Since the coronavirus disease struck the world, the stock markets have not been doing well. Particularly, airline stocks have been declining significantly. However, a few weeks before 12 June 2020, the airline stocks were quite improving. David Portnoy had made some gains off the airline stocks criticizing Warren Buffett for selling his airline stock in fear of the coronavirus uncertainty. The United States President Donald Trump condemned Warren Buffett for selling Berkshire Hathaway’s airline stocks. Little did these investors know that they had made the wrong option for not following Warren Buffett’s lead in the airline stocks.
Reasons for the Airline Stocks Declining
Before the airline stocks started going down, the stocks in the US, Hong Kong, China, and Europe witnessed gains in early June. However, the coronavirus created fear of investment and a lot of uncertainty in the market. Those who were wise like Warren Buffett saw the blow and had already sold off their stocks. In a case like American Airlines, they are using millions of dollars in cash in a single day to compensate costs such as salaries and leases for aircraft. Some aircraft companies are even planning in laying off pilots and workers because borders are not open and operations are not back to normal.
Airlines are now going batship crazy suing against public health interest. Airlines now pro epidemic? Cuz that’s the optics. https://t.co/440iIGd65s
— Eric Feigl-Ding (@DrEricDing) June 12, 2020
Even before these airline stocks started going down as they were, financial experts had already seen the vulnerability of these stocks early in March due to the financial crisis. Currently, the airlines are reducing expenses and increasing reserves to last throughout the crisis. This situation is greatly sinking the confidence of investors and resulting in the plunging of the airline stocks.
Examples Of Airline Stock that Are Going Down
Investors in the United States airline stocks are experiencing a dive by double numbers. United Airlines is 16.11% down, American Airlines is 15.51% down and Delta Airlines is 14.03% down.
Mark Manduca Opinion on the Airline Stock Plunge
He is the managing director of Citi. Mark says that due to this current pandemic the airline stocks are going down and this will pose a challenge in making profits to the airline industry in the future. In the long run, reducing profits bring danger to the airline’s companies in that a small reduction in passengers will challenge the profit margins.
“It is not a crazy supposition to assume that the airline industry will struggle actually to get profitable again.”
The views and problems Mark pointed out are the same as what Warren Buffett also gave as warnings. Warren Buffett had given a warning that the airlines are changing and that he sees unhealthy progress in the airline segment.
JPMorgan Chase Re-evaluates Its Decision On the Airline Stock
As the coronavirus cases are increasing in the US and the Trump administration planning to reopen the economy, financial institutions have to be on the look-out. JPMorgan, an investment banking company, seems to be out of the airline stock race. It would be wiser if other institutions followed that trend since the airline stocks are still not doing well.
Jamie Baker, a financial analyst, warned customers that the increase in prices of the airline stock will not last long. Indeed, this is just what is happening currently in the airline stock market- a plunge.
Baker warned that:
“We do not believe the current pace of equity ascent can be potentially maintained for much longer.”
What Is Next For The Airline Companies?
Because of the prevailing circumstances, people are asking whether things will return to normalcy. Executives of various airline firms are not sure of the recovery of these companies. Doug Parker, the CEO of American Airlines, cannot forecast the demand for resuming flights at the peak of next year. The airline industry is at halt currently.
More:
- The Stock Market Rally Might Hit a Dead End
- David Portnoy Goes Off On Warren Buffett Over The Airline Stocks
