IAG Says Coronavirus Could Push Failing Airlines "Over The Edge"

(Alliance News) - The owner of British Airways warned on Friday that the growing impact of the new coronavirus outbreak on international air travel could force some troubled airlines out of business.

The global impact of the virus is likely to be severe enough to push some airlines "over the edge," Willie Walsh, the chief executive of International Consolidated Airline Group SA, told reporters.

"We are well able to adjust to this situation because our business is in great shape," Walsh said as he presented IAG's annual results.

"It's the failing airlines who will be most affected by this," he said, adding that he expected "more [market] consolidation as a result."

Italy's Alitalia, which has been under government administration since May 2017 and is based in the country facing Europe's worst coronavirus crisis, is one of the airlines in trouble.

The airline said it has reduced its service on 38 routes due to lower demand in the wake of the coronavirus.

"I am certainly and logically worried," Italian Economic Development Minister Stefano Patuanelli told reporters, confirming that Alitalia had been hit with "many cancellations."

"There is certainly more concern for the solution of an issue that was complex already and has certainly not been helped by the coronavirus," he added.

In January, Alitalia received a EUR400 million state loan to keep it going until May 31. It is unclear what will happen to it after that deadline.

Earlier, the Philippines' flag carrier Philippine Airlines said it laid off 300 workers in a bid to manage losses due to the Covid-19 outbreak.

PAL said it completed a "voluntary separation initiative for long-serving employees and a retrenchment process" involving ground-based administrative and management personnel.

"The streamlining will strengthen the company in the wake of losses sustained in 2019, aggravated by the ongoing travel restrictions and flight suspensions to areas affected by Covid-19," the airline said in a statement.

"Other initiatives include revenue generation from an optimized route network and new ancillary products, more aggressive cost-management efforts, and investment in digital technology," it added.

IAG, which also owns Iberia and Aer Lingus, said its weaker demand because of the coronavirus outbreak was driven mainly by fewer passengers on Asian and European routes.

BA has suspended flights to China and reduced its services to Hong Kong.

This week's surge in coronavirus cases in Italy showed it was "a rapidly changing situation," Walsh said.

IAG reported an operating profit of EUR3.29 billion for 2019, down 5.7% from 2018.

Walsh said the unpredictability of the coronavirus outbreak meant the company was unable to provide an accurate profit forecast for this year.

British carrier easyJet PLC said on Friday that it is also cancelling flights and introducing wider cost-cutting measures in response to the spread of the coronavirus.

Connections to and from northern Italy, where hundreds of infections have been reported this week, are particularly affected, easyJet said.

It said company-wide hiring and promotions are being postponed and second-tier projects and expenditure are being put off, while employees will be offered unpaid leave.

Like IAG, easyJet said it was too early to assess the potential impact of the outbreak on its financial performance this year.

Germany's Lufthansa AG said Friday it plans to reduce by up to a quarter its short- and medium-haul flights in the coming weeks and that it currently has 23 long-haul jets grounded.

Brussels Airlines also announced cuts in flights to northern Italy by 30% for the next two weeks due to a decline in demand following the coronavirus outbreak.

The decision affects flights to Milan, Rome, Venice and Bologna, the airline said in a statement.

To limit the impact, it is "looking into economic measures, such as temporary technical unemployment" and extending a hiring freeze to the entire company, said the Belgian national carrier, which is almost exclusively owned by Germany's Lufthansa.

By Bill Smith, dpa

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