Major American companies are reeling from coronavirus
A growing number of major American companies are saying coronavirus is hurting their business.
Late Monday, United Airlines announced that it has suspended flights between the United States and four destinations in China, routes that represent approximately 5% of the company’s planned capacity, because of the virus.
The airline said near-term demand for flights to China has fallen to near zero, and the demand for flights to the rest of its trans-Pacific routes has declined 75%. The company added that it’s managing its business “to minimize the operational and financial disruption.”
The canceled flights were between the United States and Beijing, Chengdu, Shanghai and Hong Kong will be suspended through April 24. United said that despite these “short-term” issues, the company believes “it will be in a strong position to deliver earnings growth in 2021 and beyond.”
But the good news for United’s investors is that the airline said it should still be hit its first quarter earnings guidance. The lost revenue from the drop in passenger traffic to and from Asia is being at least partly made up by lower fuel costs. Part of the fuel savings comes from a drop in oil and fuel prices. Part of it comes from not needing to burn as much fuel due to the canceled flights. Fuel is the second largest cost for United and other passenger airlines, behind only labor costs.
United said that it is remains on course to hit its first quarter earnings target, but it can no longer give full-year earnings guidance because of uncertainty about how long the coronavirus problems will last.
Shares of United were down slightly Tuesday.
Also on Monday, Mastercard updated its first quarter and full year 2020 revenue outlook, also because of the impact of the Coronavirus.
If the trends continue through the end of this quarter, Mastercard’s sales growth in the first quarter will be approximately 2 to 3 percentage points lower than it announced late last month, the company said in a press release. Mastercard said it plans to provide further updates on its first-quarter earnings call.
