Lufthansa Drops to Its 3-Year Lows as the Coronavirus Disrupts Operations
Germany’s flagship airline, Lufhtansa, had its stock aggressively sold off these past few trading days. Since February 20, the Lufthansa stock price (LHA) has consistently traded lower. As of this writing, LHA is down 3.83% for the day, trading at 12.56. If is closes around this price, it will close with its biggest weekly loss since June 9, 2014.
The airline company has been hard-hit by the coronavirus outbreak. Even before the coronavirus spread to other countries, it had already cancelled all Lufthansa, Swiss, and Austrian flights coming to and from China. As of late, countries like South Korea and Italy have reported a surge in confirmed cases. Governments have already issued travel warnings to these destinations and it will not take long until revenue and Lufhtansa’s stock price take bigger hits.
In an effort to cope with the economic toil of the coronavirus outbreak on its business, the company has announced that it would cut down costs. It began offering its employees unpaid leaves and put hiring on hold. Personnel and airline staff training has also been cancelled. Lufthansa has confirmed that no layoffs need to be made, yet. According to a spokesperson for the company, “the core brand Lufthansa will reduce its project volume by 10% and the budget for material costs by 20%.”
It is scheduled to announce is annual earnings on March 19. If the coronavirus continues to spread at the rate it does now, we could see more travel restrictions which would only weigh on Lufthansa’s finances.
On the monthly chart, we see that Lufthansa stock price is trading at its lowest level since February 2017. Near-term support is at 10.62 where the share bottomed on August 2015. However, if risk aversion lingers, it could drop to as low as 9.23 which was the low for the year 2016.
On the other hand, if efforts to contain the coronavirus prove to be effective, the Lufthansa stock price could tick higher. It could bounce off resistance at 13.63 where it previously found support.