Cathay Pacific issues profit warning after coronavirus hits service

Cathay Pacific, Hong Kong’s flag carrier airline, has issued a profit warning after the coronavirus outbreak forced it to cancel two in every five flights for February and March.

The Covid-19 virus had by Sunday infected 51,857 people worldwide, killing 1,669, according to the World Health Organization.

Efforts to contain the virus have caused large parts of the economy in China, where the outbreak originated, to grind to a halt and businesses across the world are still assessing the potential financial cost amid continued uncertainty.

Related: ‘Black swan’ coronavirus casts its shadow over the global economy

For Cathay, the virus marks another blow after a torrid 12 months in which the street protests in Hong Kong had already caused major traffic declines. Traffic to Hong Kong fell by 46% year on year in November and December, a steeper drop than the 40% seen in January, when the virus was first identified.

The airline had already asked its 27,000 employees to take unpaid leave to help reduce costs and it faces the prospect of months of disruption ahead. Cathay had cut 30% of flights before Monday’s announcement.

Ronald Lam, the airline’s chief customer and commercial officer, said: “This was the most challenging Chinese new year period we have experienced. As the novel coronavirus outbreak in mainland China intensified towards the end of the holiday period, travel demand dropped substantially.”

Travel bans imposed by many governments across the world resulted in continued cancellations by passengers. The airline said cuts to flight numbers were likely in April as well.

The airline’s overall traffic fell by 3.1% in January but performance “deteriorated rapidly” in the last week of the month, when the severity of the outbreak became clear.

The coronavirus outbreak has affected an array of companies around the world. Moody’s Investors Service, the influential credit ratings agency, on Sunday revised down its outlook for 2020 global growth by 0.2 percentage points because of the disruption.

“Extended lockdowns in China would have a global impact, given the country’s importance and interconnectedness in the global economy,” said Madhavi Bokil, a vice-president at Moody’s. “The toll on the global economy would be severe if the rate of infections does not abate and the death toll continues to rise. If the outbreak persists, the domestic and international supply chain disruptions are likely to become significant, amplifying the shock to the global economy.”

The mining group Petra Diamonds said on Monday that reduced sales of the precious stones during the lunar new year period were denting its finances, with the virus delaying its efforts to improve cash flow, resulting in $50m (£38m) less than expected by June 2022.

Petra also warned there could be volatility in diamond prices as the outbreak exacerbated global economic uncertainty.