A LIH report on airline stock price performance during Covid-19, SARS, H1N1 (swine flu), and MERS clearly shows that this time is different. In the case of the SARS 2003, at 30 days the shares had already recovered and even gone up and at 70 days after the outbreak they had already gained 40%. In both the H1N1 2009 and the MERS 2015 the stock performance was stable and after the first 70 days of the outbreak they had fallen between 10% and 15%. On the other hand, in the Covid-19, in the same period the value of the companies has already fallen more than 60%, according to the ARCA Global Airline Index, which includes more than 30 of the world’s most capitalized and liquid international airlines.
But as in everything, there are winners and losers. The latter it is clear who they are. But who wins? Today it can be said that one of the items that demand has exploited is that of videoconferencing services. But when it comes to quantifying the transfer of wealth, the example of Zoom Video Communications, the video conferencing company based in San José, USA, founded by Eric Yuan in 2011. Today it is an everyday word for the “general public”. “Let’s zoom” is already an everyday expression like “googling”. In this business, according to Gartner, the leaders are Cisco, Zoom, Microsoft and LogMeln.
But Zoom’s escalation is impressive, especially for a company that in 2019 billed just $ 630 million. Its stock has risen nearly 130% since the pandemic broke out. Thus, its market capitalization reached close to $ 48.8 billion. The reality that the pandemic imposes, forcing many people to work and socialize from their homes, has one of the great beneficiaries at Zoom. Suffice it to mention that daily Zoom users have skyrocketed in recent months, going from 10 million in December 2019 to a whopping 300 million in April 2020 (in March there were 200 million).
And following the example of video conferencing vs. business trip, Lennart Dobravsky, director of Research and Intelligence at LIH, compared the valuation of the world’s top 5 airlines by billing (AirFranceKLM, United, Lufthansa, American and Delta) to last May 4 and were worth $ 35,200 million when Zoom was already worth $ 37.7 billion. Then VisualCapitalist’s Iman Ghosh went further and compared Zoom’s capitalization as of May 15 ($ 48.8 billion) against that of the world’s top 7 airlines (Southwest, Delta, United, IAG, Lufthansa, American, and AirFranceKLM) which together they do not reach u $ s46,200 million. It is worth noting that these airlines on January 31 were worth $ 121.3 billion.
Now, everyone is wondering if this will be normality or an ephemeral transition. Ghosh notes in Zoom’s case against its competition that industry analysts say business users have been drawn to the app because of its easy-to-use interface and user experience, as well as the ability to support up to 100 participants at a time. The app has also exploded among educators for use in online learning, after CEO Eric Yuan took additional steps to ensure K-12 schools could use the platform for free. On the sidewalk in front today it remains a question whether regular air travel will return as it was known before the pandemic. “The world has changed for airlines. The future is much less clear to me on how the business will turn out, ”said Buffett.
For Dobravsky, the recent success of Zoom it is a product of circumstances. Bet that business trips, especially those of high caliber, will continue. For Venture Capital veteran Fred Wilson, maybe attending a meeting in person is a thing of the past and shooting videos is our future. Dobravsky says: “We are likely to travel much less for work when the bans are lifted, but video calls cannot replace critical business meetings in person. The personal element is still missing. For this to become a reality, I continue to believe in more than 5 years ”.