United Airlines Abandons Full Year Guidance Due To Virus Uncertainty

Due to the Covid-19 outbreak in China, United Airlines has withdrawn its full-year 2020 forecast and warned it had seen a 100% decline in demand to China.

“Due to the heightened uncertainty surrounding this outbreak, its duration, its impact on overall demand for air travel and the possibility the outbreak spreads to other regions, the Company is withdrawing all full-year 2020 guidance issued on January 21, 2020,” United said in a filing on Monday evening. 

United suspended all flights between the US and Beijing, Chengdu, Shanghai, and Hong Kong through April 24. These routes represent about 5% of the airliner’s 2020 planned capacity.

United noted that it had seen “100% decline in near-term demand to China and an approximately 75% decline in near-term demand on the rest of our trans-Pacific routes.”

Investors fled airline stocks on Monday as the deadly virus spreads outside China. American Airlines, Delta Air Lines, and cruise ship industry were among the worst performers in the S&P500 on Monday.

And it’s not a huge surprise United killed its guidance as analysts seemed to have refused to take note of the virus impact, even if the stock has…

On top of that, Mastercard warned about the fast-spreading virus, now moving across South Korea, Japan, Iran, and Italy could hurt revenue this year.

“Cross-border travel, and to a lesser extent, cross-border e-commerce growth, is being impacted by the Coronavirus. As a result, we now expect that if the trends we have seen recently — primarily in our cross-border drivers — continue through the end of the quarter, year-over-year net revenue growth in the first quarter will be approximately 2-3 percentage points lower than discussed on our January 29, 2020 earnings call. Under these circumstances, we would expect year-over-year net revenue growth of 9-10% in the first quarter on a currency-neutral basis, excluding acquisitions,” Mastercard warned. 

Mastercard added if the virus only impacts the first quarter, then “we expect that our 2020 annual year-over-year net revenue growth rate would be at the low end of the low-teens range.” 

Shares of both United and MasterCard ended lower on the session today as a broad stock market sell-off was sparked by the spread of the virus from East to West.

Other companies such as Apple, Qualcomm, Procter & Gamble have sounded the alarm on virus impacts for the first quarter, and perhaps weakness rolling into Q2. 

And remember, President Trump’s top economist, Larry Kudlow is paid to tell happy stories because if you knew the truth, you wouldn’t be buying stocks.