Strict social distancing measures coupled with a raft of state lockdowns aimed at reducing the spread of coronavirus have all but grounded the aviation industry. To combat plunging air travel demand, Washington has, so far, allocated the group over $50 billion in federal aid as part of the historic $2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES).
The aviation aid package provides $25 million in loans and secures thousands of jobs within the industry by giving airlines access to $25 billion in grants to pay workers through September. It also offers an additional $4 billion to freight carriers. "Essentially, the U.S. government is providing funds to motivate airlines to continue air service and not involuntarily furlough any team members through a period of incredibly low demand for air travel," said American Airlines Group Inc. (AAL) CEO Doug Parker, per usatoday.com.
Although the three leading aviation stocks outlined below have had their wings severely clipped by the pandemic, a backstop of government assistance should ensure their future survival. Let's take a closer look at each name and analyze the charts to find suitable buying levels.
American Airlines Group Inc. (AAL)
With a market capitalization of $5.19 billion, American Airlines operates as a network air carrier, servicing more than 350 destinations in 50 countries. The Fort Worth, Texas-based airline has cut its international flights by 75% and domestic services by 30% to combat the steep decline in passenger numbers. It has also grounded hundreds of its planes and asked employees to take up to 12 months of unpaid leave. The iconic carrier said that it is eligible for $12 billion of the $50 billion aviation aid package. As of April 1, 2020, American Airlines issues a 3.27% dividend yield and has crashed 57.15% year to date (YTD).
Since breaking below crucial support in late February, the stock continued to move sharply lower in early March before staging an impressive 72% rally toward the end of the month. As prices retrace from this oversold bounce, investors should look for entry points near $10, where the previous low should provide key support.
Delta Air Lines, Inc. (DAL)
Delta Air Lines, Inc. (DAL) provides scheduled air transportation for passengers and cargo in the United States and globally, with the airline flying to over 325 locations in 60 countries. The Atlanta-based carrier has parked 600 planes and slashed its flight schedule by around 70% to help ride out the COVID-19 pandemic. Delta, with a market value of $18.26 billion, is one of the four largest U.S. airlines and competes with American Airlines for the lion's share of domestic market share. The company's stock has fallen 50% since the start of the year as of April 1, 2020.
Delta shares plunged as much as 62% after breaking down in late February from a 12-month trading range to test their May 2007 initial public offering (IPO) price of $20. The bulls have, so far, successfully defend this level, making it a key area for investors to watch as the stock continues to retreat from a short-term bounce.
The Boeing Company (BA)
Dow component The Boeing Company (BA) manufactures and sells commercial jetliners and military aircraft as well as satellites, missile defense, human space flight, and launch systems. The Seattle-base airplane maker has access to a $17 billion federal loan program set aside for companies deemed "critical to maintaining national security" for which Being qualifies given its large defense contracts. The aid comes at a time when up to 25% of the world's commercial jet fleets are grounded, according to Vertical Research analyst Rob Stallard, per Barron's. As of April 1, 2020, Boeing stock has a market value of $84.15 billion and is trading 53.59% lower on the year.
The firm's share price gave back four years of gains in just over a month but has bounced back strongly in recent weeks as buyers snap up beaten-down quality names. However, the partial recovery looks to have stalled at the 38.2% Fibonacci retracement level on news that the Trump administration has extended social distancing measures until April 30. Investors should eye buying opportunities near the vital multi-year and psychological $100 support level.