As the ebb and flow of United Airlines (NASDAQ:UAL) shares demonstrate, the underlying industry has been incredibly difficult to decipher. On one hand, the novel coronavirus disproportionately impacts air travel. Yet, people have to get on with their lives, which may mean a continued uptick in United Airlines stock.
Sure enough, UAL is up significantly from its March lows. But United Airlines stock has also shed a conspicuous amount of red ink since its June peak.
Initially, surprisingly positive economic data from the May jobs report lifted enthusiasm. However, that optimism gradually deflated as weekly initial jobless claims reflected the still dire state of the labor market.
Interestingly, though, reports suggest that while Americans are deeply divided regarding the right approach to fixing the economy, most of us are worried about our health. It begs the question; how did airliners get through prior pandemics?
In 2014, a study by the International Respiratory Syncytial Virus Society (IRSVS) analyzed how the H1N1 virus spread inside a passenger airplane. According to the IRSVS, the “influenza pandemic spread from Mexico to at least 214 countries with over 18,000 laboratory-confirmed deaths worldwide, with the true burden of disease many times greater.”
At the time, the World Health Organization suggested contact tracing for passengers seated within two rows of infected cases. However, the IRSVS’ research indicated that “there was no evidence that the AR [attack rate] for those seated within two rows of an infectious case was different from those who were not.”
That should be good news for United Airlines stock, right?
Well, not so fast.
Perception, Not Reality, May Determine UAL Stock
During this new normal, I’ve had much time to research the coronavirus myself. In my discussions with conservative and faith-based voters, I recognize a familiar theme: most are adamant that the Covid-19 pandemic is exaggerated for political motivations.
For me, this is nothing new. I watch a lot of Fox News, so I’ve heard these assertions from day one. Frankly, my biggest contention is a lack of independent, peer-reviewed analyses to demonstrate the veracity of this supposed exaggeration.
Because without such critical evidence, running on a political agenda of your own could lead to disastrous coverage, as comedian Trevor Noah ruthlessly proved. Unfortunately, this has huge implications for United Airlines stock, along with rivals such as Delta Air Lines (NYSE:DAL) and American Airlines (NASDAQ:AAL).
As the IRSVS study confirmed, airline travel could actually be much safer than you think despite the coronavirus. But when viewers see Fox News flip-flop multiple times on the pandemic, the organization loses something called credibility. And that may cause potential travelers to wonder, is it really safe to fly?
Again, according to the IRSVS, close proximity alone isn’t enough of a risk factor toward contracting H1N1. Presumably, you could apply the same principle with Covid-19. However, with so much conflicting information from the media, people might perceive that a threat exists, whether it does or not.
Click to Enlarge
Worryingly for United Airlines stock, it appears that negative sentiment is impacting air travel volume. Post-pandemic volume peaked in early July due to the holidays but has since declined conspicuously.
Of course, we need more information before I wave a red flag. But the fact that non-holiday airline travel is still operating at less than two-thirds capacity compared to last year is a big problem.
No Incentive to Fly
You’ll notice that of all the mockery that Fox News has taken over its coronavirus coverage, the one person liberals have not gone after is Tucker Carlson. Say what you want about the man, he has taken this outbreak seriously from the beginning.
Based on his viewership stats, people obviously trust him. If the rest of his colleagues acted like him, it would have been much easier to at least produce credible counterarguments instead of building talking points around President Donald Trump’s latest rant.
Still, even that would probably not have been enough to save United Airlines stock and its underlying industry. With states pausing or rolling back their reopening, as well as businesses shifting their operations remotely, there’s just no incentive to fly.
Moreover, despite many conservatives pushing the exaggeration narrative, their own Republican party is undermining this very thesis. By creating a raging debate over the efficacy of hydroxychloroquine to combat Covid-19, the Trump administration acknowledged – in a backhanded way – that this is a serious crisis.
Hydroxychloroquine is an anti-malaria drug, which is a serious and sometimes fatal disease. You don’t just walk into your local CVS Health (NYSE:CVS) store and buy a bottle.
Although I’m speculating, I truly believe that most Americans recognize this confusing storyline over the coronavirus. Not willing to gamble on their health, I think they’ll largely stay home. Of course, that doesn’t help the case for United Airlines stock.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he did not hold a position in any of the aforementioned securities.
