The Impacts of COVID-19 on the Stock Returns of Supplier Industries of the Civil Aviation Sector: An Event Study

Introduction

The civil aviation sector is the third largest sector in the world, which consists of different industries operating together with global regulators such as the International Civil Aviation Industry (ICAO), International Air Transport Association (IATA) and Airport Council International (ACI). Civil aviation market players continue to play their games in a narrow legal ground adorned with safety, security, environmental and anti-noise rules, regulations and laws with possible and severe punishments. Each player also possesses a financial identity that may encounter financial burdens, which have become heavier especially in the last decade. Investors, creditors and leasing companies monitor these markets vigorously and thoroughly. Besides, the sector exhibits a dynamic managerial and financial structure. In fact, the market conditions of the US Civil Aviation Sector after the 1978 Airlines Deregulation Act, with all of its negative and positive impacts, is an experienced example of the relocation of the market toward the desired destination in a complex financial world.

Ever since the World Health Organization (WTO) declared Covid-19 as a pandemic (World Health Organization) on March 11th, 2020, severe restrictions have been imposed on air transportation. According to Iacus et al. (2020), air travel bans due to Covid-19 caused significant reductions in the World GDP as well as job losses in the aviation sector. COVID-19 travel restrictions even led to the bankruptcy of several airlines and airports (Dube et. al.,2021). Similarly, global air transportation networks were also dramatically affected by Covid-19 (Sun, Wandelt and Zhang, 2020). Besides, Airport revenues dropped significantly due to the pandemic, which can be seen in the table 1.

Source: Airport Council International