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Covid plasma lifts airline stocks despite plunging corporate demand

airline corporate demand dries

Airline stocks opened higher on Monday morning following the latest coronavirus treatment news, despite a Bank of America report saying corporate travel demand has evaporated.

As the holiday season comes to an end in the US, airlines would normally rely on corporate demand to produce some revenue through the winter.

But the US bank said: “We are only a few weeks away from moving out of the peak leisure travel season and into the more business heavy fall, and domestic corporate bookings have shown no improvement since mid-June.”

However, airline shares – tracked by the US Global Jets ETF (JETS) – closed last week at $16.64 while seeing a 3% gain so far during today’s pre-market stock trading activity.

Market ignoring demand headwinds, emphasis on treatment news

On Sunday, President Donald Trump said that the US Food and Drug Administration (FDA) had given the green light to the emergency use of plasma for treating coronavirus patients as its benefits outweighed its risks, according to the agency.

“We saw about a 35% better survival in the patients who benefited most from the treatment”, said US Health and Human Services Secretary Alex Azar in regard to the treatment’s effectiveness.

News of the approval of this treatment are providing a boost to virus-battered stocks such as those in the gambling, leisure, travel, and tourism sectors, as a reduction in mortality rates and a viable treatment could increase consumer’s confidence to resume their traveling.

Are airline shares presenting an opportunity?

airlines stocks
US Global JETS ETF (JETS) price chart – 1-day candles with volume & RSI – Source: TradingView

Today’s session is one to keep an eye on, as investors will have to decide which of these two features have a bigger weight in the industry’s outlook.

The latest price action seen by this exchange-traded fund seems to be forming a descending triangle, a continuation pattern that could lead to another push towards the June highs if the ETF manages to break above that upper trend line.

The next few days could be determinant to see if the momentum is strong enough to deliver that break, while higher trading volumes should provide confirmation of this move.

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Alejandro Arrieche

Alejandro is a financial writer with 7 years of experience in financial management and financial analysis. He writes technical content about economics, finance, investments, and real estate and have also assisted financial businesses in building their digital marketing strategy. His favorite topics are value investing and financial analysis.