In afternoon trading, the S&P/ASX 200 Index (INDEXASX: XJO) has recovered most of its losses earlier in the day to be down by 0.57% to 6,404 points. With this, investors breathed a collective temporary sigh of relief that the worst of the falls may be behind us.
Amongst all the market turmoil, one company that has seen its share price down by more than most is Qantas Airways Limited (ASX: QAN). An increasing global coronavirus threat is seemingly weighing heavily on the Qantas share price today.
This follows further news on the weekend that the coronavirus has now spread well beyond just China. The reality is fast sinking in that the world may very well be on the cusp of a global pandemic.
At the time of writing, the Qantas share price is down by 4.6% to be currently trading at $5.275. Last week, Qantas shares dropped 15%. Together with today's losses of 4.6%, this takes Qantas' total share price loss over the last 6 trading days to 19%.
Qantas announces reduction in Asian flights
Just over a week ago, Qantas announced temporary reductions to flights across Asia, triggered by a drop in passenger demand due to the coronavirus.
The company will cut 16% of Asia capacity until at least May, impacting flights from Australia to mainland China, Hong Kong, and Singapore. Qantas has also made reductions of 5% to Qantas and Jetstar flights between Australia and New Zealand. Qantas' only route to mainland China (Shanghai) will remain suspended for the same period.
However, it now appears that the impact on Qantas' international passenger demand will go far beyond Asia, so more reductions may well be likely.
Recap of recent financial results
During the first half of FY20, Qantas delivered reasonably solid revenue of $9,464 million, which was a 2.8% increase on the prior corresponding period (pcp). This was driven by a 3.5% lift in net passenger revenue to $8,305 million. However, underlying profit before tax came in 0.5% lower than the pcp at $771 million.
Qantas has estimated the net impact of coronavirus on earnings before interest and tax (EBIT) will be between $100 million and $150 million in FY20. However, it is now quite possible that these figures will be revised upwards if the impact of the coronavirus worsens.
