American Airlines (NASDAQ: AAL) said Friday it will suspend 60% of its flight schedule in April and likely reduce capacity by 80% in May because of the coronavirus pandemic.
The move follows domestic-network cutbacks this week by United Airlines (NASDAQ: UAL) and Alaska Airlines (NYSE: ALK) as carriers rapidly shrink services to save cash in the midst of a dramatic travel downturn. The moves are only slightly less draconian than the capacity cuts airlines have made in their international operations. American, for example, has slashed about 90% of its overseas flights.
American said its decision to reduce domestic capacity was made easier by the Federal Aviation Administration’s recent decision to grant additional flexibility in slot-use policies at U.S. airports during the COVID-19 pandemic.
“These waivers will allow the airline to better align capacity with demand in light of adjustments to the flight schedule,” American said on Friday.
Like other U.S. airlines, American continues to maintain most routes despite the reduced service. However, American said it will suspend certain flights to Hawaii, including the Kona, Lihue and Maui airports, while continuing one daily flight between Los Angeles and Honolulu.
The Hawaii cutback was prompted by Gov. David Ige’s mandate that all people arriving in the state undergo a 14-day quarantine. Hawaiian Airlines said it will suspend long-haul flights, effective Saturday, with the exception of one daily nonstop flight between Honolulu and Los Angeles and one weekly flight to American Samoa. On April 1, it will add a daily flight between Honolulu and San Francisco.
In a Thursday letter to employees, American CEO Doug Parker and President Robert Isom expressed hope that the $58 billion for airlines contained in the economic rescue package approved by the Senate will help stabilize the airline’s finances. Congress passed the stimulus legislation on Friday for the president’s signature.
But the leaders indicated that whether, or how, they would tap the funds is uncertain. “To be clear, American must apply for the loans and worker assistance grants, and there is still uncertainty as to exactly what the conditions will be. But we know the government values what we do as an essential service, and they are committed to helping us keep our team flying through — and eventually out of — this crisis, so we are optimistic that the terms will not be onerous.”
American also joined other airlines in announcing steep decreases in compensation for senior executives and board members to reduce expenses.
In other news, United has requested a $500 million loan from Goldman Sachs Bank USA to help soften the financial impact of the COVID-19 crisis on its operations.
On the international front, Singapore Airlines (OTCMKTS: SINGF) said it will offer shareholders S$5.3 billion in new equity and up to a further S$9.7 billion through 10-year mandatory convertible bonds. The airline has arranged for a S$4 billion bridge loan from DBS Bank.
“The board is confident that this package of new funding will ensure that SIA is equipped with the resources to overcome the current challenges and be in a position of strength to grow and reinforce our leadership in the aviation sector,” said Singapore’s Chairman, Peter Seah, in a statement.
Due to the coronavirus, Kroll Bond Rating Agency (KBRA) revised its ratings for commercial aircraft leasing companies Air Lease Corp., Aviation Capitol Group, Avolon Holdings Ltd., Dubai Aerospace Enterprise Ltd., Fly Leasing Ltd., Nordic Aviation Capital and Voyager Aviation Holdings from “stable” to “negative.”
“While KBRA views the announcement of global aid packages as a welcome relief for airlines, the length and extent of the crisis still remain unpredictable and we believe that the risk to airlines’ cashflow still remains high at least for 2Q20 with some recovery through the end of the year,” the New York-based rating firm said in a statement on Friday.