Quantifying the impact of the COVID-19 pandemic on US airline stock prices

https://doi.org/10.1016/j.jairtraman.2021.102141Get rights and content

Highlights

  • We quantify the impact the COVID-19 pandemic on U.S. airline industry stock prices.

  • We use high frequency (daily) data from January 21, 2020 to March 15, 2021.

  • We employ the method of local projections to estimate impulse response functions.

  • A COVID-19 shock has negative effects on airline stock prices that persist beyond the day on which the shock occurs.

  • We find no evidence that mask mandates or vaccine administration moderated the effect of the COVID-19 shock.

Abstract

This paper uses data at the trading day frequency and the method of local projections to quantify the dynamic responses of U.S. airline stock prices to a COVID-19 shock. We show that airline stock prices decline immediately by 0.1 percentage point in response to a 1% COVID-19 shock. In addition, the effect of the shock persists beyond the day on which it occurs, with most airline stock prices falling by as much as 0.6 percentage points after fifteen days. This negative response of airline stock prices to a COVID-19 shock is not explained by a COVID-19-induced increase in airlines’ variable costs, but rather by a COVID-19-induced decrease in air travel, which, in turn decreases revenues, profitability, and stock prices of U.S. airlines.

Keywords

Coronavirus
Airline industry
Stock prices

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