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Will Airline Stocks Recover Faster Under Trump or Biden?

The Tokenist

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Managing Director - Lakeview Capital, Co-founder of Protective Technologies Capital & The Tokenist

Less diverse and competitive than ever, US airlines seek the help of politicians to soften the pandemic’s impact.

Although every election is hailed as “the most important” to drive the voting enthusiasm, the Biden/Trump election certainly seems to invoke a high degree of tension. The pandemic has taken a toll on many industries, with aviation being one of the most visible to suffer. Ahead of the election, we must ask ourselves, what would be the impact of either Trump or Biden Presidency on airline stocks?

US Presidential Elections to Sharply Impact Airline Stocks

In the growing pandemic tally, we are seeing the downfall of many previously thriving sectors. Luxury cruising is all but scrapped, the theater movie industry is barely holding on, and international tourism dropped by 65%. As with all things, one thing leads to another.

When more people feel anxious about their future income, and as more individuals prioritize virtual exchanges instead of physical interaction, reduction effects further compound. The aviation sector is the foremost example of this. The pandemic brought the US air industry to its knees with a 75% reduction in passenger activity.

President Trump’s First Term Aviation Legacy

During his first campaign and presidency, Trump emphasized multiple times his desire to “renew America’s infrastructure” in the following ways:

  • A $1.5 trillion investment in infrastructure.
  • Turning over air traffic control (ATC) to private entities from the Federal Aviation Administration (FAA).

Both never materialized. Out of the proposed $1.5 trillion, only $21 billion ended up being allotted during 2018. Further infrastructure deals were in discussion, raising the original proposal to $2 trillion, but that deal too failed to materialize. Likewise, removing air traffic control from the FAA was foiled due to the lack of bipartisan cooperation.

In the end, as US travel entered its lowest point in history, the CARES Act injected the industry with an additional $25 billion to stave off the worst wave of layoffs. As of September 17, President Trump met with a group of airline CEOs to come up with another relief plan. Also sitting at $25 billion, it was postponed under the moniker HEROES Act, likely to occur after the election.

Biden’s Aviation Plan

As a career politician with 40 years of experience, Biden served as vice president in the Obama administration from 2009 to 2017. This gives us plenty of indicators of what we can expect from a Biden presidency. As vice president, Biden oversaw:

  • The greatest consolidation of the airline industry, following the mergers of United-Continental in 2010 and Airways-American merger in 2013. This left the industry with the minimum number of competitors since its inception.
  • More transparent fee rules and refunds.
  • Stricter pilot qualification standards after the 2009 Air Flight 3407 crash.

With a Biden presidency, we should expect to see a greater emphasis on greenhouse emission reduction, although it is not yet clear how that can be accomplished given the high energy density requirements for jet fuel. Nonetheless, Biden has already pledged a $400 billion investment into technologies that would pave the path toward net zero-carbon emission by 2050.

In addition to eco-focus, Biden has pledged to increase safety standards, i.e. more regulations, and upgrade US airports by securing double the current funds for FAA’s Airport Improvement Program.

Airline Stocks in the Near Future

Both presidential contenders are almost certain to facilitate another relief round. After all, airlines may go bankrupt but airports and airplanes represent the nation’s vital physical assets. They need to be maintained regardless of momentary economic woes in order to not incur greater losses down the line.

However, Trump and Biden differ greatly when it comes to implementing pandemic measures. President Trump rejected the CDC’s plan for a mask mandate, which Biden wholeheartedly endorses and has pledged to implement as soon as possible for all public transportation.

Additionally, Biden’s administration would drastically ramp up contact tracing, to the extent of hiring up to 100,000 personnel to implement nation-wide contact tracing. In the end, as we have seen with Trump’s presidency, a lot will depend on the success of bipartisan deals. In the meantime, Trump would focus more on reverting to the previous normal with the mass deployment of vaccines—which would also impact the stock market—while Biden seeks to bring more permanent “new normal” standards.

Originally Posted on October 27, 2020 – Will Airline Stocks Recover Faster Under Trump or Biden?

Disclosure:Tim Fries has no positions in any of the stocks mentioned, and has no plans to initiate any positions within the 72 hours following the publishing of this article. This article expresses the opinions of Tim Fries. Tokenist Media LLC has no position in any of the stocks mentioned, and does not plan to initiate any positions within 72 hours of the publishing of this article. Please consult our website policy for more information.

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