The FINANCIAL — Shares of airlines and travel companies around the world plunged Monday due to fears about the spread of the coronavirus. The International Air Transport Association warned last week that the virus would inflict a $1bn hit on airline industry’s revenues. Korean Air cabin crew worker tests positive for coronavirus.
EasyJet dropped 16.4 per cent and Ryanair 13.5 per cent as airlines were forced to reassess the fallout from the rapid spread of the Covid-19 virus across Asia and beyond, with South Korea, Italy and Iran now struggling to contain outbreaks. Although airlines have yet to suspend any Italian flights, the new outbreaks raised the spectre of serious upheaval extending into the lucrative summer tourism season on a day when European stocks suffered their biggest slump since mid-2016. While budget airlines are most exposed to Italy, Credit Suisse added that lower-margin legacy carriers are at risk from a broader traffic slump if the contagion unnerves consumers, Business Times reported.
Air France KLM has calculated that the virus could cost it up to €200 million. Its business includes a long-haul operation that serves several destinations in China, where the outbreak was first detected. Aer Lingus’s parent, International Consolidated Airlines’ Group (IAG), one of whose other airlines, British Airways, also flies to China, is due to publish financial results for 2019 this week. There may be an element of panic to this, but until they know the outbreak has peaked and the threat is receding, investors will remain jumpy. It shows that aviation is vulnerable to a unique set of risks, volcanic ash and disease outbreaks among them, The Irish Times wrote.
American Airlines shares dropped 8.5% to $25.45, a more than four-month low. Delta Air Lines’ stock lost 6.3% to end at $54.23, lowest price in nearly four months, while United Airlines ended off 3.3% and Southwest Airlines fell 4.3%. The S&P 500 ended the day 3.4% lower. Ireland’s Department of Foreign Affairs and Trade warned citizens not to travel to affected areas, helping drive down shares of European carriers. More than 200,000 flights to, from and within China have already been canceled because of the virus, according to aviation consulting firm Cirium, and more disruptions are possible if the virus continues to spread, CNBC reported.
The International Air Transport Association warned last week that the virus would inflict a $1bn hit on airline industry’s revenues, as it scrapped its forecast that global passenger numbers would rise this year. InterContinental and Accor were punished hardest among hoteliers, as investors targeted those companies with significant exposure to Europe. InterContinental generates about 30 per cent of its revenues in Europe, while Accor relied on the continent for more than half its sales last year. Travel industry executives said they were awaiting further guidance from the World Health Organization, pointing to a sharp rebound the market enjoyed in 2003 when the SARS virus was contained, Financial Times wrote.
Also cruise-lines were affected as coronavirus spreads globally. Carnival, which operates 10 cruise brands, was the biggest loser in the S&P 500, dropping 9.5%. Norwegian Cruise Line Holdings Ltd. declined 9.4%, Royal Caribbean Cruises Ltd. fell 9% and American Airlines Group Inc. was down 8.6%, according to The Wall Street Journal.
A cabin crew worker from Korean Air tested positive for coronavirus the airline said Tuesday and details about what routes the employee flew were not immediately known, according to a report. South Korea now has 893 cases, compared to just 28 on Feb. 14. The country now has the second-largest amount of cases in the world, with an increase of 130 infected in the past 24 hours, FOX News.
Read more about coronavirus fears in South Korea here