Virgin Australia Group Ltd (ASX: VAH), which falls under the larger multinational conglomerate company Virgin Group, is one of Australia’s major operators in the domestic airline market. It also offering select flights to various international destinations across multiple continents such as Asia, North America and Europe. Virgin Australia has a market cap of over $580 million.
What is the most recent update on COVID-19 outbreak?
The first reports of the previously unknown virus first emerged out of the Wuhan province in China at the start of December 2019, and the first active case being reported on December 30 2019. Since then, there are 179,000 reported confirmed cases and 7,400 deaths across the globe (as of 18 March 2020). It has now spread to multiple countries, some of the worst effected being China, Italy, Korea, Japan and Iran; the world health organisation subsequently declared the virus a global pandemic on Thursday 12 March 2020.
Company update on Virgin Share Prices
Just in the last month to 18 March 2020, Virgin Australia share price has plummeted by over 50%, reaching its lowest price point of $0.05 on March 122020, and are currently trading at A$0.067. This is a direct result of the outbreak of COVID-19 and is affecting travel demand both domestically and globally.
How is COVID-19 is affecting Virgin Australia?
Cuts in domestic flight capacity have been drastically stepped up to 50% of all flights, up from an original 5% cut not one week ago (13 March 2020). These changes in domestic capacity are being put into action starting from 30 March 2020 and will remain in place until 14 June 2020 at a minimum. International capacity will also be completely grounded as of 30 March 2020, similarly, lasting until at least mid-June 2020. This is a dramatic increase from the initial 8% projected decrease in International flights being implemented just 5 days ago (13 March 2020).
If there is anything positive to take away from this unprecedented situation, it is that an exponential drop in fuel prices has been able to provide some financial relief to Virgin. Virgin have also introduced a dedicated customer care hub for guests effected by the virus, which is available on their website.
What is the Outlook for Virgin Australia?
Given the current volatility and ongoing uncertainty of the COVID-19 situation, Virgin has suspended their earnings guidance for the rest of FY20.
The Federal Government has unveiled (as of Wednesday 18 March 2020) an A$715 million bail-out package for Australia’s domestic aviation industry. The package will not only waive off aviation security charges, fuel excise and air service charges but also refund these costs to the business and backdate the payments to February 1 2020 to ensure a back payment of almost A$160 million into the industry. This package will assist Virgin, but current market conditions mean that Virgin faces significant difficulties in the period immediately.
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