Insights

October 2020 Market Recap

Air travel continues to rebound in China but remains subdued globally due to a growing number of coronavirus infections and the reintroduction of lockdown measures. Although bullion was down for the month, gold coin buying surged to a record high.

Click the buttons below to read our recap of the airline sector and gold market for October 2020.

Strengths

  • The best performing airline for the month of October was Jet2, up 21.07%.
  • The air travel recovery continues to strengthen in China. According to the International Civil Aviation Organization (ICAO), domestic passenger traffic in China, having already bottomed in mid-February, is now above 2019 levels in terms of capacity. Some areas of Chinese tourism are not just surviving but “booming,” according to McKinsey & Company. By the end of August, occupancy rates at luxury and high-end hotels were back to around 90 percent capacityfrom a year earlier.
  • Transportation Security Administration (TSA) data flashed a resounding positive signal on October 18. On that day, the number of passengers screened in the U.S. exceeded 1 million for the first time since March. Exactly 1,031,505 people passed through TSA, around 40 percent of the traffic compared to the same day a year ago.

Weaknesses

  • The worst performing airline for the month of October was Hainan Meilan International, down 24.02%.
  • Although U.S. lawmakers have been discussing another round of fiscal stimulus, particularly for the hard-hit airline industry, there was still no package confirmed. On October 12, Speaker Nancy Pelosi said she would not agree to stand-alone air for airlines unless the Trump administration committed to a broader pandemic relief plan. Lawmakers appear to be at a standstill until after the U.S. presidential election.
  • British Airways retired its last two Boeing 747 airliners, reports Bloomberg. BA had one of the largest fleets of the iconic jumbo jet. Airlines have been phasing out the older, larger aircraft models to cut costs amid the pandemic, but were also phasing them out well before the crisis.

Opportunities

  • Singapore and Hong Kong will open their borders to one another for the first time in seven months, reports Bloomberg, exempting travelers from both cities from quarantine. In place of a mandatory quarantine, there will be coronavirus testing, hopefully in place within “weeks”. Cathay Pacific Airways jumped as much as 7.8 percent on October 15 after the news.
  • Southwest Airlines CEO Gary Kelly said the carrier will add new destinations to boost revenue. “It’s exciting to take the fight to the competition and put idle aircraft and overstaffed employees to work,” Kelly said in a video message to employees. “Fortunately, our route map still has dozens of airports for growth with 737s. We’ll pursue these opportunities aggressively but not recklessly, and in every case they must meet our cash-flow threshold and contribute to our recovery.” The domestic-focused carrier added a new seasonal service to Montrose, Colorado near ski resorts in Telluride.
  • Singapore Airlines said all seats on its Airbus A380 jetliner pop-up restaurants were reserved within 30 minutes of bookings opening, reports Bloomberg. The carrier is using two of its superjumbo jets parked at Changi Airport as temporary restaurants to generate revenue. A meal in a suite costs $474, while an economy seat meal costs closer to $40.

Threats

  • Coronavirus cases continue to surge globally, sparking fears that the short-lived travel recovery will reverse. The U.S. reported 69,000 cases on October 16 – the most since July. Europe is also seeing cases rise to record highs and countries are re-implementing travel restrictions and lockdowns.
  • American Airlines and Southwest Airlines announced on October 22 they will defer the delivery of more Boeing 737 Max jets. American deferred delivery of 18 Max jets and will now take them over 2023 and 2024, pushed back from 2021 and 2022. Southwest, the largest customer for the Max, said it may restructure its order, reports Bloomberg. Competitor Airbus is also seeing carriers delay delivery. Delta Air said it had pushed out the handoff of $5 billion worth of Airbus jets until after 2022.
  • More women are becoming pilots, but the coronavirus could threaten progress. According to the International Society of Women Airline Pilots in Las Vegas, the share of female pilots rose to 5.3 percent worldwide this year, up from 3 percent in 2016. Bloomberg Businessweek notes that more than 15,000 pilot jobs have been cut in Europe so far this year due to the pandemic halting travel. According to Five Aero, job losses among all airlines globally could hit 340,000 by yearend.

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