When I worked as a business analyst for Sony (NYSE:SNE), we frequently tailored marketing initiatives toward specific demographics. From a business perspective, these moves made significant sense. Because we live in a diverse country, respecting and honoring others’ cultures often created significant revenue opportunities. But in terms of Delta Air Lines (NYSE:DAL) and DAL stock, the coronavirus pandemic is imposing perhaps an insurmountable headwind.
I’m not just referring to the fact that no one is traveling right now. Honestly, why would anyone even think about getting on a plane? With the U.S. becoming the epicenter of this crisis, tourism is simply out of the question. Additionally, several states have issued mandatory shelter-in-place orders, taking the choice out of Americans’ hands.
Obviously, these are terrible times for DAL stock and the entire travel industry. But what happens when the coronavirus fades? Will we continue to scapegoat Americans just because they look a little different?
Going back to Sony for a second, I worked closely with Hispanic sales managers to craft marketing materials that would appeal to Spanish-speaking consumers. I didn’t think anything of it because again, it makes good business sense. Because Hispanics represent a powerful demographic force, their opinions matter.
Personally, I believe I speak for everyone that we at Sony were happy to promote such initiatives.
By that same logic, airliners should also market their fares to key demographics. In this case, it’s not just about raw numbers. Anybody that works in marketing will tell you that some demos prefer certain consumer industries over others.
Unfortunately for DAL stock and its ilk, the most pivotal demo is the one that’s presently the most embattled.
DAL Stock Needs Society to Check Itself
In an unprecedented move, President Trump signed into law a massive $2 trillion stimulus bill. Within that package are funds designed to help deeply beleaguered airliners. However, as a CNN Business report suggests, the bailout won’t be enough.
Clearly, the problem is that fiscal bandages can only temporarily stop the bleeding. In order for DAL stock to convincingly recover from the doldrums, Delta must put butts in seats.
However, not all butts are the same. According to a Statista survey, at 83% each, Asian Americans and African Americans are the most likely to go on vacation domestically at least once a year. Whites come in at 76%, while Hispanics are the least likely among survey respondents willing to identify their heritage at 73%.
If you’re an airliner, you would pump out marketing materials designed to attract your target demos; namely, Asian Americans and African Americans. As I said above, it’s a good business strategy and is in fact a very common marketing practice.
Of course, I’m not afraid of airliners losing business from African Americans. But what about Asian American fliers? That’s a very tricky situation, although I want to be clear – this is no fault of Delta or any other airline company.
Irrespective of fault or causation, Asian Americans find themselves in the cross hairs for racially motivated retaliatory attacks. Blamed for spreading the coronavirus, pandemic-related hate crimes have skyrocketed in recent weeks. In fact, an FBI intelligence report stated the following: “hate crime incidents against Asian Americans likely will surge across the United States, due to the spread of coronavirus disease … endangering Asian American communities.”
Unlike other calls for solidarity, these communities largely find themselves alone in their struggle. Ultimately, this societal wedge can have a negative effect on DAL stock.
Airliners May Lose a Pivotal Demographic
Traveling by air, especially cross-country flights, aren’t exactly cheap. However, the U.S. Bureau of Labor Statistics reported that “Asian women and men earned more than their White, Black, and Hispanic counterparts in 2017.”
Prior to the coronavirus, the Asian consumer was marketing gold for airliners – a consumer that wanted the product and were willing to pay for it. Today, it’s a different story. Tomorrow, it could be far worse than you might imagine.
When people go on vacation, they want to have a good time. They don’t want to be subjected to death stares and racial slurs. While internet trolls will often state that these acts of low-level racism are “no big deal,” the reality is that no one wants to pay for such abuse, low level or not.
So, unless American society learns to stop scapegoating innocent people, DAL stock will sadly suffer from it. Am I hopeful that this ugly narrative can change in the nearer term? Judging from the “leadership” at the top, my answer is a firm no.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he is long SNE.