Airlines ditch 2020 forecasts, slash flights and costs on coronavirus impact
BENGALURU/CHICAGO – Leading US airlines American and Delta suspended 2020 financial forecasts on Tuesday and took drastic further measures to combat the impact of the coronavirus, while United announced a capital raising and said it would post a first-quarter loss.
The sector has been hard-hit in the fast-spreading epidemic as tourists cancel trips and businesses across the globe clamp down on anything other than essential travel.
"This clearly is not an economic event. This is a fear event, probably more akin to what we saw at 9/11 than necessarily what we saw in 2009," Delta chief executive Ed Bastian told an industry conference.
Delta said it was cutting domestic capacity by 10 percent to 15 percent and international by 20 percent to 25 percent and freezing hiring across the company, offering voluntary leave options to staff and looking at early retirement of older aircraft.
It said it had seen net bookings fall by as much as 25 percent to 30 percent and expected the situation to worsen further.
American said it would cut domestic capacity by 7.5 percent in April and international by 10 percent for the upcoming summer season, but has not announced major new steps on costs.
The airline said it had more than $7.3 billion in available capital as of March 9, and was "well-positioned" to manage through the crisis, noting that a fall in fuel prices is expected to drive about $3 billion in 2020 cost savings. Oil sank to around a fifth in value on Monday.
United, which had already announced capacity cuts, said it had raised an extra $2 billion in financing, bringing total liquidity to $8 billion, while slashing its 2020 capital expenditure by more than a third to about $4.5 billion.
It also said CEO Oscar Munoz and President Scott Kirby are forgoing their base salaries through at least June 30, 2020.
The steps follow a string of other announcements by airlines in recent weeks to tackle the impact of the outbreak on consumer sentiment ahead of the summer season.
Analysts have said that US airlines have strong balance sheets, significantly lower debt levels and sizeable cash reserves than they have before prior crises. Though executives have warned that no one can predict how long and how deep the coronavirus crisis will be.
In a message to employees on Monday, Southwest CEO Gary Kelly said he was taking a 10 percent pay cut in response to a "severe recession" for the airlines industry.
In an effort to encourage bookings, the largest US airlines are allowing passengers to re-book tickets through April 30 without paying fees to change flights.
Executives from United, American and other US airlines are due to present at an industry conference on Tuesday.
Spirit Airlines, which is also presenting on Tuesday, also suspended its 2020 forecasts on Tuesday and said it was trimming its April capacity and eyeing more cuts in May.Reuters