Coronavirus: Qantas and Air France-KLM warn of earnings hit

Airlines have warned of a severe financial impact as the coronavirus dampens demand for travel in Asia.

Australia’s Qantas said the outbreak would cost it up to A$150m ($99m; £76m), while Air France-KLM estimated a hit of up to €200m (£168m).

Air France is extending a ban on Chinese flights until at least the end of March, while Qantas will cut flights to Asia by 15% until the end of May.

It comes amid concerns of the impact on the global economy.

Qantas estimated that the coronavirus would result in a 100m -150m Australian dollar hit for the financial year, once it had accounted for cutting flights.

In a statement chief executive Alan Joyce said: “Coronavirus resulted in the suspension of our flights to mainland China and we’re now seeing some secondary impacts with weaker demand on Hong Kong, Singapore and to a lesser extent Japan.

“We’ve also seen some domestic demand weakness emerging, so we’re adjusting Qantas and Jetstar’s capacity in the second half,” he added.

To avoid job losses the company also plans to freeze recruitment and ask workers to use up leave.

Qantas has suspended flights from Sydney to Shanghai, cut capacity to Hong Kong and ended its Sydney to Beijing route earlier than expected after the Australian government imposed restrictions on travellers from mainland China.

Air-France KLM estimated the coronavirus outbreak would cost it between €150m and €200m between February and April.

On Thursday the airline group announced it had cancelled all flights to mainland China until the end of March. It assumes that flights will resume at a steady pace beyond then.

‘Economic damage’

In another sign of the impact of coronavirus on the aviation industry, China is reportedly planning to take control of HNA Group and sell off its airline assets.

The government of Hainan province, where HNA is based, is in talks to take over the conglomerate as the fallout from the outbreak means it is struggling financially, according to Bloomberg.

HNA directly controls or holds stakes in several carriers, including its flagship Hainan Airlines.

It would be the most dramatic step yet by the Chinese state as it attempts to ease the economic damage of the outbreak.

HNA and the government of Hainan did not immediately respond to BBC requests for comment.

Meanwhile, the International Monetary Fund has warned over the impact of the virus, saying that a further spread to other countries could derail the “highly fragile” world economic recovery.

In a document prepared for this weekend’s G20 meeting of finance ministers and central bankers, the global lender mapped out the risks facing the global economy, including the coronavirus.

China’s President Xi Jinping has said the country could still meet its 2020 economic growth target despite the outbreak.

But the IMF note cast doubt on that: “The coronavirus, a human tragedy, is disrupting economic activity in China as production has been halted and mobility around affected regions limited.

“A wider and more protracted outbreak or lingering uncertainty about contagion could intensify supply chain disruptions and depress confidence more persistently, making the global impact more severe,” it added.

In China the coronavirus outbreak has now killed more than 2,100 people and infected almost 75,000.

Source: BBC