When President Trump sat down with Fox News’ Chris Wallace for an interview this past Sunday, the mainstream media criticized him for referencing an alternate reality regarding novel coronavirus cases. It was great theater if anything. However, Trump isn’t the only one with magic facts. For weeks, the airliners have pushed a fanciful notion of an industry comeback. Now, Delta Air Lines (NYSE:DAL) and DAL stock could suffer for it.
Of course, I’m not picking on Delta for the sake of it. Whether you’re talking about American Airlines (NASDAQ:AAL) or cruise ship operators like Carnival (NYSE:CCL), the entire travel sector was dependent on a mitigation of the coronavirus. Without it, people are too anxious about contracting a serious disease. As you can see from the weakness in Delta stock and its ilk, the customer is usually right.
Another thing that the customer may be right about: airliners have failed to treat them with respect and common decency. According to an eye-opening report from Financebuzz.com’s Ben Walker, “Consumer complaints against U.S. airlines rose 965% in April 2020 compared to the previous year.” Further, Walker states that “Issues around refunds accounted for 94% of these complaints.”
Again, this isn’t a headwind exclusive to Delta stock. Among U.S.-based carriers, United Airlines (NASDAQ:UAL) received the most complaints. Also, complaints against foreign airlines skyrocketed more than 2,200% year-over-year.
However, the uproar exacerbates what has been a tense relationship between passengers and airline companies. Particularly, the middle seat has made an unwanted return to the chagrin of passengers who were initially promised social distancing measures.
Overall, it’s a bad look as airliners desperately seek to earn back consumer dollars. But that’s easier said than done.
DAL Stock and Peers Facing a Litany of Terrible News
Following the early devastation of the novel coronavirus, airliners charted a steady recovery as states began reopening. Sharp enthusiasm for Delta stock and its rivals peaked in early June. That was when the government released better-than-expected results for the May jobs report.
Unfortunately, that has so far been the highest price point the industry has achieved in the post-pandemic period. Despite the positive jobs report, weekly initial jobless claims continued to number in the millions, reflecting broader economic pain. Adding to this woe, new daily coronavirus cases have surged to record levels.
Therefore, airliners had to walk back their earlier talk about adding more routes. And it appears that we’re headed toward a long winter. Recently, CNBC reported that air travel demand recorded its first weekly percentage drop since April. Of course, this dashed hopes that the summer season will catalyze a return to a somewhat normal for airliners.
As well, it demonstrates that despite what hard-nosed conservatives and conspiracy theorists of all ideological stripes believe, the coronavirus is serious. More to the point, most Americans believe that it’s serious, causing them to adjust their economic activities.
Further, if you read between the lines, the industry itself is tuning into this harsh reality. According to a Fox Business report, Delta and Southwest Airlines (NYSE:LUV) “have each received strong demand from pilots for early departure packages.”
The article goes on to state, “The union representing Delta pilots said 2,235 pilots had volunteered for a voluntary early out program ahead of a Sunday deadline, up from 1,700 on Friday, when Delta told pilots it would avoid furloughs if they agreed to reduced guaranteed minimum pay.”
Personally, I find this remarkable given the awful labor market environment we’re in.
An Economic Storm Is Brewing
If there’s one person that wants to get away, it’s White House economic advisor Larry Kudlow. Believe me, I’ve made some bad calls in the past, so I know how it feels. But Kudlow has made some exceedingly glaring howlers, that I’m afraid he may not be able to live down ever.
For perhaps the next several decades, we’ll remember this line he gave to CNBC’s Kelly Evans regarding the coronavirus: “We have contained this, I won’t say airtight but pretty close to airtight.” The sharp drop in Delta stock shortly after those words, along with almost every other traded asset would prove otherwise.
Nevertheless, he’s been very bullish on an imminent recovery, no doubt feeding into the Trump administration’s alternate reality. But then, the Washington Post’s Jeff Stein tweeted on July 17 that Kudlow softened his stance on a V-shaped recovery.
Look, if Larry “Permabull” Kudlow is hedging his bets, you have two choices: take his word for it or the economy is unimaginably terrible. Either way, it’s not good news for Delta 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.