BA-owner and easyJet warn on coronavirus impact

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
A British Airways Airbus 321 NEO lands at London Heathrow airport. (Fabrizio Gandolfo/SOPA Images/Sipa USA)

Top airlines on Friday warned the global outbreak of coronavirus is denting their business.

International Consolidated Airlines Group (IAG.L), which owns British Airways and Iberia, and easyJet (EZJ.L) both said the epidemic was forcing them to cancel flights and leading to lower demand.

British Airways has already suspended flights to mainland China and IAG said Friday BA was reducing routes to Hong Kong and Seoul, South Korea.

Read more: British Airways suspends China flights over coronavirus outbreak

More broadly, IAG said the coronavirus epidemic has hit “business travel across our network, resulting from the cancellation of industry events and corporate travel restrictions.” Demand for short-haul flights to Italy has also suffered since the beginning of an outbreak in the north of the country.

British Airways is laying on more flights to in-demand locations such as South Africa, the US, and India to try and offset the damage, but IAG warned the outbreak would ultimately reduce the amount of passengers BA will carry this year by roughly 1% to 2%.

IAG said it was “not possible to give accurate profit guidance [for 2020] at this stage” given the ongoing epidemic.

Passengers arrive at Heathrow Airport in London after the last British Airways flight from China touched down following the suspension of all flights to and from mainland China. (PA)

EasyJet, meanwhile, said it was cancelling flights to and from Italy as a result of weak demand. The budget carrier is also seeing weaker demand across wider Europe and will cut back on flights more broadly.

Like IAG, easyJet said it was “too early” to say how the novel coronavirus, known as COVID-19, will ultimately impact its top and bottom lines. However, it is cutting administrative budgets, freezing recruitment and pay rises, offering unpaid leave, and talking to suppliers to reduce costs in a bid to mitigate the negative effects.

Read more: Cathay Pacific asks staff to take unpaid leave over coronavirus

“We continue to monitor the situation carefully and will update the market in due course,” easyJet said. The airline added it “is working closely with authorities and are following the guidelines provided by the World Health Organisation and EASA to ensure the health and wellbeing of our people and customers.”

Airlines and travel companies have been among the worst hit by the global sell-off that has gripped stock markets, amid fears about slumping demand and travel restrictions crippling their business. easyJet shares have fallen 25% since the start of the week and IAG’s stock price has fallen by 17%.

easyJet's shares have been crushed since Monday amid a broader market sell-off. Photo: Yahoo Finance UK

Selling resumed on Friday. EasyJet slipped a further 4.8%, while IAG declined by 9.4%.

IAG’s warning on the COVID-19 impact came as it reported its annual results. Revenue rose 5.1% to €22.4bn (£18.7bn, $24.3bn) in 2019 but profit dropped by 40.8% to €1.7bn.

“These are good results in a year affected by disruption and higher fuel prices,” chief executive Willie Walsh said in a statement.

Read more: Stocks fall again amid warnings of coronavirus’ ‘pandemic potential’

William Ryder, an equity analyst at Hargreaves Lansdown, said investors would be more focused on the coronavirus impact than the 2019 results.

“The balance sheet is key here, because the group’s bills still need to be paid even if the fleet isn’t running at full capacity,” Ryder said.

“IAG has €4.1bn in cash and equivalents, plus another €2.6bn in interest bearing deposits maturing in between three and twelve months. This should give IAG the liquidity it needs to ride out the coronavirus induced disruption.”

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