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Global travel industry in agony as airlines cut flights, coronavirus grows

American Airlines Group Inc and United said they would continue normal flights to and from Europe for the next week but would be reducing capacity to Europe

Reuters  |  Sydney | Chicago 

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US travel curbs on much of continental Europe announced by President Donald Trump on Wednesday evening deepened the sector's misery

The fallout from the spread across the Pacific on Friday, with travel companies in Australia and New Zealand issuing profit warnings as US airlines rushed to cut flights to Europe in the wake of new US travel restrictions.

US travel curbs on much of continental Europe announced by President Donald Trump on Wednesday evening deepened the sector's misery that began after the virus emerged in China late last year and reduced traffic.

United Airlines Holdings Inc warned of US travel disruption as the virus spreads domestically and major tourist attractions like Walt Disney Co's theme parks in California and Florida said they would close.

American Airlines Group Inc and United said they would continue normal flights to and from Europe for the next week but would be reducing capacity to Europe by around 50 per cent in April.

American also said it was cutting international capacity by 34 per cent for the summer travel season and accelerating the retirement of its Boeing Co 757 and 767 planes.

Delta Air Lines Inc also said it would significantly reduce its US-Europe schedule after Sunday as it continues to watch customer demand.

Several Latin American countries stepped up measures to slow the spread of the coronavirus, halting flights to and from Europe. More than $825 million was wiped off the value of listed Indian airlines on Thursday after the government said it was restricting visit visas.

The International Air Transport Association (IATA), a global industry group representing airlines, called on governments to consider extending lines of credit, reducing infrastructure costs and cutting taxes.

"There is a heightened concern there will be increased airline bankruptcies in 2020 given the fallout from the coronavirus," Cowen analyst Helane Becker said.

"We expect some governments to step in to help some airlines, but ultimately we expect more airlines to fail this year than last year," she said in a note to clients, citing Cirium data that 41 airlines with 324 aircraft went bankrupt last year.

Cash-strapped low-cost carrier Norwegian Air Shuttle ASA said on Thursday it would cut 4,000 flights and temporarily lay off up to half of its employees due to the outbreak.

Asia-Pacific hit hard

Virgin Australia Holdings Ltd, Auckland International Airport Ltd, Flight Centre Travel Group Ltd and Corporate Travel Management Ltd said they would take hits to earnings from reduced travel demand, which included an 18% decline in international passengers at Auckland's airport in the first 10 days of March.

Australia's No. 2 carrier, Virgin Australia, said it would offer discounted fares and cut some flights from Sydney to Los Angeles as demand for trans-Pacific travel fell while the airline's share price hit record lows.

"You will see us continue to be very disciplined with capacity as the situation evolves," Virgin Australia Chief Executive Paul Scurrah told reporters, echoing similar comments by rival Qantas Airways Ltd earlier in the week.

Qantas shares plummeted 15 per cent on Friday to the lowest level since 2017.

Virgin and Flight Centre joined a growing list of travel companies, which includes the big U.S. airlines, that are freezing hiring, halting executive bonuses and offering unpaid leave to staff in an effort to preserve cash.

Flight Centre Managing Director Graham Turner said the company's priority was to reduce costs given the uncertain environment but also to ensure it was ready to capitalise on an eventual rebound in demand.

The travel agency's shares plunged 17 per cent on Friday after it withdrew its profit guidance and said it would close up to 100 shops in Australia.

Airline stocks in Asia were also hit, with Singapore Airlines Ltd shares down 9 per cent as Singapore Changi Airport announced seat capacity for the month of March was down nearly 30 per cent from what was originally scheduled.

CGS-CIMB analyst Raymond Yap said the global spread of the virus meant the fall in demand for the airline's regional flights was likely to spread to long-haul flights, hurting the take-up rate in the lucrative business and first-class cabins.

Japan's ANA Holdings Inc and Japan Airlines Co Ltd (JAL) down more than 10 per cent, having also fallen on Thursday.

JAL said it would cut 1,468 domestic flights between March 20 and March 28 stemming from lower demand because various sporting and cultural events had been suspended in Japan.

 

 

First Published: Fri, March 13 2020. 09:23 IST
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