Airline stocks in the United States had a nightmare Wednesday on Wall Street as the rollout of 5G mobile technology triggered scheduling issues, leading to flight cancellations, compounded by Covid-19 issues.
American Airlines posted a 3.30% loss at $17.31 a share, followed by United Airlines which fell 2.65% and trades at $44.40 a share. Delta Airlines lost 1.82% and Southwest Airlines 2.20% on Wednesday.
The decision by two companies to delay switching on telecommunications antennas near key airports, following protests over possible interference, came too late to prevent a wave of cancellations on Wednesday.
It was AT&T and Verizon Communications that activated their 5G networks, after a year of investments for the placement of cell phone towers. Verizon spent $40 billion to cover 90 million people, while AT&T would cover 75 million users.
Amin Vera, deputy director of Economic Analysis at Black Wallstreet Capital, explained that “in an environment in which interest rates are going to rise, the cost of issuing debt increases, considering that airlines are among the companies that issue the most debt and that they are mostly leveraged.
In addition, he said, “in a market that is correcting itself due to the expectation of rate hikes, investors are rearranging portfolios and capital, thinking about rate increases, mainly affecting the technology sector and also airlines due to their level of leverage”.
Airlines from Asia and several from the Middle East and Europe canceled flights. Most of the initial outages affected the Boeing 777, which for decades has been a favorite of long-haul air travel.
In fact, the shares of the manufacturer Boeing registered a loss of 3.52% this Wednesday and are sold at 217.08 dollars each on Wall Street.
The sharp drop in the price of airline shares in the United States dragged down the airline sector in Mexico and in other parts of the world. Air France shares lost 3.44% in Paris and Germany’s Lufthansa fell 4.33%.
Amin Vera stated that “the issue of the pandemic puts a burden on the global economy, but winter generates waves of contagion and affects the recovery, negatively impacting mainly airlines. In addition, any restriction placed on airlines has a great impact on them, whether it is the wave of infections, the 5G network or market corrections.”
In Mexico, airport groups listed on the Mexican Stock Exchange were also affected. Grupo Aeroportuario del Pacífico was the only one with a slight rise of 0.47%; while Grupo Aeroportuario del Centro Norte fell 1.55% and Grupo Aeroportuario del Sureste lost 4.51 percent.
Volaris, the low-cost airline, had a loss of 3.52% in the session. (With information from agencies)
Aeroméxico and Volaris, with different realities
The effects of the pandemic have not been the same for airlines in Mexico. Volaris reported this Wednesday that due to the advancement of the Omicron variant, it has not canceled flights due to lack of crews nor does it foresee effects related to this issue in the future, while Aeroméxico announced the new adjustment of 23 operations for that day.
“All crew members fly healthy, thanks to the operational plan that the airline implemented last October with the aim of maintaining strict monitoring of the health status of employees and implementing the necessary measures,” Volaris explained.
This company performs about 500 operations per day.
In a statement, the airline said that it is committed to complying with itineraries and that it protects its clients against cancellations, regardless of the reason, with an electronic credit of 125% of what they paid for their flight.
The measures taken by Volaris include: reinforcement of the biosafety protocol, detection tests for ambassadors (crew, ground staff and administrative staff) and the #VolarisVuelaVacunado campaign, with which more than 98% of the workforce has the double scheme against Covid -19 and an increasing number the booster.
Despite the Volaris statement, its shares on the Mexican Stock Exchange fell 3.52% on the day.
From January 5 to 17, Aeroméxico canceled 766 flights at the Mexico City International Airport (AICM) due to lack of crew due to Covid-19 infections, which have generated a chain of flight modifications.
In the trading session on Wednesday at the Mexican Stock Exchange, Aeroméxico had a rise of 3.14%, but since it began with the cancellation of its flights, the airline has a loss of 34.8% between January 5 and 19, because its shares went from 2.47 to 1.61 pesos each.
“Due to the effects of Covid-19, 23 flights of the 427 scheduled for January 19, 2022, had modifications,” it detailed on its website, adding that “the delay or cancellation of flights is not a decision that we make to lightly and it is always the last resort, ”said the airline at the time. (Drafting)