United Airlines is poised to announce a 50 percent capacity reduction in April and May but warns load factors may still drop into the 20-30 percent range despite the cut.
United senior management said it expects the cuts to extend into the peak summer travel season and said they come after a million fewer passengers boarded its aircraft in March, shaving an estimated $US1.5 billion off revenue for the month compared to last year.
“The bad news is that it’s getting worse,’’ United chief executive Oscar Munoz and president Scott Kirby told staff in a letter.
“We expect both the number of customers and revenue to decline sharply in the days and weeks ahead.”
The United announcement is in line with a 40 percent capacity cut at Delta Airlines and a recent announcement by American Airlines that it would slash international flying by 75 percent.
Some airlines have suspended all or most of the international flying due to the virus and travel restrictions associated with it.
READ: Unprecedented Air New Zealand cuts see most long-haul routes suspended.
The cuts are in response to domestic and international restrictions aimed at slowing the spread of the coronavirus, including travel restrictions on Europe and now the UK and Ireland.
Munoz and Kirby pointed to steps taken since late January to aggressively manage the crisis, including a sharply reduced schedule, a voluntary leave program, dramatically reducing discretionary spending, cutting the CEO base salary and deferring a salary increase.
They said the steps had been designed to avoid cutting wages but that no longer seemed possible and corporate officers had been told their salary would be cut by 50 percent.
“Tomorrow, we will announce an approximately 50 percent cut in capacity for April and May,’’ they said.
“We also now expect these deep cuts to extend into the summer travel period. Even with those cuts, we’re expecting load factors to drop into the 20-30 percent range — and that’s if things don’t get worse.
“Together, we’re facing an unprecedented challenge.
“When medical experts say that our health and safety depends on people staying home and practicing social distancing, it’s nearly impossible to run a business whose shared purpose is “Connecting people. Uniting the world.”
The executives said they were continuing to work on ideas to keep as much pay as possible flowing to staff “even if gets worse from here and demand temporarily plummets to zero”.
The announcement came as Scandinavia’s SAS from Monday is temporarily halting most of its operations and laying off 90 percent of its staff, saying COVID-19 travel restrictions had made demand for international air travel “virtually non-existent”.
It said it would halt most of its traffic from March 16 until conditions again favored commercial aviation operations.
“With consideration to our customers SAS will within the next few days, as far as it is possible maintain certain traffic in order to enable return flights from different destinations,’’ SAS said in a statement.
“We will be at the disposal of the authorities to, on their behalf, take home stranded citizens or maintain infrastructure important to society, as far as possible.”
The airline said it would temporarily lay off 10,000 employees comprising about 90 percent of its workforce.
“The reductions will be implemented through all parts of the operation, according to national regulations,’’ the airline said.
“SAS is carrying out these measures for the purpose of return to normal operation as soon as possible.”
Other airlines that have been particularly hard hit include LOT Polish Airlines, which suspended operations from Poland and Hungary until at least March 28 after a decision by the Polish government to suspend international traffic.
A similar ban by the Latvian government from March 17 has prompted airBaltic to suspend international flights other than repatriation services.
And business-class boutique airline La Compagnie suspended all its flights from March 18 to April 12.
“Due to the decrease in activity and demand and to ensure La Compagnie does not operate flights that are primarily empty, the airline has taken measures to suspend the entirety of its scheduled flights from March 18 to April 12, 2020,’’ it said
“Once the travel restrictions from Europe to the U.S. are lifted—currently scheduled for April 15, 2020—La Compagnie will resume with one daily flight between Paris and New York.”
It also delayed its seasonal New York-Nice route to June 1.
