Commercial air travel market down by over 80%
Airports have become the new ghost towns as shops have closed down, check-in counters are now collecting dust and runways are closed down to make for extra room for parking of aircraft.
The aviation industry has taken a dramatic hit from the global pandemic outbreak that has occurred during the majority of 2020 as we know it. Still to this day the aviation industry is experiencing a major decreased in travel numbers in comparison to last year.
Financial indicators
IATA- AIRLINES FINANCIAL MONITOR APRIL-MAY 2020
Airline shares lost half of their value in the first five months of 2020
Just around this same day last year, The Transportation Security Administration cleared nearly 3 million passengers in a single day. From those record number we are now seeing an average of just around half a million total passengers nationwide per day. This is only 20% of the total volume of this same day last year. Load factors reach record lows for another month
We can see how in the last few weeks the total traveler numbers are dramatically lower than the year from before. Airlines look at these numbers to get a total understanding of what the supply and demand rates are for the current travelling community. These numbers help then determine more defined details such as routes and fleet configurations.
The graphs below show snips of the chart that can be found on the TSA website.
| Date | Total Traveler Throughput | Total Traveler Throughput (1 Year Ago – Same Weekday) |
|---|---|---|
| 7/4/2020 | 466,669 | 2,345,846 |
| 7/3/2020 | 718,988 | 2,184,253 |
| 7/2/2020 | 764,761 | 2,088,760 |
| 7/1/2020 | 626,516 | 2,547,889 |
| 6/30/2020 | 500,054 | 2,347,767 |
As an investor this information gives us an understanding of how the market is doing overall when we are looking at the fundamental of the aviation industry. Considering that the numbers are 20% of last years we can look to see a direct correlation to the airline profits. As a result total revenue will be greatly affected due to the massive drop in customers.
In the chart below we can see for reference what the traveler numbers were back in the start of March, just a few days before the national lockdown was set in place.
| Date | Total Traveler Throughput | Total Traveler Throughput (1 Year Ago – Same Weekday) |
|---|---|---|
| 3/10/2020 | 1,617,220 | 2,122,898 |
| 3/9/2020 | 1,909,363 | 2,378,673 |
| 3/8/2020 | 2,119,867 | 2,485,430 |
| 3/7/2020 | 1,844,811 | 2,156,262 |
| 3/6/2020 | 2,198,517 | 2,543,689 |
IATA Reports on low air travel demands worldwide
The International Air Transport Association (IATA) has been providing monthly reports on topics related to Air Passenger Market, Air Freight, Airlines Financials, and the Value of Aviation. Using a metric known as revenue Passenger-Kilometres (RPKs) IATA is able to analyze and record the total revenue generated per flying passenger.
IATA has been making a great point to highlight the efforts that the airlines have been making to facilitate a strong recovery for travel.
Broadcasting on the HEPA filter inside the cabins and implementing new sanitation recommendation they continue to strive towards the enhancement and development of the aviation industry world wide. Overall they are reporting there to be some glimmers of hope in the horizon as there is some stabilizing number coming from the data now.
As while before the numbers appeared to calm to a halting slow down showing more cases on a day to day basis and less travelers the market is starting to see a bit of a calm during the storm.
The first sector to show a bit of strength is in the domestic sector for commercial passenger travel. While many international boarder continue to have strict practices in place which mandate 14-day quarantines upon arrival, many travelers are choosing to opt of out leaving their country.
As a result domestic travel is starting to pick up as traveler are looking for the opportunity to visit more remote places with less traffic.
An important element to consider when looking at the airline industry is not only what the current demand is and what the load factors are of yesterdays flight but also what the outlook will be for the future. In a survey conducted to analyze the confidence of consumers in purchasing new flight tickets we can start to see what people are feeling towards traveling.
In a survey conducted back in April, 61% of individuals would travel within the next two months and 35% would wait until 6 to 12 months before deciding to fly again. Only 4% stated that they would not be travelling in the foreseeable future.
When the survey was conducted again in June, the data showed that 45% would now travel within the next two months or so while now 50% would wait over 6 to 12 months before flying again. A total 5% stated that they do not see themselves boarding a flight any time soon.
The confidence of consumers although experienced a slight bump has been starting to taper off from making new highs.
Airlines Share Prices
When we look back at the airline market as a whole we have seen a dramatic drop in total value. Since the major a lot of traders start to panic when they start to see prices drop rapidly. What is important during these market swings is understanding that these movements that occur unexpedetly bring greater volatility in the market.
As volatility starts to rise the premium of certain asset classes will start to have a wider spread. As the potential movement is not a greater range than before. During these last few weeks we ahve seen days were price has jumped by over 15% in just one day and then follows with multiple lossing days right after.
Selling out of the money options strategies are great ways for traders to be able to take in some premium when the rates are high and then be able to buy them back at a rate that is more stable once premium starts to level out with decreased volatility. Its important to know that volatility normally sits in a range of between 10-20% during this last year we have maintain abouve 30% for a great portion of the year.
This creates a rich environment for expensive premiums as market makers are unsure of where the values will be so they raise the values of both sides.
Buying calls and puts for out of the money positions in todays market can potentially be at a low cost. Although with probability rates of under 40% for profitablity they can seldomly turn out to be major winners. While the contrary looking to sell out of the money options that have a 30% or lower probability of entering in-the-money would result in a 70% profitability probability.
Its important to not be too rung up on certain price values when trading in the market and look more to have proability play on your side as your look to enter in trades that will rpvodie a greater rate of return on your captiol.
Top 42 Aviation Stocks
The airline industry is a rapidly moving and volatile sector. Many turn to the aviation industry for the passion in the industry and their loyalty to their favorite airline or aircarft manufactuer. Others look at the market for the resillance and ability to move quickly in the market with direction and strength.
Regardless of your stance either bullish or bearish take a look at our watch list where you can see our handcrafted list of the Top 42 aviation stocks in the market.
Top 42 Aviation Stocks
Click to access to Watchlist
Disclosures
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options: https://www.theocc.com/components/docs/riskstoc.pdf
Air Market Group content is provided solely by Air Market Group LLC and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction, or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. Air Market Group, through its content, financial programming, or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon, or risk tolerance. Air Market Group is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparison, statistics, or other technical data, if applicable, will be supplied upon request. Multi-leg option strategies incur higher transaction costs as they involve multiple commission charges. Air Market Group is not a licensed financial advisor, registered investment advisor, or registered broker-dealer. Options involve risk and are not suitable for all investors. Please read the Characteristics and Risks of Standardized Options before deciding to invest in options.
SIGN UP TO RECEIVE WEEKLY MARKET UPDATES
Air Market Group 
Leave a Reply