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.
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.
“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).
