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United Airlines Calls Off Investor Day on Coronavirus Threat

Zacks Equity Research

United Airlines Holdings Inc UAL has cancelled its investor day as coronavirus fears loom. Simultaneously, the carrier has cut back flights to Japan, South Korea and Singapore, significantly due to low demand on these routes.

United Airlines’ investor day, which was to be held on Mar 5, has been rescheduled for September. The carrier feels it will not be "practical to expect that it can have a productive conversation focused on its long-term strategy next week."

With a substantial drop in demand, the carrier has extended the suspension of its U.S. flights to mainland China and Hong Kong through Apr 30. Previously, flights from the United States to Beijing, Chengdu, Shanghai as well as Hong Kong were cancelled through Apr 24, 2020.

The airline reduced approximately two thirds of its flights to Seoul, a third of flights to Japan and 40% of flights to Singapore. Moreover, the Chicago, IL based airline is operating some routes on a smaller aircraft due to the slackness in demand.

With the airline having a large international presence, the coronavirus poses a major challenge to its prospects. Per CFRA analyst Colin Scarola, United Airlines with greater international exposure among U.S. airlines, is at maximum risk of facing lower passenger traffic from virus outbreaks. The carrier generates approximately 40% of total revenues from international route, per Scarola.

Consequently, amid uncertainty surrounding the coronavirus’ spread to other parts of the world, its duration and effect on overall air travel demand, United Airlines withdrew its 2020 guidance last week.

As a result of the setback from the deadly virus outbreak, shares of the company have declined more than 29% since the beginning of February.


 

To tackle low demand due to the outbreak, airlines are waiving off change and cancellation fees. JetBlue Airways JBLU started the trend to facilitate travel and offer some relief to customers who were worried about their travel plans in the wake of the deadly virus outbreak.

Soon after, Alaska Airlines, the subsidiary of Alaska Air Group ALK, and American Airlines AAL joined in. In order to compete, United Airlines may soon follow the same trajectory.

Zacks Rank

United Airlines carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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