United Airlines Holdings, Inc. was a surprise big winner during Tuesday's trading, as the airline saw its stocks grow more than 7 percent on the day. The rally wasn't something analysts expected. True enough, UAL's shares tumbled from then on.
United Airlines, like most of its peers, was hit hard by the sharp drop in demand for air travel due to the coronavirus outbreak which ultimately hampered its prospects.
United Airlines plans to slash international flights by 90 percent in April due to the global health hazard. In addition, the organization plans to reduce the number of flights across the United States and Canada by more than 40 percent.
The reduction in capacity is expected to continue into the summer travel season. Airlines are affected harder than other businesses, with global travel and tourism battered. UAL was among them. It closed as low as $21.28 last week - a 77 percent decline from the beginning of December.
Over the past few weeks, the company has seen eight downward revisions of the forecasts, although its consensus estimate from ratings agency Zacks for the current quarter has also been lower over the past few weeks, indicating that there could be trouble down the road.
US- based carriers are desperately seeking federal financial assistance to deal with this ongoing crisis. United Airlines management has cautioned against a large number of layoffs if "appropriate assistance" from the central bank is not available by March 31.
United Airlines expects March sales to be down $1.5 billion from the published figure in March 2019 as a result of the crisis that dealt a heavy blow on demand. In fact, the carrier anticipates a sharp decline in the number of customers and revenues going forward.
The company also plans to slash payroll costs to reduce the effects of adversities. In this end, the organization is cutting the wages of corporate officers. In addition, the airline has also taken steps such as freezing employment (except for critical positions to combat the downturn in demand). Still, United Airlines postponed its forecasts for the first quarter of 2020 and the full year.
While panic sparked by coronavirus has seized markets and dampened customer morale, airline stocks have taken on a huge hit. In recent weeks, the big-four US airlines have lost as much as 50 percent of their market prices as travel has grounded to a near-halt.
The fall in share prices around the industry tells the story of how vulnerable airlines are in the current situation. The Dow Jones U.S. Airlines Index has dropped by 61 percent since mid-February.
