(Adds details on weakness of airline stocks, industry
background)
By David Shepardson and Aradhana Aravindan
WASHINTGON/SINGAPORE, March 5 (Reuters) - The coronavirus
epidemic could rob passenger airlines of up to $113 billion in
revenue this year, an industry body warned on Thursday, while
the head of Southwest Airlines said a drastic drop-off in
travel demand seemed fear-driven, similar to the feeling after
Sept. 11, 2001.
"We could discount prices tomorrow and it wouldn't do any
good," Southwest Airlines Co Chief Executive Gary Kelly
said at an aviation conference in Washington.
Earlier, Kelly told CNBC: "9/11 wasn’t an economically
driven issue for travel, it was more fear, quite frankly, and I
think that’s what’s manifested this time. I think there’s
elements of both but it has a 9/11-type feel.
"Hopefully, we’ll get this behind us quickly."
The Dow Jones U.S. Airlines Index closed down
8.6%.
The estimated revenue hit to the sector was made by the
International Air Transport Association (IATA), which said the
impact could range between $63 billion and $113 billion this
year, depending on the progression of the virus.
That was more than three times its forecast for a $29
billion impact made just two weeks ago.
The COVID-19 virus emerged in China late last year and has
now spread to more than 80 countries, leading to travel and
other restrictions. It has killed more than 3,300 people and
infected tens of thousands more, raising fears of a pandemic
that could plunge the global economy into recession.
Airlines across the globe are rushing to cut flights and
costs, and warning of a hit to earnings.
"There are lots of airlines that have got relatively narrow
profit margins and lots of debt, and a cash flow shock like this
could certainly send some into a very difficult situation," IATA
Chief Economist Brian Pearce told a media event in Singapore.
British regional carrier Flybe became the first big casualty
of the outbreak after the British government walked away from a
rescue package agreed upon in January due to the scale of the
hit to demand over the virus.
In a sign of the new difficulties for airlines, a Turkish
Airlines jet was flown back to Istanbul without any
passengers on board on Thursday on orders from Singapore after a
passenger who had arrived on the same plane on Tuesday tested
positive for the virus.
South Korea, Italy and Iran have been particularly badly
affected. Germany, Japan, France, Spain, the United States,
Singapore and Hong Kong have all reported more than 100 cases.
IATA said its lower forecast was based on the virus being
contained in current markets with over 100 cases as of March 2,
while the higher estimate was based on a broader epidemic. Both
scenarios assume there will be a recovery by late summer.
Meanwhile, Southwest warned that the epidemic could wipe up
to $300 million from its first-quarter operating revenue and
Norwegian Air became the latest airline to scrap its
profit forecast for 2020.
Norwegian, a pioneer of low-cost transatlantic travel, has
been struggling for years due to cutthroat competition and heavy
debts built up during rapid expansion.
Its shares, which have lost nearly 60% of their value this
year, ended 13% lower on Thursday.
Analysts say few airlines are likely to remain unscathed, as
both business and tourist travel are being affected, with
meetings and events being cancelled and companies limiting
travel to protect employees.
Data provider ForwardKeys said on Thursday new flight
bookings to Europe from elsewhere in the world fell by 79% in
the last week of February, as the virus took hold in popular
tourist destinations such as Italy.
"The drop-off in bookings to Italy is even worse than we
have observed in the past for some of the most disruptive events
such as terror attacks," ForwardKeys Vice President Insights
Olivier Ponti said.
($1 = 0.7770 pound)
(Reporting by David Shepardson in Washington and Aradhana
Aravindan in Singapore
Additional reporting by Sarah Young in London, Terje Solsvik in
Oslo, Jamie Freed in Sydney, Kate Holton in London and Laurence
Frost in Paris
Writing by Tracy Rucinski
Editing by Keith Weir and Matthew Lewis)
