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Coronavirus Deals Fatal Blow to Airlines: Any Recovery in Sight?

The U.S. Airline industry has been facing a major crisis for more than two months now, which continues to deepen due to the prolonged impact of the coronavirus pandemic. Notably, the airline industry is the worst-hit as it had to deal with travel bans in the wake of lockdown measures implemented to curb the spread of the virus. This resulted in a dismal first-quarter performance for most of U.S.-based airline companies.

A Dismal Q1

Major U.S. airline companies saw staggering losses during the first quarter hit by the pandemic. American Airlines AAL reported a loss of $2.24 billion for the first quarter, its steepest loss since 2008. Delta Airlines DAL slipped into loss for the first time in five years of $534 million during the first quarter, down from a profit of $730 million reported a year ago.

Joining these names, United Airlines UAL witnessed massive first-quarter losses of $1.7 billion while Alaska Air Group ALK and Hawaiian Holdings HA also reported losses in first-quarter 2020 results.

Consequently, shares of the afore-mentioned airline stocks plunged significantly during the first quarter.


 
Rising Layoffs

Per a report by CNN Business, American Airlines and Delta Air Lines recently decided to furlough workforces through voluntary exit programs, buyout packages and layoffs, thanks to plummeting demand for air travel. American Airlines announced the need to eliminate about 30% of its management and support staff because of its shift to operate through a smaller structure. Meanwhile, Delta Airlines and United Airlines also chose to cut down employee count.

Evidently, management at these airlines was compelled to take such drastic decisions to avoid bankruptcy.

Financial Aid

Amid the economic turmoil, the U.S. airline industry received a stimulus in April, when the Trump administration reached an agreement with airline companies for providing $25 billion in form of federal aid. Per the terms of the agreement, major U.S. airlines will receive 70% of the funds for payroll in cash assistance, which they won’t have to pay back. Other airline companies receiving $100 million or less won’t be required to pay back any amount either.

What Lies Ahead?

In April, the International Air Transport Association (IATA) estimated global airline passenger revenue decline of approximately $314 billion during 2020, suggesting a 55% fall from 2019.

With the duration and severity of the COVID-19 pandemic still unclear, the projections seem reasonable. No wonder, carriers deem the pandemic as the worst-ever crisis for the industry with the anticipated to deepen going ahead.

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

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Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
 
United Airlines Holdings Inc (UAL) : Free Stock Analysis Report
 
American Airlines Group Inc. (AAL) : Free Stock Analysis Report
 
Alaska Air Group, Inc. (ALK) : Free Stock Analysis Report
 
Hawaiian Holdings, Inc. (HA) : Free Stock Analysis Report
 
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