BUSINESS

US airlines to trim capacity as virus hits demand

Spain suspends air traffic from Italy

March 10, 2020
A United Airlines passenger jet takes off in New York City in this file picture. — Courtesy photo
A United Airlines passenger jet takes off in New York City in this file picture. — Courtesy photo

NEW YORK — Major US airlines announced on Tuesday they will cut more flights and reduce capital spending as the industry tightens its belt in the wake of slumping demand from coronavirus.

Leading US carriers had already significantly curtailed service to Asia, but both Delta Air Lines and American Airlines announced broader capacity cuts, while Southwest Airlines said it would lower its CEO's salary in light of the lean market.

"As the virus has spread, we have seen a decline in demand across all entities, and we are taking decisive action to also protect Delta's financial position," said Delta Chief Executive Ed Bastian.

"As a result, we have made the difficult, but necessary decision to immediately reduce capacity and are implementing cost reductions and cash flow initiatives across the organization."

Delta plans to trim systemwide capacity by 15 percent, including a 15-20 percent drop in transatlantic flights and a 10-15 percent decline in domestic service.

Delta also said it was instituting a company-wide hiring freeze, offering voluntary leave options to employees, deferring $500 million in capital spending and suspending share repurchases.

American said it was reducing by 10 percent its capacity for international service during its peak summer season, along with making a 7.5 percent reduction in domestic capacity in April as compared with its current schedule.

Both announcements acknowledged one bright spot from the weakening economic environment: lower fuel prices. Delta estimated it would save $2 billion in 2020 from lower energy costs, while American put the savings at $3 billion.

Southwest plans to cut by 10 percent the salary of Chief Executive Gary Kelly in light of the situation, a spokesperson said. The domestic-focused carrier last week signaled a revenue hit from lower bookings, pointing to a sudden drop in bookings and increase in trip cancellations.

The International Air Transport Association estimated that the industry faces a revenue hit of up to $113 billion in 2020 due to coronavirus, according to an estimate released last week.

Meanwhile, the Spanish government said on Tuesday it was suspending all air traffic from Italy for two weeks over coronavirus fears, the official state bulletin said.

"The measure applies to all direct flights from airports in Italy to Spain," it said in a measure which would come into force at midnight (2300 GMT) and remain in force until March 25.

The only exceptions to the ban are government aircraft as well as planes carrying medical or humanitarian aid, it said.

The move came as Italy ordered a national lockdown to try and curb the spread of the deadly coronavirus epidemic that has so far infected more than 9,000 people, killing 463.

Spain itself has also seen a spike in cases in the last 24 hours, with 1,622 infections and 35 deaths.

In terms of flight arrivals, Italy is the third largest market for Spain, with more than 106,000 flights arriving in 2019 carrying some 16 million passengers and accounting for around 9.0 percent of Spain's international traffic, the bulletin said.

It made no mention of flights to Italy. — AFP


March 10, 2020
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