UK Politics

Airlines become latest victims of coronavirus disruption

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Several airlines became the latest round of business to be hurt by potential disruption from the coronavirus epidemic on Thursday, with shares in British Airways owner International Consolidated Airlines Group PLC (LON:IAG) lower as a result.

Franco-Dutch carrier Air France-KLM (AFKLM) said that it expects to lose up to £170mln if it is forced to suspend its flights to Asia until April, meanwhile Australian firm Qantas has forecast a £77mln hit to its annual profits as it unveiled plans to suspend 15% of its flights to Asia until at least the end of May.

In a note to clients, analysts at City broker Peel Hunt pointed out: "AFKLM quantifies the impact of coronavirus at €150-200mln due to flight cancellations and weaker demand to Asia. 65% of fuel has been hedged for FY20 at a price of $57 per barrel compared to 60% hedging at $64 in FY19."

They added: "The cost of the volume hedged is €300mlm lower than FY19 but whether this is retained depends on the spot price which has already increased to more than $59 and the competitive dynamics where supply growth looks limited."

The Peel Hunt analysts said they expect a similar impact from coronavirus for IAG but anticipate a lower fuel saving for FY20 as the airline was already over 70% hedged by November 2019.

Factories hit too

The airlines' warnings follow a similar assessment from companies in multiple sectors, particularly retailers whose supply chains rely heavily on products sourced from Chinese factories.

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