Restrictions on air travel to India and the global airline industry - An event study and cross-sectional approach

Abstract

Using the closing prices of 88 listed airline companies worldwide from November 16, 2020 to May 10, 2021, we employ the event study methodology to examine how air travel restrictions to India by several nations during April–May 2021 impacted the global airline industry. It is interesting to find out how the shocks that arise in India impact the global airline industry. We find that even after a prolonged pandemic, developed and emerging markets are sensitive to new information. The news content of the B.1.617 variant, named “variant of interest” by the WHO and air travel restrictions have significantly impacted the global airline industry. However, emerging markets are sensitive to travel restrictions. Furthermore, the impacts were less severe than those of the first wave in early 2020. Using cross-sectional regression, we also provide insights into which firm-specific characteristics drive firm's value during the pandemic. We find that while debt, past returns, and volatility positively impact the cumulative abnormal returns (CARs), the liquidity and total assets negatively impact the CARs in the shortest event window. To examine this research question, we conducted the first study during the second wave of the pandemic. These findings have important implications for the stakeholders.