Airline Stocks Are Tumbling Despite a $50bn Relief Package

Airline stocks are struggling to gain investors’ confidence amid ongoing uncertainty despite a financial package that includes $25bn in cash grants to cover employees’ salaries and $25bn in loans against equity stakes.

The collapse of travel demand and an extension of lockdowns has been adding to the recent large swings seen in airline stocks.

Airline stocks are already reversing the gains that they generated last week.

The American Airlines stock price plunged to $12, slightly up from a 52-weeks low of $10 a share that it hit early last week.

American Airlines is requesting $12bn in government aid to cover employees’ salaries and benefits for the next six months.

$AAL - American Airlines Share Price
$AAL – American Airlines Share Price

American is unlikely to survive the next couple of months without government aid.

Bernstein indicated that American and United Airlines don’t have enough cash to survive more than two months and they could also offer equity stake for government loans.

President Trump has extended the lockdown until at least the end of April as infection rates and death tolls continue to surpass government expectations.

The President now expects 100,000 to 200,000 deaths due to coronavirus across the United States.

The situation in European countries has also been worsening day by day and governments are using law enforcement agencies to keep people in their homes.

Market reports are suggesting airline companies will post 90% year over year revenue declines for April and May.

The outlook for the rest of the year is also bleak as reports are indicating big losses and debt loads.

American Airlines has announced the reduction of 60% of its April capacity and 80% of its May capacity due to the sharp drop in demand. Threats of running out of cash have already forced U.S. carriers to borrow $12.5bn in the last month alone.



Leave a Reply

Your email address will not be published. Required fields are marked *