The cornavirus is sweeping though the economy and the first priority is your health. The second priority is to make money or not lose money. The stock markets were on a wonderful upward spiral, assets under administration (AUM) was increasingly at the individual and institutional levels and then the market went down and the economy changed. In the weeks that the US has seriously dealt with the crisis, economic activity has slowed. A great part of the economy is service and people going out to spend money – from sports to entertainment to travel, and those areas are on life support. The fall of the price of oil has not helped the economy, it helps the environment, but not directly the economy.
In an article by Tracy Rucinski and Rachit Vats all the airlines threw their 2020 forecasts into the garbage and unveiled sweeping capacity and cost-saving measures in response to fewer people in the seats. Thousands of conferences and events have been cancelled or postponed and revenue is expected to fall 70% in April and May.
Chicago based United raised $2 billion in new capital to have $8 billion and slashed 2020 expenditures by more than a third to $4.5 billion. President Scott Kirby said Hope is not an option. The company expects a loss in the first quarter and does not see a good rebound for 2 or 3 years.
Delta Air Lines saw net bookings fall 25 to 30% and could see more. Delta is cutting domestic capacity by 10 to 15% and internationally by 20 to 25%. It is freezing hiring and encouraging people to retire early.
The good news is at this time, the US airlines had strong balance sheets, lower debt than normal, and sizeable cash reserves.
American airlines had $73 billion in available capital and was eyeing cost savings.
If you live near an airport, the airport is a large driver of the economy of the area. From the planes to the airport and the people that serve the travelers, airports have been a traditional good mini economy for the cities in which they are located. A shutdown hurts many people.
Linking to dividend paying stocks, the good news is when the coronavirus is relatively over the dividends of your shares will pay for inexpensive flights. There will be plenty of low fares offerings to get people in the seats to fly again. The bad news is there will be some pain along the way. As a consumer we love bargains, with the downturn of the stock market have patience and pick up some bargains along the way. Start with the high yield dividend stocks and take your time to ensure you have peace of mind and good health along the way.
There are more questions than answers, till the next time – to raising questions.