BA announced full year earnings today, warning it wasn’t possible to give accurate profit guidance for the coming year.
However, it did say the outlook for the year ahead was “affected by weaker demand”, because of the virus outbreak.
“We are currently experiencing demand weakness on Asian and European routes and a weakening of business travel across our network resulting from the cancellation of industry events and corporate travel restrictions”, BA said.
Airline coronavirus cancellations
In Asia, BA’s flights to mainland China have been suspended. On 29 January, the airline suspended its daily flight to both Beijing and Shanghai and Iberia suspended its three times weekly service to Shanghai on 31 January.
In addition, some services on other Asian routes have been reduced. From 13 February, British Airways reduced its daily Hong Kong service from two to one. From 13 March, it will reduce its daily service to Seoul to 3-4 times weekly.
Some of the freed-up longhaul capacity is being redeployed to routes with stronger demand.
The airline has announced additional flights to India, South Africa and the US; while Iberia is increasing capacity on US and domestic routes.
Italy flights cuts
Capacity on Italian routes for March has been significantly reduced through a combination of cancellations and change of aircraft gauge. Further capacity reductions will be activated over the coming days, BA said.
“We also expect to make some capacity reductions across our wider shorthaul network. Shorthaul capacity is not being redeployed at this stage”, BA said.
The London-listed airline said the net impact of current flight cancellations and redeployed capacity is to lower IAG’s 2020 planned capacity by approximately 1% in terms of available seat kilometres to 2% for the year.
BA’s owner IAG insisted it was resilient with a strong balance sheet and substantial cash liquidity to withstand the current weakness.
“We have a management team experienced in similar situations and have demonstrated that we can respond quickly to changing market conditions. We are strongly positioned for the expected recovery in demand.
“Given the ongoing uncertainty on the potential impact and duration of COVID-19, it is not possible to give accurate profit guidance for FY 2020 at this stage.”
Budget carrier easyJet has also cut the number of flights operating to Italy.
Following the increased incidence of COVID-19 cases in Northern Italy, we have seen a significant softening of demand and load factors into and out of our Northern Italian bases.
“Further, we are also seeing some slower demand across our other European markets” the airline said.
“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.
While it is too early to determine what the impact of the COVID-19 outbreak will be on current year outlook and guidance for both the Airline and Holidays business, we continue to monitor the situation carefully and will update the market in due course.
The carrier said it was working closely with authorities and following the guidelines provided by the World Health Organisation and EASA to ensure the health and wellbeing of its employees and customers.
“We have a cross-functional working group that has been meeting daily to make sure that all our processes and policies remain effective” easyJet said.
“Our procedures for dealing with communicable diseases are similar to those developed during the SARS epidemic and other global health emergencies.
Wage freezes and other costs
To help mitigate the impact from COVID-19 easyJet said it will focus on delivering operational efficiency and cost savings across a number of areas of the business, including:
- Budget cuts in administrative areas and discretionary spend
- Recruitment, promotion and pay freezes across the network
- Postponement of non-critical project and capital expenditure
- Offering unpaid leave and halting non-mandatory training
- Working with third party suppliers to further reduce cost
- Aircraft reallocation for summer 2020 which will offer the highest revenue opportunities on market recovery
IAG’s shares were trading 5.4% lower at £4.87 on Friday morning. They’ve fallen by around 24% in total since 18 February.
Budget rival easyJet’s shares were just over 2% lower on Friday at £10.87. They’ve fallen by more than 27% since 18 February.