BRUSSELS (Reuters) - The worst is still to come for the airline industry in terms of economic damage from the coronavirus outbreak, European bosses warned on Tuesday, but they predicted that travel demand could stabilise in the coming weeks.

Coronavirus has hit demand, forcing airlines to cancel flights and cut costs, and ask governments and regulators for help as they battle to get to grips with what they hope will be short-term, rather than long-term, disruption.

The heads of Europe's biggest carriers discussed the impact of the epidemic at an annual industry conference. They included Ryanair RYA.I chief Michael O'Leary; Willie Walsh, boss of British Airways-owner IAG; and easyJet's EZY.L Johan Lundgren.

“We have seen a drop in demand when you look particularly in the northern part of Italy, but that has also spilled over to the other parts of the network,” easyJet CEO Johan Lundgren said.

Italy has suffered the biggest outbreak of the illness in Europe.

IAG’s Walsh also noted a “very significant fall-off in demand” in Italian markets in the past week. But he predicted demand would stabilise in coming weeks if bookings followed the pattern seen in Asia.

“I think we will see air traffic recover in due course,” he said.

Ryanair’s O’Leary agreed the next few weeks would be tough. He said he expected a “very deflated booking environment” for the next two to three weeks, but should the crisis stabilise, bookings would recover.

“I think you will see a pretty rapid return to normal,” he said.

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Yet the bosses acknowledged it could get a lot worse before it gets better.

“If we’re not successful in the containment of it then there might be a more difficult outcome,” Lundgren said.

O’Leary told Reuters in an interview that he would introduce cheaper tickets to stimulate the market closer to the summer, if necessary.

On future demand for the aircraft themselves, two sales executives from planemakers Airbus AIR.PA and Boeing BA.N said that it was too early to gauge the impact. Both O'Leary and Walsh said there would always be demand for more aircraft if they were cheap enough.

‘TAKE BURDENS AWAY’

Airlines worldwide have been suspending flights or modifying services in response to the coronavirus outbreak, which has now claimed more than 3,000 lives and infected more than 90,000 people globally, after spreading from China to 77 other countries and territories.

The crisis has led to a quarter of the short-haul fleet of airlines like Lufthansa LHAG.DE being grounded.

As part of the European airline lobby group A4E, the airlines called for a relaxation of airport regulations which cover slot usage, to help them cope with the impact of coronavirus.

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That was in line with a call from global industry body IATA on Monday for a suspension of rules under which airlines can lose lucrative landing and take-off slots if they cancel flights for a prolonged period.

The airlines want a temporary waiver to be granted by all EU member states on slots, something O’Leary called “critical”, and a common set of health requirements for travel to and from the affected regions.

“Before we need help, there’s a lot of burdens you can take away - we never ask for help, we ask for less burdens,” Lufthansa CEO Carsten Spohr told the conference.

IAG’s Walsh said struggling airlines should not be given state aid to enable them to survive the drop in demand. But there was a feeling governments could take other actions to help all airlines navigate this difficult period.

“I do think it is absolutely the right thing to do to ask governments to consider what type of support they can give their airlines in terms of maintaining connectivity,” Lundgren said.

Air France-KLM CEO Ben Smith said that what set this crisis apart from the SARS crisis in 2003 was the role played by social media.

“What’s definitely different with this crisis (is) the type of media attention it’s getting. Social media has had a different impact on the trust and the understanding of people who fly,” he said.

Ryanair’s O’Leary said social media wasn’t helping but he was confident its impact was short-lived.

“There’s a lot of misinformation out there. Social media is a scourge for idiots but common sense usually wins out in a reasonably short period of time,” he said.