Demand for Latin America flights will take a hit over Zika, says Moody's

However Jonathan Root, vice president and senior credit officer at the ratings agency, said on Monday that it won’t have a meaningful credit effect on rated airlines, including British Airways and Lufthansa.

“Zika concerns are unlikely to trigger a prolonged decline in overall air travel, in part because the virus appears to have serious health consequences for only a relatively small proportion of those who are infected, specifically pregnant women.”

He said airlines typically see only a limited effect on passenger demand following the outbreak of epidemic or pandemic viruses not susceptible to airborne transmission.

“For instance, despite last year’s outbreak of the Ebola virus, which like Zika is not susceptible to airborne transmission, the global airline industry achieved record financial results in 2015 amid growing passenger demand and sharply lower fuel costs.

“But given the large expanse of the regions affected, the current Zika outbreak could affect air traffic more meaningfully than last year’s Ebola outbreak, which was mostly contained to western Africa.”

Root noted that Gol Linhas Aereas Inteligentes and and LATAM Airlines Group will be most exposed to Zika-related demand risk because large portions of their respective networks are located within the affected area.

“Lower passenger demand because of the Zika virus would compound the pressure that weak economic activity and the weak Brazilian real are already exerting in the local market.”