Eurozone airline sector getting hit by Coronavirus fallout, reports Fiona Cincotta.
British Airway’s parent company International Consolidated Airlines Group (IAG) is expected to report final results tomorrow. The results come as the share prices plunges to a four-month low after having shed 20% of its value this week and 10% of its value today.
News that the Court of Appeals has found plans for a third runway at Heathrow unlawful sent the share price sharply lower on Thursday.
The news added pressure to the airline, which is already on the back-foot owing to the impact of Coronavirus and the anticipation of lower demand globally. British Airways joined other airlines in suspending flights to and from mainland China back in January. Today British Airways has cancelled some flights to and from Milan, Italy and Seoul, South Korea as a result of reduced demand.
Investors will be almost solely focused on commentary on the impact of Coronavirus in IAG’s outlook. It will be very difficult for the airline to quantify the expected impact, but we are certain that they will attempt to. Disruption in the first quarter is expected to be significant but the effects could easily spill over into the second quarter and beyond.
So far, Air France KLM (AF) has said that it expects to lose €150 - €200 million ($165 to $220 million) should flights to Asia be suspended until April. A similar number from IAG could be in the pipeline.
Chart thoughts
IAG has been on a virtually uninterrupted bullish run since hitting a low of 410p at the end of the summer. Since then the share price has rallied some 65% to a high of 684p in mid-January (see chart below).
The share price has plunged 20% this week, breaking through the 50-, 100- and then today the 200-day simple moving average, negating the bullish trend.
Immediate support can be seen at 485p (high from Oct. 1 and Sept. 23) prior to 450p (Oct. 3 low) and 410p (August low).
Resistance can be seen at 516p (200-day simple moving average), prior to 546p (today’s high) and 576p (100-day simple moving average).
Fiona Cincotta is a Market Analyst for Currency Live
