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[1 nhs] 25/2/2020 14:17

TRANSPORTATION
Airline Stocks Plunge as Coronavirus Spreads Globally. Not All Will Suffer the Fallout.
By Evie Liu
Updated Feb. 25, 2020 6:30 am ET / Original Feb. 25, 2020 4:41 am ET


After hundreds of flights to and from China were suspended following the coronavirus outbreak, major airlines are now facing damage on a global scale. Some are more exposed to the fallout than others.

Countries across multiple continents including South Korea, Japan, Italy and Iran have been hit. The virus’s sudden upsurge in the new regions has caused city lockdowns, travel warnings and border closures. The S&P 500 tumbled more than 3% on Monday following investors’ renewed realization that the COVID-19 epidemic is spreading out of China and hurting the global economy.

The travel industry, again, will be one of the hardest hit. The U.S. Global Jets exchange-traded fund (ticker: JETS), which invests in a group of major airlines including American Airlines (AAL), Delta Air Lines (DAL), and United Airlines (UAL), declined 5.9% on Monday. American Airlines, its second largest holding, plunged an even sharper 8.5%.

Over the weekend, the U.S. State Department elevated the travel advisory for South Korea and Japan from Level 1 to Level 2. Raymond James analyst Chris Meekins believes there is an increased risk of a Level 3 advisory in the near future. Mainland China is currently designated at Level 4, the highest level that suggests do not travel.


All airline companies will experience declining volume, but some will be impacted more than others. In a Monday note, Raymond James analyst Savanthi Syth dug into the regional exposure of major airlines in the U.S. and Europe. The analysis does not include airlines from China, Japan, and South Korea.

Deutsche Lufthansa (XE.LHA) and United Airlines have the largest share of passenger revenue–about 5% to 6%–from China and Hong Kong, according to Syth, followed by 2% at Delta and Air France-KLM (FR.AF), and 1% at American and International Consolidated Airlines Group (UK.IAG) that owns a number of European airlines including British Airways and Iberia. After the market close on Monday, United withdrew its full-year 2020 forecast, citing the impact of virus.

China’s neighboring countries Japan and South Korea, where coronavirus cases have sharply shot up over the past week, will also likely see dropping travel demand. Among the analyzed airlines, Hawaiian (HA) has the greatest exposure to the two countries, which account for roughly 21% of the company’s total passenger revenue. Other companies face much smaller impact–about 4% at Delta, Lufthansa, and United, 3% at Air France-KLM, and 1% at American and International Consolidated. If the damage widens to the whole Pacific region, however, Hawaiian will have 27% of its passenger revenue under threat, followed by Lufthansa at 16% and United at 11%.

Following the Pacific upsurge, Europe might be the next region to closely watch. Already, several towns in northern Italy have been locked down as roughly 200 people were infected with COVID-19 in the region and at least six have died.


Transatlantic travel accounts for 11%, 15%, and 17% of passenger revenue at American, Delta, and United, respectively. The first quarter usually sees below-the-average volume, while the second and third quarter of the year is typically the busiest season for travelers between North America and Europe, wrote Syth in the report. If the coronavirus impact continues into the spring and summer, the economic loss will be much bigger.

Specifically, about 3% to 7% of United’s transatlantic seats are dedicated to Italy-related routes, while American and Delta have higher exposure– with 6% to 13% and 6% to 10% of transatlantic seats dedicated to trips from and to the country, respectively. Among major European airlines, Ryanair (RYAAY) and easyJet (EJTTF) have the largest exposure to Italy-related routes at 20% and 12% of total seats, respectively, while Air France-KLM has the lowest exposure.

[m1k3y1] 25/2/2020 14:09

rya ticking up.

[1 nhs] 25/2/2020 14:02

So if your so confident, what do you think is happing today, with load factors across your airline ?

[m1k3y1] 25/2/2020 14:00

1 NHS.......as I suggested,better not to say anything rather than spout drivel.

[1 nhs] 25/2/2020 13:53

Alternatively just wait for the profit warning down the road

[montyhedge] 25/2/2020 13:53

Might be a chance to get rid of some greedy pilots.

[1 nhs] 25/2/2020 13:52

For those that are in doubt.

Ask IAG how much the load factor across all routes is falling a day.

1/2%

1%

2%

Then ask about forward bookings say, 8 plus weeks out.

Load factor fall

5%

10%

15%

20%

25%

50%

[spacedust] 25/2/2020 13:48

The positive recently is that the virus has been contained in China with lesser infection reports.

We can only hope this is emulated in the other infected countries.

Long term I can't see this lasting too long as it's a cold flu like virus and once warmer weather hits infect3d countries the virus should naturally be on the decline.

Time will tell.

Yes short on rbs and barcs. Short on IAG, glencore.

Longs now sold and staying put and watching.

Someone said 525p end of the week here which might be a very good call.

[montyhedge] 25/2/2020 13:41

Looks like Coronavirus in Tenerife now. Lol, I have stayed at that Hotel.

[m1k3y1] 25/2/2020 13:32

1 NHS.....if you don't know what you're talking about , it's probably best not to .

[1 nhs] 25/2/2020 13:28

You guys have no idea what’s hitting you in the face.

A No flying policy is now just about a certain.

[m1k3y1] 25/2/2020 13:13

spacedust....if you are shorting BARC you're doing well.

Scientists saying Chinese virus numbers are dropping now, which has to be positive.

On the negative side, there are no fever scans being implemented, for arriving passengers at LHR, which I find astounding.

They are being told to fill in forms and self isolate !
Don't we ever learn ?

80,000 tested positive worldwide
only 2700 deaths reported.

[jailbird] 25/2/2020 13:13

BA's biggest impact will be North American market...all quiet on that front so far.

[montyhedge] 25/2/2020 12:49

Figures Friday, should be good, but guidance going forward with Coronavirus must surely be uncertain.

[spacedust] 25/2/2020 12:37

Gold will go up but i don't think gold stocks will go up in tandem if this virus gets worse or continues in its current trajectory. This is because the demand for gold will simply not be there.

I'm selling my two gold and silver holding centamin and fresnillo respectively. I will not reinvest it until virus situation carms.

My shorts on banks, oil, mining and airlines will remain until April when I revisit

[m1k3y1] 25/2/2020 12:06

1 NHS........a prime example of panic and scaremongering !
What a load of nonsense.

[montyhedge] 25/2/2020 11:18

Problem this is not a buy the dip market, this will drag on and costa fortune.
Figures should be ok, but forward statement because of Coronavirus may not be so good.

Dividend yield 4.97% but of course take 19% off that for the spanish withholding tax.

[1 nhs] 25/2/2020 10:53

How many days before airlines are grounded.?

[1 nhs] 25/2/2020 10:51

1 NHS21 Feb '20 - 06:55 - 306 of 556 Edit

We are not far off forced sellers of ALL ASSETS (bar Gold for immediate delivery)

Paper gold, might as well be flushed down the toilet.

It’s about to turn on a sixpence.

Governments will furnish the world with yet more free cash, but they can’t control the mindset of the people, or the virus.

No one on this thread can say they have not, been given notice.

[dround87] 25/2/2020 10:27

There's a case for both sides. The long termers are normally correct over time but I think the case for buying is on the risky side of the fence as we stand. I'm not buying or selling now. Already exited my riskiest holdings. I'm drawing up a list of stocks I want and revisiting tommorow. IAG definitely on the list though and I am more or less certain it'll be up from here at some point in time.

[montyhedge] 25/2/2020 09:43

Cant believe shareprice holding.

[spacedust] 24/2/2020 18:07

I agree jailbird. When this virus situstion carms down airlines and other ftse 109 comoanies will recover and spike. I agree that tomorrow we could well see 525p. But if the virus continues in its current pace then welcome 450p. It wasn't 430p too long ago.

I'm only long on gold silver and pharma