Delta Air Lines Inc. and American Airlines Group Inc. walked away from their 2020 forecasts and said they will slash operations because of the coronavirus outbreak, joining carriers across the globe grappling with one of the worst crises in modern air travel.
Delta plans to cut domestic capacity as much as 15 per cent and international flights by 25 per cent, the Atlanta-based carrier said in a statement Tuesday. The company also will freeze hiring and suspend share buybacks. American said it would reduce US service 7.5 per cent in April and cut foreign flights by 10 per cent for the peak summer season.
The adjustments illustrate the depth of the crisis for carriers worldwide as the virus’s spread upends economies and prompts travellers to stay home. An airline trade group said last week that the industry will lose as much US$113 billion in sales because of the virus, while Jefferies anticipates the biggest annual drop in commercial air traffic since at least the 1970s.
“We have made the difficult but necessary decision to immediately reduce capacity and are implementing cost reductions and cash flow initiatives across the organisation.”– Delta Chief Executive Officer Ed Bastian
Already this week, Qantas Airways Ltd. grounded most of its A380 jets, slashed management pay and cut about a quarter of international service for six months; Air France-KLM said its main Paris-based arm would cancel 3,600 flights this month; Finnair Oyj outlined plans to eliminate 2,400 short-distance services in April; and JetBlue Airways Corp. withdrew its 2020 forecast. United Airlines Holdings Inc. abandoned its 2020 forecasts last month.
“As the virus has spread, we have seen a decline in demand across all entities,” Delta Chief Executive Officer Ed Bastian said in the statement. “As a result, we have made the difficult but necessary decision to immediately reduce capacity and are implementing cost reductions and cash flow initiatives across the organisation.”
Despite the pain for airlines, US carriers rose Tuesday amid a broad market rally following a historic rout the previous day. Delta climbed 3.4 per cent to $44.99 at 10:02 a.m in New York, while American jumped 6.7 per cent to $15.74. A Standard & Poor’s index of major U.S. carriers tumbled 32 per cent this year through Monday, dragged down by the outbreak.
Adding to the uncertainty for the airline industry, a Trump administration economic package to be unveiled Tuesday will leave out aid for the travel industry, people familiar with the matter told Bloomberg News. While the White House wants to find a way to help reeling airlines, as well as hospitality companies, administration officials remained uncertain about the best way to do so.
As a show of good faith during tough times, some airline executives have said they would give back some of their compensation. United CEO Oscar Munoz and President Scott Kirby will give up their base salaries through at least June 30, the carrier said. At Southwest Airlines Co., CEO Gary Kelly said he would take a 10 per cent pay cut amid the drop in bookings, the Wall Street Journal reported.