Assessing the Impact of the COVID-19 Pandemic on the Risk-Return Profile of the U.S. Aviation Sector

Abstract

The COVID-19 pandemic precipitated unparalleled disruptions in the aviation sector, prompting a critical evaluation of the risk-return dynamics within the industry. This investigation focuses on the stock performance of seven prominent U.S. aviation entities, encompassing both manufacturers and airline operators. Employing the Capital Asset Pricing Model (CAPM), the study juxtaposes pre- and post-pandemic financial data to discern the pandemic's fiscal ramifications. The results unearth a dichotomous impact: while manufacturers with defense contracts like Lockheed Martin exhibited stability, commercial airlines such as American Airlines grappled with significant setbacks due to decreased travel. The analysis yields insights into the industry's differential responses to the crisis and highlights the necessity for adaptable strategies in mitigating economic volatilities. This research not only sheds light on the pandemic's immediate effects but also underscores the enduring need for resilience in aviation finance.