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IAG and EasyJet warn of coronavirus bookings hit

IAG and EasyJet warn of coronavirus bookings hit

  • 28 February 2020
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  • Coronavirus outbreak
Image copyright AFP

British Airways owner IAG has warned that bookings in 2020 will be hit by the effects of coronavirus.

IAG boss Willie Walsh said that as well as all China flights being suspended, there had been "a significant fall-off in demand in Italy".

Airline shares have fallen sharply amid investor concerns about the potential economic effects of the virus.

EasyJet is also cancelling some flights because of the virus and is looking into cost cutting.

'Significant' fall

IAG said flight suspensions to China and cancellations on Italian routes would affect how many passengers it carried this year.

The airline group - which also owns Aer Lingus, Iberia and Vueling - said it was not possible to say how much profits would be hit in 2020 because of uncertainty about the impact and duration of the current outbreak.

The British Airways-owner suspended and restricted flights as the virus spread out from China to Europe and beyond, with Italy as a major centre of infection.

At the end of January the group suspended all flights to mainland China. Flights to Hong Kong have been reduced, and from March there will also be fewer flights to Seoul.

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IAG chief executive Willie Walsh told the BBC's Today programme that in the first three weeks of February, mainly Asian bookings had been affected.

"Clearly we had announced the suspension of flights to China. We took that decision at the end of January, and we had seen some impact on our other Asian routes, but it had looked like it was stabilising.

"But earlier this week we had the issues in Italy, and that's clearly led to a significant fall-off in demand in Italy and in some of the surrounding countries as well."

The number of passengers carried on Italian routes in March "has been significantly reduced" and "further capacity reductions will be activated over the coming days", IAG said in a statement.

Image copyright Reuters
Image caption EasyJet has been forced to cancel some flights

Mr Walsh added that general business travel had been affected by the cancellation of large conferences, as well as by the introduction of travel restrictions by some big companies.

Shares in airlines have been among the hardest hit in the global market sell-off seen this week, and IAG's shares have sunk 17%.

"I don't think it's a surprise that investors are cautious in the current circumstances," Mr Walsh said.

He added that IAG had a "very strong balance sheet", but that it was "natural in the current circumstances that people will be cautious".

Cost cutting

Budget carrier Easyjet said that following the increased number of coronavirus cases in Northern Italy, it had seen "a significant softening of demand and load factors into and out of our Northern Italian bases".

"As a result, we will be making decisions to cancel some flights, particularly those into and out of Italy, while continuing to monitor the situation and adapting our flying programme to support demand."

EasyJet said it would investigate how to save costs in its business as a result. This will include looking into cutting administrative budgets, offering unpaid leave, and freezing recruitment, promotion and pay rises.

Finnair also joined the growing list of airlines issuing warnings, saying it expected a significant fall in operating profit this year due to lower demand for air travel.

'A known unknown'

Rolls-Royce, one of the world's largest makers of aircraft engines, also warned of the impact of coronavirus on its business.

Chief executive Warren East said the virus was a "macro-risk for everyone".

"It's not sector specific, or company specific. It's a known unknown," he told the BBC.

"This is something that is developing daily, and the impact is going to depend on how long disruption lasts for, how wide, from a regional point of view, the disruption spreads, and of course for us as a business, our ability to mitigate against that."