The COVID-19 pandemic and its immediate effects have had a severe knock-on effect on the global trading markets. One of the largest industries in trouble is the airline industry. Instant closures of borders and limits to travel for extended periods of time have created one of most worrying times for airlines since the recession.
The Immediate Effect
The beginning of the coronavirus pandemic saw a soft-rollout travel ban in many areas, with full travel bans in others. The serious problems didn’t begin until social distancing and the lockdown went into effect. And with shared air conditioning and the close quarters of seating, airlines couldn’t realistically abide by these new rules. At present, most of the large scale airline companies are grounded, travel demand is at an all-time low and the only global movement allowed is either people returning from holidays or returning from abroad to ‘shelter in place’ at home.
Will It Get Worse Before It Gets Better?
Despite the cry for help, British airlines and airports have been told that they will not receive an industry bailout. Airlines are undoubtedly important for the economy and no one wants to see them in a bind, but it seems to be general consensus that there are much more pressing matters in our country, at least for now.
What About The US Market?
The UK airline market, while far from healthy, has not seen effects as bad as their US counterparts. Even the biggest of US airlines are in much worse shape with some nearing permanent shutdown. Delta Airlines is struggling with cash reserves equivalent to only 7% of last year’s operating costs, while IAG has spent the last 5 years buying back its stock shares and now may find themselves grounded with less support and no funding.
Experts can’t decide if the future of airlines post-lockdown will show a flood of people desperate to travel again or if we will see cautionary consumers, reluctant to travel abroad. This makes the decision of whether to invest in the airline industry a difficult one for many traders.
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To learn more about investing in today’s global markets, contact CFI Financial today and speak with someone who can answer any questions that you might have.
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