The Impact of COVID-19 on the Aviation Industry: Event Study on U.S. Passenger Airline Stocks

This study aims on analyzing the impact of the COVID-19 pandemic on the aviation industry by using stock data from the listed US Airline companies. The hypothesis is that the pandemic has a significant negative effect on these airline companies and is likely to have a different scale of impact on companies specializing in international flights to those specializing in domestic flights. Data is retrieved for both individual stocks and S&P 500 index (benchmark) for both pre-and post-pandemic outbreaks, based on which an event study using the Linear Regression Model was conducted. Using calculated daily returns as a performance indicator, robust results reveal a good level of match between the selected stocks and the market index, and the confidence interval test reflects that the pandemic has an additional negative effect on the aviation industry relative to the benchmark return, a stronger impact on companies specializing in international flights than those specializing in domestic flights, and effects are not identical across companies. The US aviation industry has a high market share worldwide, thus attracting our study interest. Results from our research provide a solid foundation for government to implement a recovery plan and would serve as a guide for potential investors.