Any doubts as to whether the impact of the coronavirus outbreak would spread beyond Asia to European airlines has been answered by a slew of cost-savings measures, capacity cuts and warnings of potential earnings hits in the past few days.
British Airways and Iberia parent IAG, EasyJet and Finnair all today sounded warnings on the impact on air travel of the coronavirus, joining the likes of Air France-KLM and Lufthansa who had recently outlined preventative measures.
Notably that includes European short-haul operator EasyJet, reflecting the significance of the recent increased incidence of the virus in northern Italy. This underlines that the impact is not limited to those carriers from Europe operating to Asia, and mainland China – the source of the outbreak – in particular.
”Following the increased incidence of COVID-19 cases in northern Italy, we have seen a significant softening of demand and load factors into and out of our Northern Italian bases,” EasyJet says in a stock market update today. The UK carrier has a large base at Milan Malpensa – which Cirium schedules data shows is its fifth biggest base – as well as a presence in Venice, Verona, Pisa and Milan Linate.
”Further, we are also seeing some slower demand across our other European markets. As a result we will be making decisions to cancel some flights, particularly those into and out of Italy, while continuing to monitor the situation and adapting our flying programme to support demand,” the carrier adds.
In keeping with several other operators, EasyJet is introducing interim cost-saving initiatives including a hiring freeze, offers of unpaid leave and deferring non-critical capital expenditure.
”While it is too early to determine what the impact of the COVID-19 outbreak will be on current year outlook and guidance for both the airline and holidays business, we continue to monitor the situation carefully and will update the market in due course,” the carrier adds.
IAG took a similar line in releasing full-year results earlier today. It said uncertainly around the impact coronavirus outbreak meant it could not give earnings guidance for the year ahead.
“It’s clear that the industry is being affected as a result of weaker demand as a result of the coronavirus,” said IAG chief executive Willie Walsh during his last IAG annual results presentation today. While initially the group saw an impact on its Chinese operations, “it has now spread to other parts of our network”.
IAG carriers BA and Iberia had already suspended until the end of March services to mainland China, as well as trimming capacity on some Asian routes. It had also trimmed some northern Italian capacity and warned furthers cuts – both to Italy and across its wider short-haul network – were likely to follow. That could see cancellations spread to other carriers in the group, including Vueling.
”The net impact of current flight cancellations and redeployed capacity is to lower IAG’s full-year 2020 planned capacity by approximately 1% in terms of available seat kilometres to 2% for the year,” the group says.
Finnair, a partner of BA and Iberia in Oneworld, was more explicit today in outlining the financial impact. The carrier says it is expecting the coronavirus to result in significantly lower operating profits for the first half.
It is looking to trim costs by €40-50 million ($44-55 million) to cope with the threat to its revenue streams, and is considering measures such as temporary lay-offs, recruitment adjustment, and changes to sales and marketing activity.
The airline had initially predicted, just two weeks ago, a relatively limited impact from the outbreak, and still intended a 4% capacity increase for 2020. But in a revised outlook it says the situation is “fast-developing” and that coronavirus is having a wider-than-estimated effect on the air transport market.
Selected European carrier responses to the coronavirus outbreak
Air France-KLM: KLM has curtailed recruitment and capital investment in an effort to save costs amid reduced travel demand due to the outbreak.
EasyJet: The budget carrier has highlighted the impact on air travel demand, particularly on Italian routes. It is reassigning capacity, implementing a hiring freeze and has made staff an offer regarding unpaid leave.
Finnair: The operator is looking at programme of cost-cutting measures after paring back capacity plans and stating that first-half results will be “significantly” lower.
IAG: The group is implementing capacity cuts on short-haul in addition to its Asian routes. Outbreak uncertainty means it is unable to issue a full-year outlook.
Lufthansa Group: The business is implementing a hiring freeze and offering staff unpaid leave as part of cost-cutting measures across the group. It says capacity cuts are already the equivalent of having 13 aircraft grounded.
SAS: Chief executive Ricard Gustafson said on 26 February that as the outbreak was occurring during SAS’s winter season, the “bottom line impact is more manageable”. The airline has reaffirmed its full-year earnings guidance. While raising concerns over the potential impact in the summer, Gustafson says that for now, bookings for the summer season are in line with expectations.
Wizz Air: The low-cost carrier is suspending select routes to destinations in northern Italy between 11 March and 2 April, accounting for around 60% of its capacity to the country.
There is also a strong impact on cargo operators, given the importance of China to the air freight market. That was evident in the 27 February announcement that UK freighter operator CargoLogicAir has suspended operations as its exposure to China takes its toll.
”CargoLogicAir has been severely affected as it had placed a significant portion of its commercial activities in the Chinese market,” it states. “As a result, a decision was made to suspend the flights,” it notes.
Which airlines have capacity in Italy
While coronavirus seems likely to have an impact on overall air travel demand within Europe, the initial focus of cuts is around Italy.
The popularity of Italian destinations for both business and leisure markets, together with the weakness of Italian operators over the years, means European carriers have a relatively large footprint in the country.
Ryanair – which is yet to make a specific announcement regarding the potential impact of the coronavirus outbreak – is the largest operator on routes between Italy and the rest of Europe, Cirium schedules data shows.
| Airline | Flights | Seats | ASKs |
|---|---|---|---|
| Ryanair | 18,408 | 3,479,112 | 3,665,323,997 |
| Alitalia | 13,686 | 1,916,082 | 1,282,890,254 |
| EasyJet | 9,508 | 1,629,096 | 1,651,230,827 |
| Wizz Air | 2,384 | 490,124 | 532,370,740 |
| Lufthansa | 3,064 | 468,699 | 304,127,238 |
| Vueling Airlines | 2,580 | 457,708 | 432,312,911 |
| British Airways | 2,209 | 347,435 | 398,941,476 |
| Air France | 2,375 | 291,398 | 243,521,141 |
| Air Dolomiti | 1,971 | 236,520 | 116,413,315 |
| Eurowings | 1,356 | 198,380 | 177,309,222 |
| Source: Cirium schedules data March 2020 | |||
Lufthansa Group is the fourth-most-impacted operation, once its Italian regional carrier Air Dolomiti, budget brand Eurowings, Swiss, and Austrian are considered.
But it is northern Italy where the primary focus of airline capacity cuts have so far been. The biggest hub for European routes from Italy, Rome Fiumicino, is relatively unimpacted. But the next four biggest airports are all located in northern Italy. Eight of the 20 biggest Italian airports for European capacity are located above Florence and Pisa – the area identified by the UK government as being subject to precautionary measures in relation to the spread of the coronavirus.
| Airport | Flights | Seats | ASKs |
|---|---|---|---|
| Rome Fiumicino | 9,443 | 1,529,883 | 1,421,649,195 |
| Milan Malpensa | 6,024 | 985,417 | 967,751,490 |
| Bergamo Milan | 3,137 | 583,546 | 604,256,219 |
| Milan Linate | 3,924 | 528,841 | 403,069,291 |
| Venice | 2,958 | 467,555 | 437,119,973 |
| Naples | 2,630 | 429,774 | 426,906,753 |
| Bologna | 2,637 | 419,740 | 412,632,869 |
| Catania | 2,147 | 370,695 | 364,232,349 |
| Rome Ciampino | 1,386 | 262,606 | 328,588,912 |
| Palermo | 1,432 | 247,435 | 203,283,359 |
| Bari | 1,417 | 244,355 | 203,754,505 |
| Turin | 1,503 | 221,618 | 180,937,777 |
| Pisa | 1,089 | 185,357 | 176,676,481 |
| Cagliari | 871 | 153,191 | 104,682,518 |
| Florence | 1,173 | 147,780 | 118,987,095 |
| Venice Treviso | 733 | 137,916 | 129,218,443 |
| Verona | 767 | 120,888 | 119,083,624 |
| Brindisi | 641 | 109,510 | 94,377,230 |
| Lamezia Terme | 587 | 103,726 | 88,831,726 |
| Genoa | 445 | 57,657 | 35,354,383 |
| Source: Cirium schedules data | |||
EasyJet is the biggest operator out of Malpensa on European routes, followed by Ryanair. Italy’s biggest carrier Alitalia has a relatively small presence at Malpensa – though is the dominant carrier at Milan’s downtown Linate airport.
| Airline | Flights | Seats | ASKs |
|---|---|---|---|
| EasyJet | 3,906 | 679,692 | 635,204,706 |
| Ryanair | 1,414 | 267,246 | 278,679,946 |
| Lufthansa | 630 | 103,372 | 45,614,403 |
| Vueling | 454 | 88,604 | 61,676,107 |
| Eurowings | 626 | 87,756 | 55,325,066 |
| Aeroflot | 392 | 62,931 | 143,003,593 |
| Wizz Air | 284 | 60,820 | 57,085,621 |
| Turkish Airlines | 286 | 55,302 | 93,631,000 |
| Austrian | 343 | 55,248 | 36,276,519 |
| Source: Cirium schedule data March 2020 | |||
Ironically, probably the more challenged business by a drop in demand at Malpensa may have been Air Italy, which had the lion’s share of its capacity at the airport. But backers of Air Italy had already made the decision earlier this month to pull the plug on the airline, even before the spike in coronavirus cases in northern Italy had emerged.
Ryanair is the biggest operator at Bergamo’s Orio al Serio airport – followed by Wizz Air – while EasyJet is the biggest carrier at Venice Marco Polo airport.
Lufthansa Group’s Italian regional carrier Air Dolomiti operates across a number of northern Italian airports – including Turin, Verona and Venice – as part of its feeder operations into Frankfurt and Munich.
