Airlines are not wasting any time cutting.
Cut flights, unpaid leave and hiring freezes: Airlines race to stem impact from coronavirus
PUBLISHED THU, MAR 5 202012:41 PM ESTUPDATED 16 MIN AGO
Leslie Josephs @LESLIEJOSEPHS
Southwest warned about a drop in first-quarter revenue because of the coronavirus.United and JetBlue are slashing flights and offering leave to workers.Airline stocks are trading at the lowest levels in years.
A person watches as a Southwest Airlines Co. plane arrives at a gate at the Pittsburgh International Airport (PIT) in Moon Township, Pennsylvania, U.S., on Tuesday, July 2, 2019.
Justin Meriman | Bloomberg | Getty Images
WASHINGTON — Airline executives are racing to cut costs as coronavirus spreads, raising concern about lower demand for travel that is sending shares to lows not seen in years.
Airlines are waiving change fees for new bookings and in some cases cutting fares in an effort to entice travelers on board. The measures have accelerated the drop in airline stocks, which have fallen more than the broader market.
American Airlines declined more than 11% on Thursday to a new low since its 2013 merger with US Airways. Its shares are down more than 20% over the past week. Delta Air Lines was down more than 6%, United Airlines was off close to 10%, and Southwest Airlines was trading 3% lower.
Smaller airlines that are more focused on the domestic market also fell sharply, as worries grow over a broad drop in travel demand. JetBlue Airways was down close to 10%, Alaska Airlines shares slid nearly 12% and Spirit Airlines was down nearly 16% to the lowest level since 2013.
The moves by airlines may not be enough to stabilize revenue streams, said Bill Franke, longtime airline investor and managing partner of Indigo Partners, which owns a stable of discount airlines including Frontier Airlines, Hungary’s Wizz Air and Mexico’s Volaris.
These efforts have “been only marginally successful to date because the traveling public has essentially taken the view that they don’t know enough to know whether they should travel or shouldn’t travel, and the end result around the world is a lot of people are just staying home,” Franke said at a U.S.Chamber of Commerce aviation conference in Washington, D.C., on Thursday.
U.S. airlines are facing their biggest demand shock since the financial crisis as the new coronavirus, or COVID-19, spreads around the world. Travel restrictions as well as potential risks such as getting quarantined have hurt demand and prompted companies from Boeing to Amazon to Ford to forgo the business trips that are lucrative for airlines and hotels.
Globally, airlines could lose up to $113 billion in revenue this year, the most since the financial crisis, if the disease continues to spread, the International Air Transport Association, an industry trade group, forecast on Thursday.
JetBlue offered flight attendants unpaid leave next month, when it plans to cut its capacity by 5%, according to a company memo that was seen by CNBC. The New York-based airline is also reducing its hiring and canceling events, according to another memo. Flight attendants who take the voluntary unpaid leave will retain their health benefits and travel privileges.
“We are closely monitoring booking trends to assess whether additional capacity reductions will be required,” wrote JetBlue’s president, Joanna Geraghty.
The move followed a similar step by United, which announced on Wednesday that it would cut its international flights by 20% next month and domestic flights by 10%. The Chicago-based airline has also pulled its 2020 financial forecasts and postponed its investor day, which was scheduled for Thursday, because the coronavirus is preventing it from providing new estimates.
For its part, Southwest warned Thursday that it logged a “significant decline” in customer demand in the last few days and an increase in cancellations.” The low-cost carrier said revenue per available seat mile, a key aviation industry measure of how much money airlines make for each seat they fly per mile, could range from a 2% decline to a 1% increase on the year this quarter, compared with a previous estimate of a 3.5% to 5.5% increase.
Southwest’s CEO, Gary Kelly, said the company hasn’t yet made a decision on flight cuts but the carrier hasn’t ruled out that measure.
“If you have the kind of ongoing weakness in revenues that we’re seeing right now, one would have to do that,” Kelly said at the aviation conference in Washington. The Dallas-based airline is considering changes to “discretionary hiring,” however.
“We’re going to be on our toes,” he said |
