With Thanksgiving behind us and the winter season approaching, the CDC has been offering its same statement: “Postponing travel and staying home is the best way to protect yourself and others from COVID-19.” During the holiday of Thanksgiving, according to Expedia, traveling statistics demonstrate that 60% of Americans will not travel but those who will, will travel in the range of 250 miles from home, whereas last year, the average was 450 miles from home. According to Investors, “United [Airlines] recently said it lost $1.8 billion in the third quarter due to plunging air travel because of the coronavirus pandemic,” while “it notched a $1 billion profit in the same stanza last year.”
Similarly, according to CNBC, United Airline “bookings were slowing” and “cancellations were on the rise,” in similar status to Southwest Airlines. This information offers “bad news for airlines that were hoping for a rebound in demand” during the holiday season. It is noted that air travel is approximately a third of the levels last year.
Vaccines
With vaccines rapidly approaching, another question challenges the economic market as well as the road to recovery: Who will receive the vaccine first, according to Boris Schollesberg, who is a director at BK Asset Management. The United Airlines Holdings Inc. has started to charter flights for doses of BioNtech SE’s BNTX’s and Pfizer Inc.’s PFE’s COVID-19 vaccine on November 27 for distribution, if shots are approved by regulators, such as the Food and Drug Administration (FDA), according to the Wall Street Journal. The Federal Aviation Administration (FAA) stated in a letter that “the FAA today [on November 24, 2020] is supporting the first mass air shipment of a vaccine” and “is working with manufacturers, air carriers, and airport authorities to provide guidance on implementing current regulatory requirements for safely transporting large quantities of dry ice in air cargo,” including the testing of thermal packaging.
With Pfizer requesting emergency use authorization, distribution might start around the date of mid-December and with airlines assisting with this, the arrival of vaccines have offered a better economic future for them as they play a key role in the distribution of vaccines.
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Boeing 737 MAX
In addition, the FAA has signed an order on 11/18/2020 in which the Boeing 737 MAX will return to commercial service after a series of safety issues. The shares of United Airlines have risen due to this prominent decision and according to United.com, “United expects to begin flying the 737 MAX in the first quarter next year.” Though, some other airlines have suffered due to the fact that they had Max 8 jets, which were the ones involved in previous fatal crashes.
Road to Recovery
The road to recovery for aviation will consist of many challenges as we dive deeper into the pandemic, making aviation even more vulnerable. According to Schlossberg, airline companies are “actually very vulnerable to a sell-off as they see very, very little engagement from the consumer.” A sell-off is the rapid sale of a security. Security is a financial instrument, or assets (item/s of value or future benefit) that hold financial value. Due to drastic decline in value of security, shareholders, or stockholders, might sell shares. Thus, this concept is thoroughly relevant to the relationship between the consumer and the company and with many sellers, and few buyers, sell-offs will ultimately damage a company’s reputation.
With travel during the pandemic decreasing, “the behavior of the customer” affects the ability for companies to perform well. If there is a larger number of customers than sellers, which means more demand, the company will positively benefit, while in the case of airlines, there are more sellers than buyers, in which the company might suffer, though also in accordance with differing factors.
United Airlines now ranks No. 28 on IBD's 197 industry groups. Previously, United Airlines ranked No. 65 in October and No.180 in August during the pandemic, though it was No. 5 in mid-September 2019. According to Investors.com, United Airlines “needs to regain at least its 50-day moving average and form a base of support before investors should consider it.” In addition, companies that have Earnings Per Share (EPS) Ratings of 80 or better have the best chance of success.” United Airlines has a EPS Rating of 7, in accordance with the impact on air travel from the COVID-19 pandemic. However, it is expected that the EPS will continue to fall this year.
Thus, the airline company, United Airlines, is on a path to recovery, due to the chartering of vaccines and authorization of the Boeing 737 MAX. However, the future still remains questionable, as with the many factors that will ultimately affect the financial market of aviation.
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