Helloworld share price higher despite withdrawing its guidance

The Helloworld Travel Ltd (ASX:HLO) share price is pushing higher on Wednesday despite withdrawing its guidance like rival Webjet Limited (ASX:WEB) did…

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The Helloworld Travel Ltd (ASX: HLO) share price is pushing higher on Wednesday despite following the lead of rival Webjet Limited (ASX: WEB) and releasing a trading update this morning.

At the time of writing the travel company's shares are up 1.5% to $2.32.

What did Helloworld announce?

Just as Webjet did this morning, Helloworld has withdrawn its earnings guidance for FY 2020 due to the coronavirus outbreak.

Last month the company advised that it expected its EBITDA to be at the low end of its guidance range.

However, since then the coronavirus has spread into Europe and North America. This has led to drastic action being taken such as Italy closing its borders and the DFAT advising Australians to reconsider taking overseas cruises.

These developments have resulted in declining forward international travel demand and a sharp reduction in international capacity from major airlines such as British Airways, Singapore Airlines, and of course Qantas Airways Limited (ASX: QAN).

And while it notes that domestic travel demand is currently holding up, it isn't enough to offset the weak international travel market.

As a result, management warned that it is not possible to quantify the size of the impact on its earnings for the remainder of the financial year and has withdrawn its guidance accordingly.

What now?

Helloworld advised that it is taking decisive action to reduce the adverse outcomes of coronavirus on travel demand. This includes increasing its domestic leisure offerings, promoting destinations still regarded as safe to travel to, and cutting costs across the business.

Furthermore, Helloworld's chairman and non-executive directors will take no fees, its CEO will take a 30% salary cut, and its executive management team will take a 25% salary cut.

Helloworld's CEO, Andrew Burnes, remains cautiously optimistic on the future.

He said: "Helloworld is a strong business with a solid balance sheet, low debt levels and a mix of business, some of which are being impacted and some of which are not. We're in a good position to see this through but like so many businesses in tourism and other industries we need to take steps to right size our operations for the journey ahead."

"Who knows how long this will go on but it will eventually get better and the world will recover and we want to ensure we are well positioned when that happens to meet the leisure and corporate travel demands of our customers in Australia, New Zealand and around the world," he concluded.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Helloworld Limited. The Motley Fool Australia has recommended Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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