American Airlines Group Inc. (NASDAQ: AAL) Plunge Persists Amidst Bailout Calls
American Airlines’ stock fell by more than 25% as a plunge from one year high continued to gather pace and showing no songs of slowing down. The plunge came amidst growing concerns about further travel restrictions, as the coronavirus pandemic continues to send shockwaves around the world.
Travel restrictions Impact
The havoc causing virus has already triggered travel restrictions into the U.S from key markets of Europe as well as Asia. President Donald Trump announcing that travelers without U.S citizenship would not be allowed into the country has all but compounded the company’s woes in addition to other airlines.
The AAL stock remained under pressure as it became clear the government could go forth and restrict air travel within the U.S. Such a move would bring the air travel industry to a standstill at a time when it is already grappling with a decline in the number of people booking flights.
Demand for flights is at an all-time low even as the government considers other stringent measures to curtail the movement of people as a way of curtailing the further spread of the coronavirus. With more restrictions appearing to be in the pipeline, American Airlines looks set to remain under pressure in the market.
The airline company is already under immense scrutiny, having emerged; it is $29 billion in debt has also carried out massive share buybacks. Just like other airlines, American Airlines is pushing for a government bailout in the form of direct aid and low-interest loans to keep business afloat to counter the deteriorating travel demand.
Calls for the government to bailout airline companies continue to elicit mixed reactions. The fact that most of the airlines led by American Airlines spent close to 96% of their free cash flow on buybacks is not going well with some people. Billionaire investor Mark Cuban insists that share repurchases should be revisited as part of any bailout package.
American Airlines is already down by more than 125% from its all-time highs, having already registered a new 52-week low. Institutional holding in the stock has dropped by more than 80% over the past three months; a number of investment firms have downgraded the stock.