Airline Shares Fall on New Estimates of Epidemic's Impact
06 March 2020 - 8:24AM
Dow Jones News
By Doug Cameron and Alison Sider
U.S. airline shares fell to their lowest level in more than four
years as executives said even heavy discounting wouldn't help
prevent passengers from avoiding travel because of
coronavirus-driven fears.
Industry revenues in North America could fall as much as 10%
this year, though that's only half the drop facing airlines
world-wide as the International Air Transport Association warned
sales could drop by more than $110 billion.
U.S, carriers remain among the most profitable in the industry,
and so far have stopped short from pulling their financial guidance
for 2020, while acknowledging a big drop in bookings.
Southwest Airlines Co. on Thursday said its first-quarter
revenues could be cut by up to $300 million, and like low-cost
peers Spirit Airlines Co. and Allegiant Travel Co. said the
slowdown affected their business and leisure traffic.
United Airlines Holdings Inc. this week said it would cut
domestic capacity by 10% in April, and is parking some jets after
cancelling flights to Asia and Europe. JetBlue Airways Corp. has
also trimmed flying.
Southwest Chief Executive Gary Kelly said at an industry
conference that discounting fares wouldn't help boost demand as
passengers simply didn't want to fly.
"The industry can't sustain the current level of seats with the
current level of demand," he said in an interview.
IATA, the trade group, said bookings for April had dropped more
than 70% in China and Italy, and by about 50% in South Korea and
Iran, the four worst-hit countries. In the U.S., analysts estimate
the drop is between 10% and 20%.
"It's clear it will be a sizable shock," IATA Chief Economist
Brian Pearce told reporters.
The NYSE Arca Airline Index dropped another 9% on Thursday, with
Spirit worst hit with a fall of almost 18%. American Airlines Group
Inc. shed 12%.
Southwest was the best performer, losing around 3% as the
carrier said it wasn't at the stage of having to park planes.
(END) Dow Jones Newswires
March 05, 2020 16:09 ET (21:09 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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