The Impact of Covid-19 and Policy Responses on Airlines’ Stock Returns

This study investigates the mitigating impact of government policies on the COVID-19 pandemic’s effect on the weekly stock returns of 73 global airline companies in 36 countries. Using panel data estimation techniques with country and week fixed effects, we find that, overall, government policies, containment and health policies, and stringency policies increase airlines’ stock returns. However, economic support policies do not have a significant impact on the returns. Government interventions do not moderate the negative effect of the pandemic on airlines’ stock returns. They exhibit significantly heterogeneous effects based on the headquarter location, but are not affected by the ownership structures and business operations of the airlines. Our empirical findings provide salient insights for protecting airline companies by reflecting on which government policy responses are effective and how governments should invest and prioritize policies. The findings also present valuable implications for airline managers, investors, and policymakers concerned with the current pandemic and future such crises.