Over the last two months the Qantas Airways Limited (ASX: QAN) share price has lost 51% of its value.
This makes it one of the worst performers on the S&P/ASX 200 Index (ASX: XJO) over the period along with fellow travel stocks Flight Centre Travel Group Ltd (ASX: FLT) and Webjet Limited (ASX: WEB).
Why is the Qantas share price down by over 50%?
The catalyst for this sizeable share price decline has of course been the coronavirus pandemic.
Due to the closure of borders at home and abroad, social distancing initiatives, and other steps to battle the spread of the coronavirus, travel demand has fallen off a cliff over the last few weeks.
In fact, a recent update by Flight Centre revealed just how severe the downturn has been.
During March the travel booking giant revealed that its total global transaction value (TTV) fell to 20% to 30% of normal levels. And that was despite Australia's borders remaining open until late in the month.
Unsurprisingly, Flight Centre has warned that further declines are expected as travel restrictions continue.
What now?
The good news for Qantas is that it recently struck a deal for a total of $1.05 billion of additional liquidity. These funds will be used to secure the long-term viability of the airline and strengthen its position to navigate the fallout from the coronavirus crisis.
This is expected to provide the airline with sufficient liquidity to last it until at least the end of the year.
This means that if the pandemic passes and travel markets return to relative normal before then, Qantas should be positioned to ride out the storm.
It may even come out in a stronger position if other airlines are not as fortunate. There are concerns that Virgin Australia Holdings Ltd (ASX: VAH) may struggle to find sufficient funding to see it through the crisis. Especially given how the government appears to be reluctant to bail out the airline.
Should you buy Qantas shares?
Based on the flattening curve, I'm optimistic that the pandemic will pass long before Qantas runs out of liquidity.
This could make the airline a good option for investors looking for bargains.
However, it certainly comes with a lot of risk. After all, nobody truly knows how long the pandemic will actually last or how long travel restrictions will remain in place after it passes.
In light of this, if you do buy Qantas shares, I would suggest you restrict it to just a small part of your portfolio and prepare yourself for a bumpy ride over the coming months.
