The airline industry was the one that bore the maximum brunt of financial constraints arising out of the COVID-19 pandemic, mainly due to a reduction in air traffic. However, with the subsiding effects of the pandemic, the situation for aviation companies is getting better around the globe. China Eastern Airlines Corp. Ltd. (NYSE: CEA) is no different. Analyses have revealed that china’s premier airline company, which is headquartered in Shanghai, had substantially recovered from the impacts of the pandemic, but the recent resurgence has once again made the situation challenging for the company. The effects of the recent surge are expected to remain there for several months, meaning a bearish outlook for the company for the upcoming few months.
CEA Steadily Stabilizing after Enduring a Challenge
In March, a crash of China Eastern Airline’s Boeing 737-800 saw 132 people getting killed. The horrible incident prompted regulators to ask CEA to ground its fleet of Boeing 737-800 jetliners. The fleet comprised 223 aircraft. However, recently, it was announced that the company has started putting back its grounded aircraft for commercial flights. The company has said that after conducting several tests and checkups, it had decided to resume the commercial usage of Boeing 737-800 aircraft.
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Current Valuation
CEA currently has a market capitalization of $5.38 billion, while the trading volume sits at 17,900 shares. The trading volume appears to be quite nominal when compared with other giant airline companies. The debt to equity ratio stands at 0.89, which means that the company is not largely reliant upon the debt, but instead, manages its capital requirements by itself. This comes even though the airline industry is one of eh most capital-intensive industries, and hence, most of the companies belonging to it have a high debt to equity ratio. The beta value of the stock currently stands at 1.17, depicting a high risk for the stock.
Final Remarks
Although the statistics proved that the situation improved a lot for CEA stock, the recent wave of the pandemic in PRC and the crash of the company’s aircraft could dent the investor’s confidence in investing n the stock. The increased fuel prices have also prompted a negative reaction from the investor community. Hence, coming time is critical for China Eastern Airlines.