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The Covid-19 pandemic has caused significant disruption around the world. So much of how we used to function as a society has changed, and most countries have been affected by this deadly virus plaguing every corner of the globe.

The financial markets have subsequently been chaotic and downright unpredictable amidst the rollercoaster ride of 2020. There have been highs and lows, and uncertainty has reigned supreme among investors, with stock prices changing at the drop of a hat as industries gain and lose the confidence of investors. With stringent lockdown measures being implemented at the beginning of the year, countries all over the world halted both domestic and international travel. It’s no secret then that airlines were impacted in a big way and have taken a plummet in the markets, as virtually overnight they lost most of their business. The question is, will they recover, and what is happening now that there are second waves of the virus?

Plummeting prices

Pieter Elbers, CEO of KLM, part of AirFrance KLM, said at the World Aviation Festival that both collaboration and consolidation will be necessary for the airline industry to claw its way back from the pandemic’s devastating effects. “Every big crisis in the industry so far as led to further consolidation. So, my view [COVID-19] would also lead to further consolidation in the industry. The massive recovery trajectory will require also more collaboration between various carriers in order to make sure that we optimize our assets,” said Elbers. He has highlighted that change needs to come from collaboration in a global sense, and this also extends to sustainability.1

Irish low-cost airline Ryanair announced that in October it would be cutting capacity by 20%, taking total capacity to 40% of what it was in October 2019. The announcement comes after another drop in bookings due to second waves of the virus across various European countries.2 Yet in a move to combat the effect of the pandemic, the airline sold an 850 million euro bond in September—a move that may have worked for the time being. According to ratings agency S&P, along with low-cost competitor easyJet, Ryanair is one of three airlines that still hold investment grade ratings. “Ryanair is in a better place, therefore it’s going to be easier for it to get the financing it wants,” said Azhar Hussain, head of global credit at Royal London Asset Management. Meanwhile, the credit ratings of other major airlines such as Lufthansa and British Airways were demoted to “junk” during the course of the pandemic.3

Safety first

Despite its historic reputation as the safest mode of travel, concerns over air travel are once again high during the pandemic. In efforts to restore faith in air travel during these uncertain times, European airlines are taking innovative new measures. There is a Covid-19 test currently being developed which aims to provide test results in 15 minutes, giving travellers an extra measure of safety. However, as hopeful as these tests are, doubts are still being raised about their accuracy, as well as comfort, as they are administered via nasal swab, keeping uncertainty afloat for the time being. 4 

Germany’s Lufthansa airlines is said to be in discussions with Roche, a Swiss drug-maker, about the deployment of “antigen” tests in the near future. Alitalia Airlines in Italy is also aiming to create safer travel by adding two extra flights between Milan and Rome for passengers specifically with negative Covid-19 tests, dubbed the “Covid Test Flights” experiment. The idea is for these tests to be administered by health authorities at airports and included in the price of the air ticket.4

 

Airlines continue to face uncertainty

Regardless of fast tests and special flights, the general sentiment is that travelling with hundreds of other people in an essentially airtight tube goes against every rule of social distancing, and therefore the concerns remain. And such uncertainty tends to show up on the financial markets as well, where the price volatility of certain airline companies creates both risks and opportunities for traders who invest in CFDs or Contracts for Difference. CFDs allow investors to trade on the price fluctuations of shares of companies like Lufthansa, AirFrance KLM, and many more, without having to purchase the asset itself. At iFOREX shares are just one of the many hundreds CFD instruments on offer—choose from over 800 indices, commodities, ETFs, crypto, and foreign currencies. iFOREX has decades of experience in the financial markets and offers a proprietary trading based on today’s most advanced technology. Before you begin iFOREX shares trading, sign up today and take advantage of free educational materials, including 1-on-1 training with a trading coach.


Airline shares drop out of the sky
Digital Mag

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