Delta, American to Trim Capacity, Southwest CEO to Take Pay Cut--Update

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 due to 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 impact 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 percent, and domestic capacity as much as 15 percent. 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."

Mr. Kelly told employees in a video message Monday that was viewed by The Wall Street Journal that the virus has created a challenge more serious than any the industry has faced since 9/11, "and it may be worse."

He said: "The velocity and the severity of the decline is breathtaking."

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'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 Wednesday. The event, usually held in New York, will now be held via teleconference.

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 the conference.

Write to Alison Sider at [e-mail]

(END) Dow Jones Newswires

March 10, 2020 08:55 ET (12:55 GMT)

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