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Why Alaska Air, Hawaiian Holdings, and Other Airline Stocks Just Popped

By Rich Smith - Mar 6, 2020 at 1:50PM

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There are rumors that the White House is mulling a coronavirus bailout of the airline industry.

What happened

All of a sudden, things are coming up roses for airline stocks -- yes, in the midst of the novel coronavirus crisis, and largely because of it.

As of 12:30 p.m. EST, shares of Alaska Air (ALK 2.76%) are up 4.3%, Hawaiian Holdings (HA 8.09%) stock has gained 5.4%, and Delta's (DAL 3.43%) up 2%. Even Southwest (LUV 1.78%) has gained 0.2%. This is all pretty surprising considering that most of these stocks were down close to 5% earlier in the day -- and some significantly more than 5%.

But why is this happening?

Collage of an airplane, coronaviruses, and a world map.

Image source: Getty Images.

So what

You can thank President Trump for the sudden turnaround in airline shares -- and his nemesis The Washington Post. Just before noon EST, the Post reported that "White House officials are considering deferring taxes for industries hurt by the coronavirus outbreak, including the ... airline industries."

Discussions of a travel industry bailout are said to be in a "preliminary" stage, but White House economic advisor Larry Kudlow confirmed that "timely and targeted" measures to salvage the ravaged travel industry are in fact under consideration.

Travel is largely a consumer discretionary industry: Folks can choose to either buy a plane ticket and add to the economy or cocoon at home and hide from the COVID-19 coronavirus -- subtracting from the economy. With many potential travelers apparently choosing the latter of late, the administration wants to ensure that once the crisis is over and folks begin wanting to fly again, there will still be airlines in business to carry them.

Now what

Specifics of the White House's plan are still being formulated, and it's possible even the White House isn't sure just yet what it might do. It's also not entirely clear what deferring taxes on profits might do for an airline industry that, one presumes, is not looking particularly profitable this month.

For now, though, just the reassurance that the White House recognizes there's a problem and is mulling measures to deal with it has given airline stocks an inoculating shot of optimism -- and is lifting Alaska Air, Hawaiian, Delta, and Southwest shares higher.

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Stocks Mentioned

Alaska Air Group, Inc. Stock Quote
Alaska Air Group, Inc.
ALK
$48.43 (2.76%) $1.30
Southwest Airlines Co. Stock Quote
Southwest Airlines Co.
LUV
$45.80 (1.78%) $0.80
Delta Air Lines, Inc. Stock Quote
Delta Air Lines, Inc.
DAL
$42.23 (3.43%) $1.40
Hawaiian Holdings, Inc. Stock Quote
Hawaiian Holdings, Inc.
HA
$18.03 (8.09%) $1.35

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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