Travel industry under siege as coronavirus contagion grows
By Jamie Freed and Tracy Rucinski
SYDNEY/CHICAGO (Reuters) - The fallout from the coronavirus spread across the Pacific on Friday, with travel companies in Australia and New Zealand issuing profit warnings as U.S. airlines rushed to cut flights to Europe in the wake of new U.S. travel restrictions.
U.S. travel curbs on much of continental Europe announced by President Donald Trump on Wednesday evening deepened the sector's misery that began after the virus emerged in China late last year and reduced traffic.
United Airlines Holdings Inc (O:UAL) warned of U.S. travel disruption as the virus spreads domestically and major tourist attractions like Walt Disney Co's (N:DIS) theme parks in California and Florida said they would close.
Several Latin American countries stepped up measures to slow the spread of the coronavirus, halting flights to and from Europe. More than $825 million was wiped off the value of listed Indian airlines on Thursday after the government said it was restricting visit visas.
The International Air Transport Association (IATA), a global industry group representing airlines, called on governments to consider extending lines of credit, reducing infrastructure costs and cutting taxes.
Virgin Australia Holdings Ltd (AX:VAH), Auckland International Airport Ltd (NZ:AIA) and Australia's Flight Centre Travel Group Ltd (AX:FLT) said they would take hits to earnings from reduced travel demand, which included an 18% decline in international passengers at Auckland's airport in the first 10 days of March.
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 while the airline's share price hit record lows.
"You will see us continue to be very disciplined with capacity as the situation evolves," Virgin Australia Chief Executive Paul Scurrah told reporters, echoing similar comments by rival Qantas Airways Ltd (AX:QAN) earlier in the week.
Virgin and Flight Centre joined a growing list of travel companies where executives are taking pay cuts and offering unpaid leave to staff due to reduced demand and weaker economic conditions.
"With this uncertain environment our priorities are to reduce costs, while also ensuring that we and our people are ready to capitalize when the steep discounting that is underway across most travel categories starts to gain traction as the trading cycle rebounds," Flight Centre Managing Director Graham Turner said in a statement.
The travel agency's shares plunged 17% on Friday after it withdrew its profit guidance.
Airline stocks in Asia were also hit, with Singapore Airlines Ltd (SI:SIAL) shares down 8% in early trade and Japan's ANA Holdings Inc (T:9202) and Japan Airlines Co Ltd (T:9201) down more than 10%, having also fallen on Thursday.