EasyJet and the owner of British Airways have reported significant drops in demand because of the coronavirus outbreak and announced emergency measures, including cancelling flights, changing the size of planes used on routes and freezing pay.
The virus has hit ticket sales around the world, wiping tens of billions of dollars off industry revenues, with Asia and Europe particularly affected.
In an unscheduled trading update, EasyJet said on Friday it was cancelling hundreds of flights and imposing a pay freeze as part of a number of emergency cost-cutting measures.
IAG, the owner of BA and Iberia, warned it was suffering from weak passenger demand across both continents, including a drop in business travel around the world as companies impose travel restrictions and cancel big industry events. IAG warned its earnings outlook had been “adversely affected” and it could not issue profit guidance for 2020.
IAG’s chief executive, Willie Walsh, said the situation had escalated rapidly: “Last Friday I know we would have been comfortable providing the markets with guidance – but given what has happened since, there is just too much volatility there.”
Walsh said almost 40% of calls to IAG customer service centres were now coronavirus-related queries, peaking after a spike in coronavirus cases in Italy. He said there were high rates of no-shows on every Italian flight and demand had significantly reduced: “It’s north, south, east, west of Italy – I don’t think people are differentiating between the region that has been quarantined or anything else.”
No other European destination has yet been affected but Walsh said there were “trends in other markets”, although on a far smaller scale in neighbouring countries, which he declined to specify.
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Shares in easyJet, which have fallen by a third this week, had inched up by lunchtime as investors acknowledged the airline’s cost-cutting measures, which also include a hiring, promotion and pay freeze, a halt to all non-mandatory training and cuts to its administrative budget. The airline is also offering unpaid leave to staff.
IAG shares, which had slumped by a quarter since Monday, were down a further 3.7% by Friday lunchtime.
EasyJet said it would cancel 500 flights on its Italian routes over the second half of March. It will mean dropping one in every 10 scheduled flights to Italy.
EasyJet has convened a special committee of senior managers to deal with the problems arising from the Covid-19 outbreak, the airline said. That group, which includes a company doctor, is meeting on a daily basis. The airline said it was also working closely with authorities.
What is the coronavirus and should we be worried?
It is caused by a member of the coronavirus family that has never been encountered before. Like other coronaviruses, it has come from animals. Many of those initially infected either worked or frequently shopped in the Huanan seafood wholesale market in the centre of the Chinese city.
Severe acute respiratory syndrome (Sars) and Middle Eastern respiratory syndrome (Mers) are both caused by coronaviruses that came from animals. In 2002, Sars spread virtually unchecked to 37 countries, causing global panic, infecting more than 8,000 people and killing more than 750. Mers appears to be less easily passed from human to human, but has greater lethality, killing 35% of about 2,500 people who have been infected.
The virus can cause pneumonia. Those who have fallen ill are reported to suffer coughs, fever and breathing difficulties. In severe cases there can be organ failure. As this is viral pneumonia, antibiotics are of no use. The antiviral drugs we have against flu will not work. Recovery depends on the strength of the immune system. Many of those who have died were already in poor health.
UK Chief Medical Officers are advising anyone who has travelled to the UK from mainland China, Thailand, Japan, Republic of Korea, Hong Kong, Taiwan, Singapore, Malaysia or Macau in the last 14 days and who is experiencing a cough or fever or shortness of breath to stay indoors and call NHS 111, even if symptoms are mild.
China’s national health commission has confirmed human-to-human transmission, and there have been such transmissions elsewhere.
As of 20 Februrary, China has recorded 2,118 deaths from the Covid-19 outbreak. Health officials have confirmed 74,576 cases in mainland China in total. More than 12,000 have recovered.
The coronavirus has spread to at least 28 other countries. Japan has 607 cases, including 542 from a cruise ship docked in Yokohama, and has recorded one death. There have also been deaths in Hong Kong, Taiwan, France and the Philippines.
There have been nine recorded cases and no fatalities to date in the UK. As of 17 February, a total of 4,501 people have been tested in the UK, of which 4,492 were confirmed negative.
We don’t yet know how dangerous the new coronavirus is, and we won’t know until more data comes in. The mortality rate is around 2% at the centre of the outbreak, Hubei province, and less than that elsewhere. For comparison, seasonal flu typically has a mortality rate below 1% and is thought to cause about 400,000 deaths each year globally. Sars had a death rate of more than 10%.
Another key unknown is how contagious the coronavirus is. A crucial difference is that unlike flu, there is no vaccine for the new coronavirus, which means it is more difficult for vulnerable members of the population – elderly people or those with existing respiratory or immune problems – to protect themselves. Hand-washing and avoiding other people if you feel unwell are important. One sensible step is to get the flu vaccine, which will reduce the burden on health services if the outbreak turns into a wider epidemic.
A pandemic, in WHO terms, is “the worldwide spread of a disease”. Coronavirus cases have been confirmed outside China, but by no means in all 195 countries on the WHO’s list. It is also not spreading within those countries at the moment, except in a very few cases. By far the majority of cases are travellers who picked up the virus in China.
No. The spread of the virus outside China is worrying but not an unexpected development. The WHO has declared the outbreak to be a public health emergency of international concern. The key issues are how transmissible this new coronavirus is between people, and what proportion become severely ill and end up in hospital. Often viruses that spread easily tend to have a milder impact. Generally, the coronavirus appears to be hitting older people hardest, with few cases in children.
Sarah Boseley, Hannah Devlin and Martin Belam
“Our procedures for dealing with communicable diseases are similar to those developed during the Sars epidemic and other global health emergencies,” the company said.
IAG said: “Our operating companies will continue to take mitigating actions to better match supply to demand in line with the evolving situation. Cost and revenue initiatives are being implemented across the business.” Walsh said this included restrictions on hiring: “We’re not going to grow as fast as planned.”
The BA and Iberia parent has already suspended flights to mainland China and reduced services for other routes in Asia, including Hong Kong, where it is now only offering one daily flight instead of two.
Next month it will significantly cut its capacity on Italian routes by cancelling flights and using smaller aircraft, and will take similar action on short-haul flights across the business. By 13 March, IAG will also cut a daily service to the South Korean capital, Seoul, where it will now only fly three to four times a week.
IAG, which also owns the Aer Lingus and Vueling airlines, said it would boost the number of flights on some of BA’s long-haul routes where there is greater demand, including to India, South Africa and the US.
The update was released as part of IAG’s full-year results, which showed a 34% drop in pre-tax profits to €2.3bn (£2bn) despite a 5% rise in revenue to €22bn (£18.8bn).
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