The rapid spread of the new coronavirus is testing airlines and other travel companies with a risk that had been nearly unthinkable over the past decade: a broad decline in travel demand.
Air-travel demand had been growing at twice the pace of the global economy, but that bright spot is now at risk. U.S. airlines and other travel stocks have tumbled more than the broader market in this week’s rout as big conferences were canceled and fears grew that customers may just opt out of trips because of the spreading COVID-19 outbreak.
The issue caps a difficult year for airlines that have been grappling with the nearly yearlong grounding of the Boeing 737 Max. Carriers need demand to stay robust, particularly in the lucrative spring and summer travel seasons, and analysts are warning that that looks unlikely.
The NYSE Arca Airline Index, which tracks 16 carriers in North America and Latin America as well as European budget carrier Ryanair, is down 20% this week, putting it on pace for its biggest weekly percentage since October 2008 — during the last recession.
American Airlines shares fell 7.7% to $20.60, a new low since it started trading after its 2013 merger with US Airways. American has a higher debt load than its rivals, which has contributed to larger declines in stock price. United Airlines, which suspended its full-year guidance this week because of the virus, lost 2.4% to close at a two-year low, Delta fell 2.8% to end at a more than one-year low.
“Every day we think we could be near a bottom, and every day we are not,” Cowen airline analyst Helane Becker said in a research note.
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SOURCE: CNBC, Leslie Josephs