U.S. airlines to trim capacity as coronavirus hits demand

NEW YORK, USA – Major United States airlines announced Tuesday, March 10, they will cut more flights and reduce capital spending as the industry tightens its belt in the wake of slumping demand from the coronavirus.

Leading US carriers had already significantly curtailed service to Asia, but both Delta Air Lines and American Airlines announced broader capacity cuts, while Southwest Airlines said it would lower its chief executive officer’s salary in light of the lean market.

“As the virus has spread, we have seen a decline in demand across all entities, and we are taking decisive action to also protect Delta’s financial position,” said Delta CEO Ed Bastian.

“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 organization.”

Delta plans to trim systemwide capacity by 15%, including a 15% to 20% drop in transatlantic flights and a 10% to 15% decline in domestic service.

Delta also said it was instituting a company-wide hiring freeze, offering voluntary leave options to employees, deferring $500 million in capital spending, and suspending share repurchases.

American said it was reducing by 10% its capacity for international service during its peak summer season, along with making a 7.5% reduction in domestic capacity in April as compared with its current schedule.

Both announcements acknowledged one bright spot from the weakening economic environment: lower fuel prices. Delta estimated it would save $2 billion in 2020 from lower energy costs, while American put the savings at $3 billion.

Southwest plans to cut by 10% the salary of CEO Gary Kelly in light of the situation, a spokesperson said. The domestic-focused carrier last week signaled a revenue hit from lower bookings, pointing to a sudden drop in bookings and increase in trip cancelations.

The International Air Transport Association estimated that the industry faces a revenue hit of up to $113 billion in 2020 due to the coronavirus, according to an estimate released last week. – Rappler.com