The Webjet Limited (ASX: WEB) share price will be one to watch on Wednesday.
Hot on the heels of both Air New Zealand Limited (ASX: AIZ) and Qantas Airways Limited (ASX: QAN) effectively withdrawing their earnings guidance this week due to the coronavirus outbreak, Webjet has followed suit this morning.
What did Webjet announce?
Due to the uncertainty of the duration and scale of the coronavirus outbreak, Webjet has withdrawn the FY 2020 EBITDA guidance it issued to the market on February 19.
That guidance was for underlying EBITDA of between $147 million and $165 million, an increase of 14% to 28% over FY 2019.
Management made the move after experiencing a material escalation in the cancellation rates of near-term travel and a reduction in overall travel booking activity following the spread of the coronavirus globally.
And while the company revealed that its forward bookings beyond three months remain in line with previous expectations, it notes that cancellations are now occurring at short notice prior to travel. This is reducing the visibility on future earnings, which means there is insufficient insight into its future performance to maintain its earnings guidance at this time.
The response.
As with both Air New Zealand and Qantas, Webjet is taking steps to mitigate the impact of coronavirus on its business.
This includes the implementation of a company-wide cost reduction programme to minimise operating expenditure. Management expects this to result in $10 million in savings for the remainder of FY 2020.
Other initiatives are being implemented to ensure the company retains its strategic and competitive advantage when conditions normalise.
Webjet's CEO, John Guscic, and the board of directors have voluntarily agreed to reduce their salary and director fees by 20% with immediate effect until conditions return to normal. Mr Guscic will also forgo any bonus that would have been achieved in FY 2020.
Mr Guscic said: "With Covid-19 placing downward pressure on bookings, we are focused on mitigating the short-term impact to earnings but importantly, we remain intent on retaining our leadership positions in our global WebBeds business and Australian Webjet OTA."
"Webjet has a strong balance sheet and low net debt levels, ensuring we are well placed to weather this event. In the immediate term, we have taken steps to ensure we maintain this strength through cost reductions and have the flexibility in our operating model to allow us to implement further changes should the situation require," he added.
Pleasingly, the company's managing director appears optimistic that Webjet will accelerate its market share gains when travel markets return to normal.
He concluded: "Our momentum prior to Covid-19 was well ahead of the market and we are preparing ourselves to take advantage of what is likely to be a faster-growing market when broad-based travel returns globally."
