Alaska Airlines plans coronavirus capacity cuts of up to 15%; CEO will forgo pay
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Alaska Airlines will cut capacity by up to 15% as part of an effort to preserve cash amid the growing novel coronavirus pandemic.
The Seattle-based carrier will reduce capacity by 10% in April and 15% in May from previously published levels, Alaska said Monday in a federal filing. It previously planned to maintain its April schedule and cut May by roughly 3%.
In addition, Alaska has suspended hiring, is offering staff unpaid leaves of absence and its leaders, CEO Brad Tilden and president Ben Minicucci, will not draw salaries for the length of the crisis. The airline is also slashing capital expenditures by at least $300 million.
Alaska is the latest U.S. carrier to announce capacity cuts amid the growing COVID-19 crisis. The reductions are likely lower than those at the carrier’s legacy-airline competitors due to its lack of long-haul international routes.
The international networks of American Airlines, Delta Air Lines and United Airlines have been hit hard by the pandemic. American plans to operate only three long-haul routes through May. Delta has pruned its transatlantic network to just five routes, comparable in size to what it flew in 1987.
The capacity and spending cuts at airlines are all part of an effort to conserve cash. The availability of cash, and access to liquidity, is critical to the survival of any company. When this dries up, it has been the downfall of numerous carriers, including Thomas Cook and WOW air last year.
Industry group Airlines for America (A4A) is pushing the U.S. government for billions in assistance for carriers in an effort to avoid a liquidity crunch. According to The Wall Street Journal, airlines are requesting as much as $50 billion in aid.
One potential cash-saving move Alaska has yet to unveil are any fleet reductions. This could, as Minicucci outlined at a J.P. Morgan investor conference on March 10, be due to leases on much of its Airbus A320 family fleet that would have to be paid even if the jets were parked.
“We’re obligated with this fleet for much of 2020… in the next 12 to 18 months, we do have a number of aircraft we’re due to return,” he said. Alaska was already looking for a replacement for its 61 A319s and A320s, which begin returning to lessors as soon as 2021.
Alaska could park some of its older Boeing 737-700s and 737-900s if the crisis worsened, said Minicucci.
The crisis has prompted American to park the vast majority of its wide-body fleet, including permanently retiring its Boeing 767 fleet. Delta plans park up to 300 jets, likely including its McDonnell Douglas MD-88 and MD-90 fleets, as part of its response.
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