Airlines Rise on White House Adviser's Talk of 'Targeted Measures' to Help Industry

White House economic adviser Larry Kudlow says the administration is considering 'targeted measures' to offset the coronavirus' impact on the industry.
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Battered airline stocks were rising Friday after chief economic adviser Larry Kudlow said the Trump administration was considering “targeted measures” to offset the devastating impact the spreading coronavirus was having on the industry.

Delta Air Lines (DAL) - Get Report was up 1.5%, United Airlines Holdings (UAL) - Get Report was rising nearly 4%,  and JetBlue (JBLU) - Get Report was advancing 2.5%. American Airlines (AAL) - Get Report was up about 1.3%.

"We are in the camp that wants timely and targeted micro-measures,” Kudlow said on Bloomberg Television, noting that some of the White House's measures could be directed at the airline industry.

President Trump on Friday signed an $8.3 billion emergency spending bill to combat the coronavirus.

The International Air Transport Association recently said carriers worldwide could lose between $63 billion and $113 billion in passenger revenues this year, depending on the scope of the spread of the coronavirus.

Cowen analyst Helane Becker said that the "coronavirus has sent a shockwave through the booking curve with corporate and leisure canceling trips or hesitant to purchase new tickets."

Still, Becker said she believes "the risk of a liquidity crisis is low in our base case scenario."

"At this time we do not foresee the coronavirus impact triggering a bankruptcy scenario for the U.S. airlines," she said in a note to clients. "Given the changes in the landscape since consolidation and a focus on balance sheet improvement, many of the airlines have large amounts of unencumbered assets to tap if needed and continue to have access to the financial markets (both American and Delta recently raised capital)."

Becker warned, however, that "we assume the recovery from the coronavirus will be more of a U-shaped recovery than a V-shaped recovery, but if this extends through the end of the year all bets are off."

"We expect all airlines to make meaningful adjustments to their network given what is happening to demand," Becker said. "Expect older, inefficient aircraft to be parkedand phased out first, while high frequency routes are adjusted lower. Seasonal routes ininternational markets will be cut next, outside of the reductions already made to China, Hong Kong, Japan, South Korea and Italy."

Becker said she has seen very little movement in consensus estimates since the coronavirus outbreak spread to Europe and the US, "suggesting many do not know where to start."

"Our current expectation is significant declines in demand & bookings in March and April, with sequential improvement starting in May as the virus plays itself out and media attention slows," she wrote. "The current consensus view is that the virus' spread will slow with warmer weather."