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(Alliance News) - Three London-listed air carriers - International Consolidated Airlines Group SA, easyJet PLC and Wizz Air Holdings PLC - on Monday warned of major disruptions to their operations due to travel restrictions imposed by governments to curb the spread the new coronavirus.
Shares in IAG dropped 20% to 279.80 pence each in London early Monday. easyJet was down 30% at 551.73p and Wizz Air fell 21% to 2,172.00p each. All the stocks have halved or more in value so far in 2020.
British Airways parent IAG said it is implementing further initiatives - following a raft of route suspensions - in order to combat the "challenging market environment" caused by the virus pandemic.
The company said its first quarter capacity, or available seat kilometres, is expected to fall 7.5%. In April and May, IAG will reduce its capacity by about 75% compared to the year before. IAG also is planning to ground surplus aircraft.
In an attempt to cut operating expenses further, IAG will halt non-essential and non-cyber related IT spend, freeze recruitment and discretionary spending, implement voluntary leave options, temporarily suspend employment contracts, and reduce working hours.
IAG also said that it is unable to give an accurate profit guidance for the 2020 due to the continued uncertainty on the potential impact and duration of Covid-19 virus.
As at March 12, IAG had cash, cash equivalents and interest-bearing deposits of EUR7.35 billion. In addition, undrawn general and committed aircraft backed financing facilities amount to EUR1.9 billion, resulting in total liquidity of EUR9.3 billion.
IAG also put its leadership succession on hold amid the crisis.
"In light of the exceptional circumstances facing the aviation industry due to Covid-19, and in particular the developing situation in Spain, it has been decided that Luis Gallego will continue in his role as Iberia chief executive for the next few months to lead the response in Spain. In the meantime, Willie Walsh will continue to act as group chief executive and Javier Sanchez will remain in place as Vueling chief executive," it said.
Back in January, IAG had announced Walsh would be stepping down in March, replaced by Gallego.
Fellow FTSE-100 listed airline easyJet said Monday it has undertaken "significant" cancellations, which could result in the grounding of the majority of its fleet.
"European aviation faces a precarious future and there is no guarantee that the European airlines, along with all the benefits it brings for people, the economy and business, will survive what could be a long-term travel freeze and the risks of a slow recovery," the budget airline said.
easyJet currently has GBP1.6 billion cash balance, an undrawn USD500 million revolving credit facility and unencumbered aircraft worth in excess of GBP4 billion. The company has no debt re-financings due until 2022, it noted.
Meanwhile, Wizz Air said that it has suspended all flights to Poland until further notice due to the Polish government's decision to impose travel restrictions imposed on all foreign flights.
"The travel ban imposed by the Polish government affects 20% of Wizz Air's capacity. At this point in time it is difficult to predict the duration and the impact of the Covid-19 pandemic on Wizz Air as governments across Europe are implementing strategies to cope with the virus, however, the company's ultra-low cost business model and our strong balance sheet with EUR1.3 billion of free cash provide a solid foundation and a significant competitive advantage in the current challenging environment for airlines, while also making us a long-term structural winner in the aviation sector," the FTSE 250-listed company said.
The announcements in London mirrored those in the US and Europe over the weekend, after US President Donald Trump's administration banned foreign travellers arriving from Europe.
American Airlines Group Inc said it would reduce all international capacity by 75%. It also said domestic service would be reduced by 20% in April compared to last year.
Delta said it would "significantly reduce its US to Europe flying beginning Monday, March 16, following the US government directive restricting travel between the US and Europe."
Southwest Airlines said it "will likely make service reductions based on demand".
The restrictions on travel from Europe took effect at midnight Friday and were later extended to Britain and Ireland as of Tuesday.
By Tapan Panchal; tapanpanchal@alliancenews.com
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