IATA's New Forecast Adds Gloom To Coronavirus-Hit Airlines
Zacks Investment Research | Mar 05, 2020 08:40PM ET
The fast-evolving coronavirus outbreak rattled stock markets globally. Almost all sectors are reeling under its effects. However, it is the travel industry that is the worst hit. The dreaded coronavirus, having first emerged in Wuhan, China, now spread its tentacles to 86 more countries claiming the lives of more than 3,300 people and infecting over 95,000. As of Mar 6, United States reported in excess of 225 confirmed cases of the virus and a death toll of 12.
Given the rapid spread of the virus and the consequent plunge in air travel demand, airlines across the globe are trimming capacity on international routes. For instance, American Airlines (NASDAQ:AAL) suspended flights connecting Dallas with China, Hong Kong and Seoul due to lackluster demand following the coronavirus outbreak. The carrier also decided to call off all U.S. flights to Milan, Italy. Fellow U.S. carriers, namely United Airlines (NASDAQ:UAL) and Delta Air Lines (NYSE:DAL) also suspended multiple flights citing the same issue.
Latin American carrier LATAM Airlines (NYSE:LTM) also cancelled Milan flights from Sao Paulo. Due to significant drop in bookings, Ryanair Holdings’ (NASDAQ:RYAAY) fourth-quarter fiscal 2020 (ending Mar 31, 2020) results are likely to be heavily impacted. Notably, Ryanair will cut 25% of its Italian capacity for the Mar 17-Apr 8 time frame. Also, Germany’s Deutsche Lufthansa (OTC:DLAKY) , which has exposure to Italy and China, reportedly decided to ground 150 of its planes due to weak demand.
Among U.S. airlines, United Airlines, carrying a Zacks Rank #3 (Hold), is seemingly experiencing the maximum downfall. Flight cancellation apart, the carrier took some dramatic measures, such as putting a halt to hiring (except for crucial roles), delaying 2019 merit salary increases as well as giving employees the option to apply for unpaid leave of absence voluntarily. Per CFRA analyst Colin Scarola, the carrier reportedly generates approximately 40% of total revenues from international route and has greater international exposure among U.S. airlines. You can see Zacks Investment Research
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