COVID-19 Impact: Know why stock prices of airline companies take a toll during pandemics
New Delhi | Jagran Business Desk: Amid these testing times of coronavirus pandemic, when every sector is affected by this unprecedented crisis and has halted functioning of almost every activity, the airline industry is one of the worst-hit sectors affected by coronavirus-induced lockdowns.
The coronavirus crisis has also resulted in a sharp decline in stocks of airline companies as compared to other pandemics in the past decades.
Published in the ‘International Journal of Humanities and Social Science Invention’ (IJHSSI), the research was done by entrepreneur Paleesha Parwani and analyses the decline in airline stock prices during the past pandemics and their impact on the airline's stock price currently.
In the journal, Paleesha outlined the fluctuations in shares of American Airlines due to the Zika virus in 2015-16, and Delta Airlines due to the swine flu pandemic in 2009-10. Along with this, she has also analysed the time at which the stock of an airline stock declines, when it remains stable and for what reasons.
2009-10: How Delta Airlines' share price has been affected due to swine flu
In the journal, she noted that despite Swine Flu was less deadly than coronavirus it created panic in America and led to declining in the shares of Delta Airlines from USD 8 to USD 5.4 within a month. However, the stock prices remain steady between USD 5-6 but jumped again in the month of July as the havoc of swine flu was decreased. The share prices decreased again in October when swine flu infections started coming again. In 2009, Paleesha noted, that the stock prices of Delta Airlines remained in ‘Drop-Stay-Rise’ model.
2015-16: American Airlines
In 2015-16, the Zika Virus has scared the world, most prominently evident in the South American countries. Due to the pandemic, the stock prices of American Airlines decreased sharply within a month of the start of the pandemic, from nearly USD 55 to USD 30, but as soon as scientists identified that the virus is more dangerous to pregnant women only, the stock prices again increased rapidly and reached USD 45 by mid of 2016.
Comparison and conclusion from the current scenario
After analysis in this report, it has been found that the price fluctuations of the stock at the time of an epidemic depends on how contagious and how deadly that disease is. At the same time, the impact of its effects also causes the rise and fall in share prices. Stability also depends on these aspects after the fall in share prices.
Now, if we look at these things in the present time, we find that the decline in the shares of the airline companies has come to a certain level and stopped declining further, but this stability is of longer duration.
You can see that with the announcement of the reopening of the economy in the US, there was a slight rise in share prices. In such a situation, all these aspects are pointing to the fact that the price of the shares of the airline companies will be normal again soon.
There is a lot of similarity between Covid-19 and Swine Flu in terms of impact on share prices. Also,it seems that once the situation came back to normal, the stock prices of airline companies will go above their actual levels.
Posted By: Talib Khan