Virus outbreak clips airlines’ wings after high-flying year

NEW YORK (AP) — Airlines are stuck in a severe patch of turbulence as the virus outbreak causes passengers to cut back on travel, clouding the industry’s growth prospects.

All big United States (US) airlines have warned investors that their finances will take a hit, and many are cancelling flights because of slumping demand. It’s a dramatic change of fortune for the industry, which finished 2019 with strong passenger demand.

As governments across the globe implement quarantines and other strict measures to contain the virus, the outlook for the travel industry is darkening. Amazon, Apple and other companies are telling staff to skip business trips, an especially profitable market for airlines. Tourists worried about the

virus or the risk of being stranded in a virus-stricken nation are also holding off booking trips.

The International Air Transport Association (IATA) forecasts big losses for the industry.

“It is unclear how the virus will develop, but whether we see the impact contained to a few markets and a USD63 billion revenue loss, or a broader impact leading to a USD113 billion loss of revenue, this is a crisis,” said IATA’s Director General and CEO Alexandre de Juniac in a statement.

The IATA has said the impact will be on the same scale to the 2008 financial crisis, when airline shares lost 25 per cent following the collapse of Lehman Brothers.

The virus outbreak hit just as the industry was forecasting mostly solid growth in 2020. United Airlines had forecast a profits between USD11 and USD13 per share after finishing 2019 with a profit of USD11.58 per share.

A key measure of airlines’ revenue was expected to rise 4.1 per cent globally, according to the IATA.

All of those forecasts are now in doubt.

United Airlines is slashing capacity by 20 per cent on international routes and by 10 per cent in the US starting in April. The airline also abandoned its financial forecasts for the year and asked employees to volunteer for unpaid leave.