Delta, American to Trim Capacity, Southwest CEO to Take Pay Cut--2nd Update
March 10 2020 - 10:03AM
Dow Jones News
By Alison Sider
Airlines on Tuesday detailed the growing impact of the
coronavirus by cutting more flights in domestic and international
markets, parking planes, freezing hiring and reducing executive
pay.
American Airlines Group Inc. and Delta Air Lines Inc. both said
they planned to reduce the number of flights across their networks
and Southwest Airlines Co. CEO Gary Kelly told employees that he
will take a 10% pay cut as the airline faces the most severe
downturn in decades because of the spread of the coronavirus.
The moves come as bookings have dropped off amid growing
passenger fears about traveling, and concerns that recovery could
take months, rather than the quick bounceback many had initially
anticipated when the virus first started to affect travel early
this year.
American said it plans to cut domestic flying by 7.5% by
decreasing frequencies in markets where it operates many flights.
It will reduce international flying by 10% for the summer peak
travel season.
Delta said Tuesday that it will park some planes and reduce
capacity across its network, cutting international capacity as much
as 25%, and domestic capacity as much as 15%. Delta also said it
would freeze hiring and offer voluntary leave options, in addition
to deferring $500 million in capital expenditures and suspending
share buybacks. The carrier said it would consider retiring some
planes early.
Delta CEO Ed Bastian said: "We have made the difficult but
necessary decision to immediately reduce capacity and are
implementing cost reductions and cash-flow initiatives across the
organization."
Overseas, the European Commission is close to approving a
suspension of airport-slot rules that will allow airlines to cut
back capacity without risking the loss of lucrative takeoff and
landing rights, according to people familiar with the matter.
The move, which could be signed off as early as Tuesday
afternoon, would provide significant relief for domestic and
international carriers operating in Europe. Some have been
operating near-empty flights in and out of congested hubs, like
London's Heathrow, to retain the slots.
Under the so-called "use-it-or-lose-it" airport slot rules,
airlines must use a takeoff or landing slot at a level of at least
80%, to keep the flying rights for the next season.
Southwest's Mr. Kelly told employees that the virus has created
a challenge more serious than any the industry has faced since
9/11, "and it may be worse."
"The velocity and the severity of the decline is breathtaking,"
Mr. Kelly said in a video message Monday that was viewed by The
Wall Street Journal. Southwest had previously said the reduced
bookings could result inasmuch as $300 million in lost revenue in
March alone.
The virus is testing airlines' ability to weather the kind of
economic crisis they have promised investors they could withstand
following a decadelong run of industry profits. While a sharp drop
in fuel prices is likely to relieve some pressure, carriers are
facing a global-demand shock that looks to be more severe than
anything they have encountered since 9/11.
American's reduction in domestic flights will include
cancellation of routes where customers can be easily rerouted. Some
domestic routes will get a boost, though, with bigger planes that
would have been used for international flying. Internationally, it
will trim service to destinations including Paris and Madrid. Latin
America, which had been the one relative haven for U.S. airlines'
international operations, will also see cuts, including American's
flights to Chile and Uruguay.
Top airline executives, including United President Scott Kirby,
American CEO Doug Parker, and Southwest's Mr. Kelly, are slated to
speak at JPMorgan's Aviation, Transportation, & Industrials
Conference Tuesday. The event, usually held in New York, will now
be held via teleconference.
All three airlines said fuel savings could be a silver lining
because of the oil price rout. American pegged the cost reduction
at as much as $3 billion in a presentation prepared for the
conference.
Benjamin Katz contributed to this article.
Write to Alison Sider at alison.sider@wsj.com
(END) Dow Jones Newswires
March 10, 2020 09:48 ET (13:48 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
American Airlines (NASDAQ:AAL)
Historical Stock Chart
From Mar 2024 to Apr 2024
American Airlines (NASDAQ:AAL)
Historical Stock Chart
From Apr 2023 to Apr 2024