The impact of government policy responses on airline stock return during the COVID-19 crisis

Abstract

This study investigates the impact of government policies on the weekly stock returns of 73 global airline companies in 36 countries during the COVID-19 pandemic. Using panel data estimation techniques with country and week fixed effects, we find that the overall government policies, containment and health policies, and stringency policies increase airline stock returns. Economic support policies do not significantly impact the returns. Containment and health policies mitigate the negative effect of the pandemic on airline stock returns, whereas economic support policies strengthen the adverse effect. The government interventions' impact on airline stock returns is heterogeneous based on the airlines' headquarters but not on their ownership structures and business operations. Our empirical findings provide salient insights for protecting airline companies by reflecting on which government policy responses are effective and how governments should invest and prioritize policies. The results also present practical implications for airline managers, investors, and policymakers concerned with the current pandemic and future crises.