Wednesday, as did the
Dow Jones Industrial Average
entered the territory of the bear market.