Headline – Airline Stocks are Under Pressure from Ebola Uncertainties
As first reported by Experience the Skies 12 days ago, US airline stocks continue to experience downward momentum.
The following is a chart that shows the severity of the drops between the major US airlines and the bigger market.:
In the last 5 days, Dow Jones and Nasdaq only dropped 3.95% and 5.40% respectively. However, major US stocks have dropped anywhere from 4.34% (Alaska Airlines) to 20.12% (American Airlines).
Given it is a national holiday in Canada, we will report how the Air Canada and Westjet reacted to rumoured cases in Ottawa and Belleville tomorrow. As of closing on Friday (October 10, 2014), both stocks are down over 8% over the past 5 trading days versus the market at 3.8%.
Update for October 14, 2014 – Air Canada is off its low of great than 15% and is down about 11.8% in midday trading in Toronto. This is more than 200% more than the S&P TSX loss of 4.25%. Noted that Westjet is not down as it has very little international operations.
With additional cases reported outside of Africa, worldwide airlines will continue to experience uncertainty. This might drive their stocks to go down in the short run and may not be countered by lower oil prices and good quarterly performance. However, the stocks would go back up quickly if the virus is contained. The downward trend should be limited to those with more international than local exposure.
In the long run, if the virus is not contained and it spreads into major cities, air travel would be restricted. This might significantly impact airlines’ financial performance in the future. Given the steps taken to contain the virus thus far, this may be not be a major concern currently.