American Airlines Stocks Suffer Sales Wave As COVID-19 Cases Increase

Shares of American Airlines Group Inc. sank to a seventh consecutive loss on Thursday, triggering a rebound in the broader airline sector, as continued improvement in travel demand collides with an increase in new COVID-19 cases to keep Wall Street sentiment under control.

American Airlines USA Shares: AAL
It plunged 2.7% in mid-day trade, and was headed for the lowest close since June 3. It has lost 25.5% during a 7-day losing streak, which would be the longest since it fell for 8 consecutive days until March 3, which was before. The coronavirus outbreak was declared a pandemic.

The mass sale of shares comes despite the company announcing a $ 4.5 billion increase in liquidity this week, including a $ 2.5 billion note offering that was priced on Wednesday night and $ 2 billion. Millions in common stock and convertible debt deals that were priced Tuesday.

The offer of $ 2.5 billion guaranteed senior notes maturing in 2025, which increased from $ 1.5 billion, priced slightly below par, 99% of face value, despite paying an 11.75% interest rate annual. That compares to the yield on 5-year Treasury bills BX: TMUBMUSD05Y

While increasing post-offer cash balances eliminates liquidity risk, UBS analyst Myles Walton said American’s “problem” is not the amount of cash it has, but the amount of cash it burns for operate. And with the cash burn slated to continue, “the return to normalized earnings is so far away that the material drawback remains for capital,” Myles wrote in a note to clients.

He reiterated the selling rating he has had on the stocks since late 2019, but has lowered his target price to $ 9, which is 29% below current levels of $ 10.

American stocks were the only decline among its US peers, as the US Global Jets US exchange-traded fund: JETS
decreased 0.2%. The Jets ETF, which is in danger of a sixth decline in the past seven sessions, has lost 25.7% since closing at a three-month high of $ 21.94 on June 8.

Among the other most active components of the industry tracker, the shares of United Airlines Holdings Inc.USA: UAL
increased 1.4%, Delta Air Lines Inc.USA: DAL
gained 0.4%, Spirit Airlines Inc.USA: SAVE
added to 0.7%, Southwest Airlines Co. USA: LUV
Advanced 0.6% and JetBlue Airways Corp. USA: JBLU
2.6% was recovered.

On the positive side, data from the Transportation Security Administration (TSA) shows that the number of people passing through passenger checkpoints continues to increase.

The average daily number of travelers for the week ending Sunday increased for nine weeks in a row, reaching 522,327 in the past week, down from a low of 97,799 for the week ending April 19, according to a MarketWatch analysis of TSA data. Meanwhile, a decline from a year ago in the average daily passenger per week has decreased each week, to 80.0% in the last week from a peak of 95.8%, also for the week ending April 19.

More disturbingly, however, the number of new cases of coronavirus disease in the US rose to 34,700 on Wednesday, the highest level since the peak of 36,400 observed in late April, according to the Associated Press, with aggregated data. by Johns Hopkins University of Medicine indicating that 30 states have seen higher infection rates in the past week.

Do not miss: Coronavirus Update: Global Case Count Rises to 9.5 Million, and Rising Cases in the US, Brazil, and others show the pandemic is far from over.

“Demand has improved recently despite increasing cases, but we are concerned that this may be subdued.”

– Analyst Helane Becker at Cowen

Cowen analyst Helane Becker is particularly concerned about the growing trend of infections in Arizona, California, Florida, Georgia and Texas, which together account for more than half of new cases in the United States in recent days.

Also read: Texas Governor Greg Abbott Attempts to Reopen State After Peak in COVID-19 Cases and Hospitalizations

“All airlines have relatively similar exposure to these five states,” Becker wrote in a note to customers. “Demand has improved recently despite increasing cases, but we are concerned that this may be subdued.”

On Wednesday, the governors of Connecticut, New Jersey, and New York said those traveling to their states from Arizona, Florida, and Texas, as well as from Alabama, Arkansas, North Carolina, South Carolina, Washington, and Utah, should submit to quarantine on your own. 14 days, or face fines ranging from $ 2,000 to $ 10,000.

What to expect when flying now (and in the future)