The Ongoing Recovery of U.S. Airline Stocks Through the COVID-19 Pandemic: An Event Study Approach

Abstract

The COVID-19 pandemic hit the airlines, both business and leisure travels, hard due to severe travel restrictions imposed by governments around the world to combat the virus. The stock prices of major airline companies have dropped more than the broader market. This paper aims to quantify the impact of a shock to the COVID-19 pandemic on U.S. airline stock prices by examining ten specific events evenly spread through January 2020 and August 2022. Seven airline stocks are selected, including JetBlue, American, Delta, Alaska, United, Hawaiian and Spirit. It is observed that the stock prices react to public information quickly by the Efficient Market Hypothesis in most but not all situations, and to varying degrees. Simple regression analysis was performed as a supplement to understand the factors affecting the performance of transportation stocks in general. The result of this study will be useful to airline investors and stock market participants to react quickly when making investment decisions. Moreover, these results shed light on guiding regulators and policymakers to implement financial support amid catastrophic shocks from a pandemic or likewise.