AAL American Airlines Group Inc

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. United Airlines Holdings Inc. CEO Oscar Munoz and President Scott Kirby said they would forgo their base salaries until at least June 30, and Southwest Airlines Co. CEO Gary Kelly told employees he will take a 10% pay cut as the airlines face 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. Airlines are now preparing for the prospect that recovery could take months, rather than the quick bounceback many had initially anticipated when the virus started to affect travel early this year. The virus's rapid impact on demand has sent airlines reeling: American, Delta and United have all withdrawn their financial guidance for the year and suspended share buyback programs, among other measures.

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 said it would consider retiring some planes early.

"This is a fear event," Delta CEO Ed Bastian said, speaking at an industry conference that was webcast, rather than being held live, on Tuesday. Mr. Bastian said he expects demand will continue to erode in the near term.

Overseas, the European Commission is close to approving a suspension of airport-slot rules that would 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 "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.

United said it now expected to incur a first-quarter loss, rather than the profits it had anticipated. The airline said it raised $2 billion from a group of banks, which will bring its total liquidity to $8 billion. The airline is also slashing capital spending by $2.5 billion.

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. "There is no question this is a severe recession for our industry and for us, and it's a financial crisis." Southwest had previously said the reduced bookings could result in as much 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 CEO Doug Parker said corporate travelers have shown the steepest declines in demand, as companies have told employees to stay put. The airline saw a "large increase" in bookings when it opened up more seats at cheaper prices, he said.

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, the airline will hold off on flying to mainland China until late October, and will extend cancellations to Hong Kong and Singapore for months. It is temporarily suspending or cutting back on service to European destinations including Barcelona, Madrid, Rome and Paris. 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, Uruguay, and Brazil.

United said Tuesday that it expects the schedule reductions it has already announced will be rolled forward.

All three airlines said fuel savings could be a silver lining due to the oil-price rout. American pegged the cost reduction at as much as $3 billion in a presentation prepared for Tuesday's conference.

European carriers stepped up their own cancellations after Italy shut down travel in and out of the country. Ryanair Holdings PLC revised down its traffic plans for this year by three million passengers to 151 million, while Norwegian Air Shuttle ASA said it would cut 3,000 flights from its schedule.

--Benjamin Katz and Doug Cameron contributed to this article.

Write to Alison Sider at alison.sider@wsj.com

(END) Dow Jones Newswires

March 10, 2020 11:27 ET (15:27 GMT)

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