While the ongoing coronavirus (COVID-19) epidemic has brought a lot of attention to biotech and healthcare stocks, with many companies working on developing a drug or vaccine, other industries have been severely impacted by the outbreak. In particular, the airline industry has been one of the worst-hit industries, with many companies seeing a drastic decrease in traffic as Chinese air travel has drastically shrunk.
Many U.S. airlines have been adversely hit to the point where they are withdrawing their previous 2020 earnings targets. United Airlines (NYSE: UAL) saw its shares plunge over 7% today, likely in no small part to the company’s decision to withdraw its 2020 guidance over coronavirus uncertainties.
United Airlines went on to say that the coronavirus virtually eliminated all demand to travel to China, while other Pacific destinations have seen severe reductions in traffic as well. Other companies, like American Airlines (NYSE: AAL) have plunged significantly over the past couple of weeks as well. Shares of the company have fallen by 24% over the past two weeks.
Helane Becker, an analyst at Cowen, went on to say recently that the damage done to airline traffic will take a long time to recover, possibly not until 2021 before things return to normal. “We also noted in one of our Covid-19 updates that we expect China to lose a year of air traffic growth, and if people are afraid to travel outside of their own borders, the $30 billion impact to revenue that IATA cited last Thursday will be low,” she said, mentioning an early prediction made by the International Air Transport Association regarding the total impact of the coronavirus. “We believe that a complete recovery in traffic by the fourth quarter could be optimistic, and that it may take until the second quarter of 2021 at the earliest for traffic to return to normal.”
International airlines have also been hit as well. Air France, Deutsche Lufthansa, Ryanair, and easyJet have all seen their stock prices slide over the past few days as coronavirus fears continue to grow. Other travel-related companies, especially those operating cruise ships, have seen substantial declines as well. These include Carnival Corp, Norwegian Cruise Lines, Royal Caribbean Cruise, and others all seeing substantial double-digit declines in just this week alone.
There has been a fresh outbreak of cases in countries outside China, including Iran, South Korea, and Italy. Right now, the total number of confirmed coronavirus cases has reached 82,000, with the number of deaths sitting around 2,800. The total number of patients that have recovered from the condition is just under 33,000. Although a number of biotech companies are working on a treatment, it will likely be months before a treatment is ready.
United Airlines Company Profile
United Airlines operates more than 4,500 flights a day to five continents. United’s hubs include San Francisco, Chicago, Houston, Denver, Los Angeles, New York/Newark, and Washington, D.C. United operates more than 740 mainline aircraft. The airline is a member of the Star Alliance, which provides service to 192 countries via member airlines. In 2018, the carrier posted $41.3 billion in revenue, of which $37.7 billion was passenger revenue. – Warrior Trading News
