Airlines slash flights by up to 90% as coronavirus destroys demand

March 16, 2020, 9:57 AM UTC

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The airline downturn reached new levels as carriers from American Airlines Group Inc. to British Airways parent IAG SA slashed schedules and braced for a drought that could last for months.

American will pare long-haul international flights by 75% — the biggest reductions to date by a U.S.-based carrier — because of the collapse in travel demand and government restrictions imposed to slow the spread of coronavirus.

Delta Air Lines Inc. and United Airlines Holdings Inc. further reduced schedules, while IAG fell 23% after saying it will cut capacity by at least 75% for the next two months and freeze hiring. The Bloomberg EMEA Airlines index sank 16%.

The actions reflect the increasing severity of the downturn that has pummeled airlines worldwide as the virus spreads and travel restrictions expand. White House officials are discussing temporarily allowing cash-strapped carriers to keep some taxes and fees they collect from passengers. Separately, Sydney-based CAPA Centre for Aviation warned the pandemic may bankrupt most airlines worldwide, and many have probably been driven into technical bankruptcy or substantially breached debt covenants already.

Fallout from the outbreak is sparing few airlines anywhere. President Donald Trump extended a temporary ban on some flights into the U.S. to include those from the U.K. and Ireland, pulling more airlines into the bedlam.

At IAG, where outgoing IAG Chief Executive Officer Willie Walsh will delay his retirement, the company said Monday it can’t accurately predict full-year profit. The shares fell 23% while big trans-Atlantic carriers Deutsche Lufthansa AG and Air France-KLM , dropped 14% and 19%, respectively. EasyJet Plc fell 29% after rescinding its earnings forecast.

Air France-KLM Chief Executive Officer Ben Smith said he would take a 25% cut in his compensation to help cut costs. The carrier has asked the French and Dutch governments, who hold stakes in the company, for support and has further slashed fights at Air France and Transavia by as much as 90%, he said in an internal video to staff Monday.

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. The carrier has already axed almost a quarter of its international flights for six months.

Air New Zealand Ltd. said it’s slashing long-haul capacity 85% and cutting jobs. In Sweden, SAS AB is temporarily laying off as much as 90% of its workforce and canceling most of its flights.

American will cut service starting Monday through May 6, the carrier said late Saturday. The airline will continue to operate one flight daily from Dallas-Fort Worth to London, one daily from Miami to London and three weekly flights from Dallas-Fort Worth to Tokyo. The airline has an extensive partnership with carriers led by British Airways.

U.S. capacity will fall 20% in April and 30% in May, both from a year earlier. American is suspending flights from New York, Boston, Chicago and Los Angeles to London’s Heathrow Airport over the next seven days.

Delta will temporarily suspend service between Detroit and London starting Monday and between New York’s John F. Kennedy and Dublin on March 18, the carrier said Sunday. Delta already announced plans to reduce flying and seat capacity 40%, park 300 planes, suspend hiring and offer unpaid voluntary leaves.

United will reduce its capacity about 50% in April and May, deepening previous cuts, the company said late Sunday. Salaries of corporate officers will be halved. The airline also started talks with unions to lower payroll expenses. That process “will be painful for all of us,” United Chief Executive Officer Oscar Munoz and President J. Scott Kirby said.

In a joint statement to nearly 100,000 United employees, Munoz and Kirby warned there’s worse to come. Passenger numbers and revenue will “decline sharply” in coming days and weeks, they said.

“We are working night and day on support and ideas to keep as much pay as we possibly can flowing to you — even if gets worse from here and demand temporarily plummets to zero,” they said.

A Standard & Poor’s index of the five largest U.S. carriers has fallen 38% this year through March 13.

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