March 2020 Market Recap

April 8, 2020

The continued spread of COVID-19 globally has sent investors away from equities and into perceived safe haven assets such as gold. Airlines have been forced to cut almost all flights and share prices are down significantly so far in 2020. However, governments around the world are stepping in to help carriers during this difficult time of decimated demand. Gold, on the other hand, attracted more buyers and saw its price rise from February.

Click below to read our recap of the airline sector and gold market for March 2020.


  • Investors are noticing the buying opportunities among airlines amid the continued equities selloff on coronavirus concerns. Billionaire investor Warren Buffet’s Berkshire Hathaway, Inc. increased its stake in Delta Airlines in late February, reports Bloomberg. The company acquired more than 976.000 shares for around $45.3 million. Berkshire now owns 17.9 million shares of the carrier – or about 11 percent total.
  • As commercial carriers make big cuts to scheduled flights due to plummeting passenger numbers, private jet operators are seeing a surge in demand. Richard Zaher, CEO of Paramount Business Jets, says demand is unbelievable and that “aircraft are getting booked literally in minutes.” Bloomberg reports that Zaher’s business is up 30 percent from the same time last year and that JetSet Group, Inc. is 60 percent higher. The carriers noted that passengers are required to go through mandatory temperature screenings.
  • One positive light for airlines amid the COVID-19 outbreak is lower oil prices. Crude has fallen dramatically as the world predicts weaker oil demand and production continues to grow. Fuel is one of airlines’ biggest expenses. However, many carriers now hedge oil prices and secure locked-in prices. For example, RyanAir hedges almost 90 percent of its oil consumption, while Southwest is less than 60 percent hedged. Airlines learned from the oil surge in 2013 that locking in lower prices can be beneficial when prices rise, but a weakness when prices fall.


  • Airlines could lose $252 billion in revenue from passenger operations this year due to the pandemic, according to the International Air Transport Association (IATA). The organization’s CEO said that half of its member carriers could go bankrupt without government aid. Commercial flights globally have been cut by nearly 90 percent and carriers are seeking bailouts from their respective countries. The U.S. passed a stimulus package that includes more than $50 billion in earmarked liquidity for domestic airlines, $25 billion in loans and guarantees for passenger carriers and $25 billion in direct grants. Although this should help the airlines, many predict that it won’t be enough.
  • The entire airline industry is suffering from the slowdown in global travel, including manufacturers and engine makers. Rolls-Royce halted civil engine production for a week and Safran cut a $1.1 billion dividend. Bloomberg writes that the sector employs more than 500,000 people in the U.S. alone. GE Aviation – the world’s biggest engine maker – is cutting 10 percent of its 26,000 U.S. employees and will furlough half of its maintenance staff for 90 days.
  • A 136-page report released by Ethiopian investigators shows that Boeing’s design of the 737 MAX jet and inadequate pilot training led to the deadly crash of an Ethiopian Airlines flight a year ago. The report released in early March is a draft and the final report determining the cause of the crash has not yet been released. The report puts a focus back on Boeing for its troubled 737 model that suffered two deadly crashes. Aircraft design and pilot training were also cited as factors in the fatal Lion Air flight.


  • Airlines are adapting to the changing travel landscape by venturing into cargo-only flights. Carriers are replacing passengers with goods in a bid to earn some revenue as traffic is down 90 percent during the COVID-19 outbreak. Bloomberg notes that carriers around the world, such as Cathay Pacific Airways, Korean Air Lines and American Airlines, are boosting cargo traffic by transporting goods in the belly of passenger planes. Southwest even offered its first cargo-only flight in its history. Um Kyung-a, analyst at Shinyoung Securities, said “with oil prices falling and higher rates, it’s become economical for some airlines to be using passenger plans for cargo.”
  • The European Union (EU) is helping airlines cope with the coronavirus pandemic by waiving until October 24 the requirement that carriers use at least 80 percent of their takeoff and landing positions or risk losing them the following year, reports Bloomberg News. Airline slots are worth millions of dollars and the suspension of the EU “use-it-or-lose-it” rule should help struggling carriers.
  • Although the U.S. government stimulus package might not have been all that airlines had asked for, President Donald Trump did express strong support for the sector. In mid-March Trump told reporters that “as far as the airlines are concerned, we are going to back airlines 100 percent. We’re going to help them very much.” President Trump’s economic advisor Larry Kudlow also expressed support for the industry, saying that “If they get into a cash crunch, we’re going to try and help them.” This provides hope that airlines might get even more help further down the road.


  • Bloomberg News used Edward Altman’s Z-score method to predict bankruptcies and created a list of the airlines at most risk of going bankrupt in the next two years. The list is heavily concentrated in Asian carriers due to high debt levels and includes Pakistan International Airlines, Air Asia Indonesia, Nok Air PNG Air and Kenya Airways. Qatar Airways CEO Akbar Al Baker said that “in this very difficult period, it will only be the survival of the fittest.” The executive added that “a lot of airlines” will disappear due to the virus.
  • Before U.S. lawmakers passed the over $2 trillion stimulus package, the bill included language that would have linked financial aid to a requirement that airlines would have to cut in half their carbon emissions over the next 30 years and start offsetting emissions in 2025, reports Bloomberg. That provision was ultimately removed from the package, along with other green initiatives, as Republicans accused Democratic lawmakers of trying to add in unnecessary measures and put the Green New Deal in effect.
  • From 2010 to 2019, U.S. airlines spent approximately 96 percent of free cash flow, or $45 billion, to purchase shares of their own stock. Share repurchase programs aim to boost share prices. This issue arose when lawmakers were considering aid packages for airlines. Perhaps if airlines used all that cash to build up reserves, rather than buy their own stock, they might have been in a better position to weather a downturn such as now due to the virus.

Free cash flow (FCF) represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. 

A basis point, or bp, is a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 1/100th of 1%, or 0.01% (0.0001).