Australia continues to witness an increase in the number of COVID-19 cases. As per the recent report released by the Australian government on 23 March 2020 (at 03:00 PM AEDT), Australia had 313 new cases of coronavirus. The total number of cases in the country has now reached 1,709.
Since the outbreak of coronavirus, there has been an exponential growth in the confirmed cases of COVID-19. Most of the people suffering from the deadly disease have a travel history of Europe or the Americas.
On 13 February 2020, the Prime Minister of Australia had released a statement to extend the travel restriction on foreign nationals who had recently been in Mainland China to protect its citizens from the contagious disease. Only Australian citizens, residents & immediate family members would be allowed to enter the nation. All the travellers who are coming to Australia would be isolated for 14 days either in their home or in any hotel.
Due to this travel ban, the aviation industry has been impacted severely.
In this article, we would look at the impact of the pandemic on the business of three companies from the travel and airline industry.
Webjet Limited (ASX:WEB)
Webjet Limited, on 11 March 2020, announced that due to the uncertainty surrounding the duration and the scale of coronavirus, the company decided to withdraw its FY2020 EBITDA guidance.
Because of the worldwide spread of the disease, with cases in more than 180 countries and territories, the company reported a material increase in the cancellation rate of the near-term travel as well as a drop in the total travel booking activities. WEB also noted that the cancellation rate was now happening at short notice before travelling, which is lowering the outlook of future earnings.
The company is now taking steps to lessen the impact of this lethal disease by implementation of a company-wide cost reduction programme to reduce the operating expenses. With these steps, the company expects to save $10 million for the remaining part of FY2020.
As a part of the cost reduction program, John Guscic, the Managing Director and the Board of Directors, agreed to lessen their respective salaries & directors fees by 20% until the situation becomes normal.
Further, the company, in its 1H FY2020 presentation, highlighted that it is witnessing the impact of COVID-19 on its booking and TTV across its business in FY2020. Also, because of the travel restriction along with traveller uncertainty, the effect would be seen in the company’s earnings.
Other businesses which would remain affected in the second half of 2020 are WebBeds, Webjet OTA as well as Online Republic’s Motorhome business.
On 23 March 2020, as per the listing rule 17.2, the company announced that its shares would be suspended from quotation immediately pending the release of an announcement related to the result of a proposed raising.
Sydney Airport (ASX:SYD)
Sydney Airport had reported a marginal drop in its Airport Traffic performance during January 2020 and a significant fall in the traffic performance during February 2020.
During January 2020, the total traffic was 3.9 million passengers, down 0.6% as compared to January 2019. Domestic passengers who passed through the Sydney Airport declined 0.6% while international passengers dropped by 0.7%.
This number dropped significantly during February 2020 because of the coronavirus outbreak, which significantly impacted the travel and tourism industry in Australia.
There was a drop in the total traffic during the month by 9.3% to 3.1 million passengers. International traffic slipped by 16.8% while domestic traffic by 4.5% as compared to the previous year.
During February 2020, travel across most nationality groups got affected. The Chinese and South Korean citizens travel to Australia reduced by 72.4% and 34% respectively as compared to the last year.
On 23 March 2020, Sydney Airport, considering the recent announcements of the Federal and State Government about COVID-19 along with the related replies from the airlines like Qantas (ASX:QAN), Virgin, and Air New Zealand, announced that it is working through the exact scheduling impacts on Sydney Airport with its airline partners. SYD expects and is preparing for a considerable but a short-term fall in international & domestic traffic.
At present, the company prioritises the health and safety of its people along with those who come to the airport daily. SYD confirmed that in such a situation, it would be working with the Federal and NSW government.
The company also confirmed that it has a strong balance sheet, and it would be reviewing its entire capital expenditure program for 2020 with a focus on continuing the critical projects and deferring the less critical ones.
Flight Centre Travel Group Limited (ASX:FLT)
Flight Centre Travel Group Limited, in its 1H FY2020 results for the period ended 31 December 2019, reported a growth of 11.2% in the total transaction value (TTV) to $12.4 billion with underlying PBT of $102.7 million. However, because of the COVID-19 impact, the company highlighted that the virus has a significant impact on the Greater China & Singapore corporate businesses. The virus has impacted the global travel pattern, especially in the corporate sector.
There was a decline in the activity from corporate clients.
Because of the uncertainty surrounding COVID-19, on 13 March 2020, the company suspended its 2020 fiscal year (FY20) guidance. The company also highlighted that because of the travel restriction along with a fear of virus spread, the demand is softening considerably. Further, the time frame for the situation to recover is still not clear.
In the present scenario, the company’s response plan is well positioned, aiming to safeguard and grow market share in advance of future bounce back, while lowering costs.
FLT also confirmed that the under-performing leisure shops in Australia are expected to close before 30 June 2020, and the sales staffs would be used to fill the openings in other shops in the nearby locations.
At present, the company has ~1040 sales teams within its well-known leisure brands at a few 855 locations across the country.
On 18 March 2020, the company released an announcement updating its urgent business review to look for further cost and cash saving initiatives. FLT also confirmed that being one of the largest leisure and corporate travel providers in the world, it would be significantly impacted by the recent happenings along with the unprecedented government-imposed limitations on international travel, and significant cuts in airline capacity. FLT has suspended its FY2020 guidance.
On 23 March 2020, FLT announced that the Group has cancelled its interim dividend and requested for a short-term suspension from its ASX listing.
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