As Scott Morrison warns Australians to prepare for a coronavirus “pandemic”, there are some companies already seeing the silver lining.

Coronavirus has turned into a game of smoke and mirrors with organisations using the virus to explain away low profits — despite not yet being affected by the virus at all. 

As Terry Rawnsley, Principal & Partner at SGS Economics and Planning told Crikey, “it’s something that can be pointed to in a press release to say it’s not just us — it’s having a big impact”.

See how power works in this country.

News done fearlessly. Join us for just $99.


Let’s take a look at the sectors blaming the pandemic for bad business.

Crown’s already down 

Crown Casino has announced its 2020 half-year results, which have been labelled by CasinosAus as a “disappointing big picture” thanks to “negative publicity and the virus”. Coronavirus is mentioned as being “closely monitored” in the report. 

But the numbers are calculated through to December 31 — the same day China first alerted the World Health Organisation to several cases of unusual pneumonia in Wuhan.

As Rawnsley put it: “Obviously the coronavirus will have an impact on Crown, but they’re reporting on stuff that shouldn’t be impacted … they’re setting the ground for even worse results.”

While it makes sense for companies to flag the impact the virus might have early on, Rawnsley believes some companies are “using the coronavirus for less than stellar results”. “The narrative for the results and the economic reality differ,” he said. 

Crown did not respond to Crikey’s request for comment.

Retail has been bad since Christmas 

Factories that churn out some of our favourite products — including iPhones, wedding dresses, and even instruments parts — closed in China, hitting retailers. But the virus extended a planned shutdown in several Chinese factories over the Lunar New Year and many of them — including Apple stores which closed at the start of the month — are already back in business

Foot traffic sales may also be affected thanks to a lack of consumer confidence — but this isn’t something new, Rawnsley said. The retail slowdown has already been prominent in Australia since before Christmas.

“You don’t expect a collapse but a lot more softness in that series … A bigger drop will be the tourism, accommodation, recreation and entertainment sectors,” he said.  

The surplus was already bust 

Scott Morrison has stepped away from his surplus pledge, asking: “hands up those who thought there was going to be a coronavirus epidemic when the budget was released last May?” 

It’s a convenient excuse given that the probability of a surplus had already turned to ash thanks to both the bushfires and a slow economy, said Tim Harcourt, an economist at the UNSW Business School. 

“It’s likely investment was slowing in Australia and it was hard to meet the surplus in the budget,” he said. 

The surplus wasn’t huge at $5 billion, meaning there wasn’t much wiggle room — especially after the dollar dropped to the lowest level since the global financial crisis last week, while unemployment climbed to 5.3% last month. 

Even without the coronavirus, we “might not have made it”, Harcourt said. 

Not all tourism will suffer

The hit to the tourism sector has been described by David Beirman, senior lecturer in Tourism and Management at University Technology of Sydney, as a “quadruple whammy” from the droughts, fires, floods and now, coronavirus. 

But some have already managed to use the virus to spin their bad news: Corporate Travel Management downgraded its forecast earnings for this financial year, preempting the effects of the coronavirus following a loss of growth.

A Corporate Travel Management spokesperson told Crikey the organisation has “provided assumptions to the market of the potential impact Covid-19 may have on our second-half operating profits. But, we don’t have a crystal ball.”.

The spokesperson added they were aiming for a “swift recovery at the other end of the virus impact cycle”. 

Meanwhile, Tigerair (owned by Virgin Australia) has used the virus as an excuse to move forward its planned fleet downgrade — a move Beirman said can only be beneficial. 

“For low-cost airlines, the downgrade is a good thing. The more you have a single aircraft fleet, the cheaper it is to run it.” Airlines, he said, save money maintenance, fuel and repairs by cannibalising parts from one aircraft to another.

Tigerair said in a statement the fleet withdrawal was part of its mitigation strategy to minimise impact to Virgin Australia Group’s financial position. 

While Royal Caribbean cruises have warned that the company’s full-year earnings will take a hit, Beirman doesn’t think this will apply to Australian cruise lines.

“Seventy-five percent of Australian tours either cruise within national waters, around New Zealand or to the south-west pacific,” he said. “Most cruise close to home.” And, given that cruise passengers are the “risk-averse travellers”, there may even be an uptick in domestic cruises. 

But others are not so easy to convince: as Richard Holden, another economist at the UNSW Business School, told Crikey: “a cruise is the perfect petri dish for transmitting a virus”.

Holden said that, while some outbound will get replaced by domestic travel, “a holiday in South Australia is different to one in Milan”. 

The takeaway? 

“In general, this is an easy thing for people to blame poor results on,” Holden said. “[But] people aren’t necessarily going to take the time to go back and look at their account,” meaning companies could get away with it. 

And as Rawnsley told Crikey: “the coronavirus will get blamed for a lot of things moving forward so it’s important to understand where it will have an impact and where it’s being used as an excuse for poor performance elsewhere”.

See how power works in this country.

Independence, to us, means everyone’s right to tell the truth beyond just ourselves. If you value independent journalism now is the time to join us. Save $100 when you join us now.

Peter Fray
Peter Fray
SAVE 50%