Coronavirus: Travel industry under siege as outbreak spreads

Airlines reduce capacity as passengers stay at home

Jamie Freed,Tracy Rucinski
Friday 13 March 2020 16:50
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The fallout from the coronavirus spread across the Pacific on Friday, with Australian travel firms issuing profit warnings and Japanese carriers cutting capacity, while US airlines rushed to cut flights to Europe in the wake of new travel restrictions.

US travel curbs on much of continental Europe, announced by Donald Trump on Wednesday, 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, while major tourist attractions like Walt Disney Co’s theme parks in California and Florida said they would close.

American Airlines Group Inc (AAG) 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.

AAG 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.

German airport operator Fraport said on Friday that passenger numbers at its key Frankfurt airport dropped by around 30 per cent in the first week of March due to the coronavirus epidemic.

“We have to assume that the strong decline in air traffic volumes will continue during the next few weeks and months,” CEO Stefan Schulte said in a statement.

Air France KLM SA said on Friday that it had drawn down on €1.1bn (£977m) worth of its revolving credit facility to help its financial position.

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

Iata last week estimated that the crisis could wipe out some $113bn (£904bn) of industry revenue, in a forecast that did not include the US clampdown on European travel.

“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 coronavirus outbreak.

The Indian government said it would extend the deadline for submission of early bids for ailing state carrier Air India until 30 April, in part due to the virus situation.

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.

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.

“You will see us continue to be very disciplined with capacity as the situation evolves,” Virgin Australia’s chief executive Paul Scurrah told reporters, echoing similar comments made by rival Qantas Airways Ltd earlier in the week.

Virgin and Flight Centre joined a growing list of travel companies, which includes the big US airlines, that are freezing hiring, halting executive bonuses and offering unpaid leave.

Singapore will, from Monday, deny entry or transit to visitors who have been in Italy, France, Spain or Germany in the last 14 days, the health ministry said on Friday.

Earlier in the day, Singapore Changi Airport announced seat capacity for the month of March was down nearly 30 per cent from what was originally scheduled.

Raymond Yap, analyst for financial services firm CGS-CIMB, said the global spread of the virus meant the fall in demand for Singapore Airlines Ltd 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 (ANA) and Japan Airlines Co Ltd (JAL) closed 7.6 per cent and 13 per cent lower respectively.

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

ANA will cut the number of daily flights from Japan to Los Angeles and New York and reduce operations to other cities in North America from Monday, it said. It also said there will be fewer flights to Europe including France, Germany and Belgium.

Reuters

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