The Fairy Tale Ending for General Electric May Get Delayed

It’s hard to accept for people that have grown up in an era of unquestioned American dominance but the last time General Electric (NYSE:GE) was truly exciting was the period leading up to the tech bubble blowoff of 2000. Otherwise, GE stock did bring in a very respectable performance heading into the 2008 financial collapse.

The General Electric (GE) logo on a building
Source: Sundry Photography /

But that’s probably what worries investors about GE stock in the current paradigm. Every time shares start to show credible signs of life, something terrible seems to happen. And when bad things happen to General Electric, it’s usually a train wreck that you don’t want to be in — just look at its share price history from the late-1990s onward.

Now, the industrial conglomerate is back on its Houdini act once more, hoping to pull another rabbit out of another hat. At least this time, you can’t really fault the company for its volatility. With the novel coronavirus pandemic taking multiple industries offline temporarily, there was nothing anyone can do.

What’s more, the devastation to the airliners was a kick in the gut for GE stock. With the underlying company struggling for relevance over the years, its aviation unit has been the means for the company to keep the lights on. Honestly, you couldn’t think of a worst headwind for the industrial giant.

So I’m sure that management was absolutely thrilled with the vaccination rollout and just as importantly, the concept of retail revenge. In short, the pandemic wasn’t just a public health threat. For those that were thankfully not impacted physically, the SARS-CoV-2 virus took a social toll. From weddings to graduations to even the ability to watch a movie at the box office, people’s lives suffered disruption.

By opening their wallets and getting out and about, it’s a means for consumer to take back control. But is it enough for General Electric?

Airliner Data a Worrisome Sign for GE Stock

Against certain frameworks, the fundamentals appear to be setting up a contrarian case for GE stock. Last year, the Centers for Disease Control and Prevention warned against traveling for the Thanksgiving holiday but millions brushed aside such concerns. They did the same for mitigation requests for Christmas and New Year’s.

This implies that Americans in particular will not let a pandemic or any other threat — see the recovery in air travel post 9/11 — get in the way of their lives. If anything, it’s a feel-good narrative, a confirmation that Americans have a certain moxie in their blood. But for GE stock, it’s the one catalyst that gives its bullish hopes credibility.

Still, prospective buyers should assess this storyline’s viability with hard data — and that’s where the concerns start piling up. For instance, as of the latest read (May 2021) provided by the Federal Reserve Economic Data, air revenue passenger miles at 54.2 billion sits 39% below the level right before the pandemic hit us.

That’s particularly worrisome because in September 2001, passenger miles dipped 27% against the prior month for obvious reasons. And that was the worst of the post-9/11 impact as passenger miles generally continued to improve since the terror attack.

True, we’re missing June through August data which can give us a better picture of where demand stands and by logical deduction the potential opportunity for GE stock. However, after more than a year following the pandemic’s devastation to the U.S. airliner industry, that passenger miles are still 39% down is not encouraging to say the least.

Further, in terms of U.S. flight departures, the closest gap between 2021 departures versus pre-pandemic departures (in 2019) occurred on week 36, with this year’s metric down 8.5%. Otherwise, flight departures this year have been down double-digit percentages against 2019 levels.

Better to Watch from the Tarmac

Of course, you can make the assumption that air travel will bounce back stronger than ever from here on out. Certainly, the crowded ball games we’ve seen confirm that consumers are ready to resume normal activities.

But I also think there’s a big difference between being in a crowded but open-air environment for a few hours versus being crammed into a flying tube for five or six hours for cross-continental flights. Additionally, with other countries imposing strict mitigation measures, travelers don’t have the freedom they once did.

Therefore, for the conservative investor, it’s best to sit on the sidelines. While the contrarian approach appeals, significant ambiguity exists as to when airliners can start flying at full capacity again.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

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.

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