On 15th April 2020, the New Zealand stock exchange saw a surprising surge in the stock value of Air New Zealand as the share price rose 13% over night. It marked a very positive start to the day of trading across the New Zealand Stock Exchange (NZX)
Though Air New Zealand has always performed well on both the New Zealand and Australian Stock Exchange, the rise was a welcome site during these uncertain pandemic times.
On 15th April the share price as $1.18 and had a market capitalisation of $1.01 billion. So despite being unable to fly its normal domestic and international routes, the stock value of Air New Zealand surged, the big question is, why?
Why did the [NZX:Air] share price rise?
Like many stocks in this coronavirus landscape, the share was previously sold down heavily. Yet, there was optimism amongst investors that seems to be driving people to put their money in Air New Zealand stock.
These include:
- The liquidity that Air New Zealand was able to arrange with the New Zealand government in the form of a $900 million dollar loan package.
- VirginAustralia, a major competitor, moved to close its New Zealand operations as it ground almost all of its fleet.
- Auckland Airport has seen a strong rise in its stock value after a major capital placement option.
- Air New Zealand has supported its continued trading by cost-cutting, reduction of unprofitable travel routes and redundancies.
- The leadership of Air New Zealand CEO Greg Foran has so far been transparent and strong, inspiring confidence in the stable future of the company.
- The management of Air New Zealand through the countrywide lockdown due to the coronavirus and the preparations the company made to begin operating again once the lockdown had eased to an appropriate level.
- Panic sellers in the market had dissipated leaving behind long-run investors and bargain hunting buyers.
All of this allowed Air New Zealand’s stock price to stabilise and begin to rally.
One month on
One month on and the stock price on 15th May 2020 closed at $1.22, a steady decline from the high of $1.39 on 20th April 2020. However, the movement of New Zealand to its level 2 lockdown phase has led to the announcement that flights from and to Taupo and Timaru on 8th June 2020 and has already begun flying between most of its domestic ports is a positive sign for the continued recover of the stock.
What does the future hold?
Any and all positive news from the aviation, travel and tourism can only help to increase optimism amongst all investors and will help the share prices to rise, especially if Air New Zealand’s competitors continue to keep their fleets grounded.
Ultimately the recovery of the travel sector is dependent on how long the corona virus pandemic continues overseas. With vaccines expected to be ready as early as September and hard hit countries such as Italy and Spain beginning to flatten their curves, there is hope that international travel will become stable sooner rather than later.