Airlines worldwide will shrink operations to only a trickle of flights, severing global links and putting hundreds of thousands of jobs at risk as they fight to preserve cash and survive the coronavirus pandemic.
British Airways owner IAG SA will slash capacity for April and May by at least 75 per cent amid the collapse in demand and government restrictions aimed at slowing the disease. Partner American Airlines Group Inc. will cut international long-haul flights by the same degree in the biggest reductions by a US carrier.
Ryanair Holdings Plc and Air France-KLM announced even deeper cuts at 80 per cent and 90 per cent respectively, and the Irish firm said its entire fleet may be grounded. Paris’s two biggest airports plan to shutter terminals as travel hubs stand almost empty, while TUI AG, the largest vacation firm, will suspend the bulk of its hotel and cruise-ship operations.
Job cuts mounted as Norwegian Air Shuttle, already mired in debt and losses, cut 7,300 posts, and Virgin Atlantic Airways offered staff 12 months of leave.
The actions reflect mounting fears that Covid-19 threatens the survival of even healthy travel companies as people stay home and the disease wipes out economic growth. White House officials are looking at letting cash-strapped carriers keep some taxes and passenger fees, while European governments are exploring measures that could go as far as partial nationalization.
“Coordinated government and industry action is needed now if catastrophe is to be avoided,” the Sydney-based CAPA Centre for Aviation said Monday. Otherwise, “emerging from the crisis will be like entering a brutal battlefield, littered with casualties.”
Many airlines have probably substantially breached debt covenants already, and the pandemic will bankrupt most carriers worldwide by the end of May without coordinated action, the report said.
Fallout from the outbreak is sparing few airlines anywhere.
Delta Air Lines Inc. and United Airlines Holdings Inc., the biggest US network operators alongside American, further reduced schedules. And in Australia, Qantas Airways Ltd. said it plans a fourth round of capacity cuts after the government forced anyone arriving from overseas to isolate themselves.
IAG, which owns airlines in Spain and Ireland as well as BA, will freeze hiring and veteran Chief Executive Officer Willie Walsh, who was due to stand down this month, will delay his retirement. Like many airlines the company said it’s no longer possible to provide estimates for full-year earnings.
At Air France-KLM, CEO Ben Smith addressed staff in a video following an extraordinary board meeting and talks with the French and Dutch governments, which hold stakes in the carrier, on support that could include postponing taxes, fees and charges.
“We don’t know when this will end,” said Smith, who is taking a 25 per cent pay cut. The company has begun talks with unions on shorter working hours and has pulled wide-body jets including Airbus SE A380s. The superjumbo is also suffering a cull elsewhere, with Dubai-based Emirates grounding 29.
Global airport operator Aeroports de Paris said that in addition to closing some Paris terminals and suspending airline fees for parking jets, it has shut down hubs in Amman, Jordan, Ohrid and Riga, Latvia.
Cuts at Finnair Oyj will be among the steepest, with the carrier eliminating about 90 per cent of normal capacity from April “until the situation improves.” It had already taken a battering from the earlier collapse in Asian travel after following a strategy focused on serving China, Japan and South Korea.
“Coordinated government and industry action is needed now if catastrophe is to be avoided.”– CAPA Centre for Aviation
Companies have sought to provide reassurance about their liquidity, with EasyJet Plc saying it has a 1.6 billion-pound ($2 billion) cash balance, an undrawn $500 million revolving credit and aircraft worth more than 4 billion pounds. Europe’s second-biggest discounter said it expects to ground most planes while operating what it called “rescue flights” for short periods.
Ryanair said it has 4 billion euros ($4.5 billion) in cash and will also defer capital spending and share buybacks to bolster reserves.
TUI fell as much as 39 per cent in London, the most
ever, after saying
it was winding down travel. The group’s airlines are now
focused on bringing people home, and the last two or three
cruise ships will stay in port once they dock. Destinations where some outbound flights continue include Egypt, Cape Verde and Mexico.
Virgin Atlantic Airways Ltd. chief Shai Weiss has written to UK Prime Minister Boris Johnson saying British carriers and airports may need credit of 7.5 billion pounds. The airline will have terminated four-fifths of daily services by the end of next week and could ground all-but 15 per cent of its planes in April.
Job cuts are racking up, most of them temporary for now. The ax has come down hardest in Scandinavia, with Norwegian Air laying off 90 per cent of staff, the same proportion as at tri-national rival SAS AB, where up to 10,000 people will be sent home as it cancels most flights.
Elsewhere, recruitment freezes have become the norm. Virgin’s staff will also be required to take eight weeks of unpaid leave over the next six months, and it’s touting voluntary severance packages and year-long sabbaticals.
American announced additional cuts hours after President Donald Trump extended a ban on some flights into the US to include those from the U.K. and Ireland, while US capacity will fall 20 per cent in April and 30 per cent in May from a year earlier. The carrier is also cutting flights to numerous cities in South America, Australia, New Zealand and Asia.
United will reduce its capacity about 50 per cent in April and May, deepening previous cuts, the company said late Sunday. Executive salaries will be halved and talks will begin with unions to lower wages, with CEO Oscar Munoz warning that the process will “be painful for all of us.”