United Airlines to extend coronavirus-related capacity cuts into summer
Quick summary
U.S. airlines are taking actions unseen since the days following the 9/11 attacks as they attempt to minimize the impact from the dramatic drop in bookings amid traveler fears of the novel coronavirus outbreak.
United Airlines was the first to unveil sweeping cuts to its schedules when it said earlier this month that it would reduce international flying by 20% and domestic by 10% in April. JetBlue Airways promptly joined them, and Alaska Airlines, American Airlines, Delta Air Lines and Spirit Airlines unveiled their own reductions this week.
United's April cuts are only the beginning for the Chicago-based carrier. The airline is working on a roughly 20% systemwide capacity reduction in May, and further reductions of a similar magnitude monthly through the summer, United president — and future CEO — Scott Kirby told investors at the J.P. Morgan Industrials Conference on Tuesday.
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"This is a crisis that's going to have a large near-term impact on revenue," he said. "While we expect the duration to be short, it's going to be deep."
Kirby did not comment on what flights or routes will be cut in May and through the summer. The airline axed 13 routes in addition to those already cut to Asia and Italy in April, and trimmed frequencies on more than 160 routes around its network.
American also sees COVID-19 fears depressing travel through the summer. Speaking at the same J.P. Morgan conference, the Oneworld carrier's network head Vasu Raja said American is planning its 7.5% domestic capacity reduction and 10% international reduction "all the way through the IATA summer, [until] Oct. 25."
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No other U.S. airline has yet to plan for systemwide capacity cuts through the summer. However, executives at all of the airlines that spoke at the J.P. Morgan event said they are watching demand closely and are prepared to make further cuts.
Alaska plans to cut capacity by roughly 3.2% in May, executives said Tuesday. Delta is planning a 15% system capacity cut before summer though executives did not provide a specific timeline. JetBlue's 5% capacity reduction applies to its March through mid-May schedule. And Spirit is reducing its April schedule by roughly 5%.
As of noon Tuesday, the Centers for Disease Control and Prevention (CDC) reported 647 confirmed COVID-19 cases and 25 deaths in the U.S. These numbers are up dramatically since the first case not directly connected to the initial outbreak in China was reported at the end of February.
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The severe drop in passenger bookings are driving airlines' capacity cuts. Executives at both Delta and United said Tuesday that domestic bookings are down by at least 25% over the past two weeks — a dramatic drop in an industry that saw strong demand in both January and February before the impact of COVID-19 was felt domestically.
United sees an even more dire environment. The airline is planning for demand to be down 70% year-over-year in both April and May, before slowly recovering to down roughly 20% by December, said Kirby. For comparison, demand fell by roughly 40% in the months immediately following 9/11.
"The demand scenario is not a forecast but what we're planning for under a dire stress test scenario," he said. "It's far better to be too aggressive than not aggressive enough."
United, for its part, expects the recovery from the COVID-19 fears to take around 18 months — or until around September 2021 — said Kirby.
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