One industry that was devastated by the Covid-19 epidemic was our nation’s airlines. Revenues nosedived 65% in 2020 compared to 2019 when the virus made most people unwilling to sit next to each other, suggests Jim Powell, editor of Global Changes & Opportunities Report.
Not surprisingly, investors bailed out of the airline stocks — most of which lost over half their value. One of America's finest carriers that was harmed by the coronavirus was Delta Airlines (DAL).
As you can see from its stock chart, DAL plunged during the crisis. As with American Airlines (AAL), United Airlines (UAL) and most other major carriers, it’s possible that Delta could go out of business.
As a practical matter, however, the government hasn’t allowed any of the large US airlines to fail — even when they declared bankruptcy during previous recessions. That will almost certainly continue to be the case.
Both stimulus packages included billions of dollars for our airlines — and the new Biden proposal is calling for more of the same. I think Delta is the most innovative of our large airline companies — and will make the most of its share of government assistance — and a Covid recovery.
During the worst of the epidemic when its rivals were trying to fill every seat, Delta attracted many passengers by leaving its center seats empty.
Even as the epidemic eases, Delta’s separation policy should continue to pay off. Delta also acted to overcome the other big threat to profits in the airline industry — rising fuel costs. Delta bought its own refinery.
In addition, Delta revamped its pricing policies and is now more competitive than it was in the past. This change should be popular with today’s travelers who compare ticket prices and schedules online — and choose the one that best suits them.
As with our other successful fallen angels, the best of the group are successful blue chip companies that ran into serious problems brought upon by the Covid epidemic. The casualties should recover as the disease comes under control and consumers resume the activities they have always enjoyed.
I think Delta will begin to recover within a year. If you want to ride along, I think you should take positions while most investors are focused elsewhere.