Previous crises hit certain parts of the economy sharply, like the Global Financial Crisis for banks. But no crisis has ever hit anything harder than the coronavirus crisis has hit the travel industry.
Due to the worries about Covid-19 transmission, airlines shut down completely, resulting in a shocking unemployment spike in the U.S.
Along with consumer demand for flying, airline and other travel companies’ stocks cratered. And although legendary investor Warren Buffett decided to liquidate his airline stocks — which further tanked the stocks — some market watchers are very bullish on travel.
Sarah Ketterer, CEO of fund manager Causeway Capital Management, which invests in airline stocks, told Yahoo Finance that she sees airline stocks like bank stocks during the 2008 financial crisis. Shares of airlines have fallen considerably: United (UAL) traded at around $81 per share in February and has fallen to $33. Delta (DAL) has similarly lost value, dropping from $55 to $26.
During the financial crisis, “banks were decimated — uninvestable,” she said. “Only 12 months after, bank stocks had doubled. That’s what will happen, we believe, to the airlines.”
JPMorgan traded at $19 a share in February 2009. In October of that year, a share was up to $42.
The boom won’t happen to all airlines, Ketterer clarified. The better-managed ones, the low-cost carriers, the shorter-haul carriers will be the ones to bounce back, like Alaska Airlines (ALK) and Ryanair (RYAAY).
Ketterer said that even during the spring there were upticks in travel and guests, indicating an appetite to travel — even without a vaccine.
“You can imagine what it’ll be like when, of the 21 different vaccines between phase one and phase three, any one of those are successful,” she said.
In her view, most companies involved in the travel industry are doing a good job with cleanliness and lowering risks. "People will come back," she said.
On the other hand, the spikes in travel were before most of the country was hit hard by the pandemic, so it’s possible that people’s thinking may have evolved as the U.S. coronavirus situation deteriorated.
But insofar as what a vaccine will do, few doubt that getting rid of the disease will change things significantly – that’s the key to moving forward, as many economists and experts have said. Kill the disease and bring back the economy.
Taking a point on the other side of Ketterer, however, is CEO of Southwest, Gary Kelly, who told Yahoo Finance last week, “you can’t make people fly,” and estimated that recovery to pre-Covid levels might take five to 10 years, at least for business travel.