Aer Lingus sees drop in business travel over coronavirus
Aer Lingus parent company IAG said the cancellation of industry events and corporate travel restrictions due to the coronavirus has weakened business travel across their network.
The company reported a profit of €765m for the final quarter of 2019 but said it was unable to provide an outlook for future performance due to uncertainty over the spread of the virus.
IAG, which also includes British Airways and Iberia, said their earnings outlook is adversely affected by weaker demand as a result of coronavirus (COVID-19).
“We are currently experiencing demand weakness on Asian and European routes and a weakening of business travel across our network resulting from the cancellation of industry events and corporate travel restrictions,” IAG said.
Shares in the IAG Group opened almost 5% lower yesterday as stocks worldwide were impacted by fears the coronavirus could have a lasting global economic impact.
Willie Walsh, IAG CEO, said that while the Asian markets were impacted initially they are now seeing disruptions spread to their short-haul European markets.
Sean Doyle, Aer Lingus CEO, said the impact is being seen more on business travel than on flights for leisure purposes.
“There is a network decline in business activity over the last few days and we are monitoring that closely,” he told journalists in a conference call yesterday.
Mr Walsh said the impact could be seen from early in the week. “It has been very noticeable that Northern Italy, Milan in particular followed by Venice have seen a very noticeable fall-off in demand since late Monday.”
Northern Italy is one of the worst impacted parts of Europe by the Coronavirus with many parts of the region under quarantine.
In January, British Airways suspended its daily flight to both Beijing and Shanghai and Iberia suspended its three times weekly service to Shanghai on January 31.
Despite the uncertainty going forward, Mr Walsh said IAG was reporting an operating profit of €3.285bn for 2019 down by €200 million compared to the previous year.
“These are good results in a year affected by disruption and higher fuel prices,” he said. “We demonstrated our robust and flexible model once again through additional cost control and by reducing capacity growth to reflect market conditions.
“We’ve increased investment in new aircraft, customer products and operational resilience and this has seen our airlines improve their customer performance scores this year,” Mr Walsh said.
Broker Davy said while coronavirus fears are weighing on demand in Asia and Europe, IAG is a business model that has demonstrated clear resilience in the past.
“In our view, it has the balance sheet strength, brand diversification and variable cost base to ensure that it does so again.”
