Every day brings more news about the devastation of the airline industry from the coronavirus pandemic.
On Friday night, United Airlines (NASDAQ: UAL) announced it is wiping out 95% of its international schedule. Southwest Airlines (NYSE: LUV) said it is closing down all international flights from Sunday until May 4 and a quarter of all flights through mid-April. Earlier, Hong Kong-based Cathay Pacific and sister airline Cathay Dragon said they will further reduce passenger capacity by 96%.
The moves are the latest attempts to minimize expenses amid a stunning crash in bookings and widespread cancellations that have erased most revenue in the past month as the disease has spread around the world and governments have closed borders.
On Saturday, the trade group representing major airlines, including cargo carriers FedEx, UPS, and Atlas Air, made another plea for federal emergency aid to help companies stay afloat until demand recovers.
In a letter to congressional leaders, Airlines for America said that without a package of grants, loans, loan guarantees and tax relief member companies will be forced to furlough workers. United warned Friday it will have to release most employees unless federal aid comes through soon.
The industry is asking for $58 billion, but lawmakers and the White House appear to favor loans over grants, which airlines say won’t help their immediate need.
“Given the extreme nature of this situation, we respectfully urge Congress not to pursue opportunistic measures that will hurt, not help our ability to recover. Unless worker payroll protection grants are passed immediately, many of us will be forced to take draconian measures such as furloughs,” the airlines said.
The domestic airline industry employs 750,000 people. Millions of other jobs are indirectly tied to air transport.
In addition to severe cost-cutting measures, airlines have already asked employees to take voluntary leave and are borrowing billions of dollars from banks to stay in business and have resources to restart operations when the pandemic recedes.
Airline critics, including many House and Senate Democrats, say airlines have taken advantage of bankruptcy and mergers this century to wring concessions from labor and used proceeds from massive corporate tax cuts passed in 2017 to repurchase shares rather than investing in their workforces. They are looking to condition aid on retaining workers at current pay levels, prohibiting stock buybacks and even, possibly, reducing carbon emissions associated with climate warming.
Airlines counter that they have reinvested almost three-quarters of operating profits in people and products, and created many jobs that pay better than other sectors.
If Congress agrees on a rescue plan that includes the requested amount of grants and loans, airlines promised to retain their workforces through August 31, place limits on executive compensation, and eliminate stock buybacks and dividends over the life of the loans.
Network Adjustments
United’s trans-Atlantic network will go dark on March 25 and its trans-Pacific routes will shut down Sunday, March 22, with the exception of three routes that will end on March 28. Service to Latin America is also being shut down. United said it will reduce its Mexico operation over the next five days, after which it will only maintain a small number of daytime flights to certain destinations there. Service to Canada will be suspended effective April 1.
Southwest has a much smaller international footprint than United, operating to Mexico, the Caribbean and Central America.
On Friday, Southwest said it is canceling a quarter of its almost 4,000 daily flights until April 14, when a previous plan to cut domestic capacity by at least 20% through June 5 goes into effect.
It also canceled all flights through Midway International Airport in Chicago after the Federal Aviation Administration earlier in the week closed the airport’s control tower when several staff tested positive for coronavirus, according to NBC 5 in Dallas-Fort Worth. The FAA said the airport and control tower are operating with shorter hours until it can guarantee a safe work environment.
The reduction in the number of flights has limited Southwest’s cargo division from accepting any types of cargo or resulted in short drop-off or delivery windows, Wally Devereaux, managing director cargo and charters, said in an email. Southwest Cargo suspended service to Canada via its partnership with WestJet.
Emirates also suspending service to 104 destinations, representing about 65% of its global network, according to schedule changes on its website, Reuters reported.
Cathay Pacific also operates a fleet of large dedicated cargo planes, which are unaffected by the cutbacks in passenger service. However, the elimination of passenger routes impacts cargo operations at airlines that operate freighters because passenger planes feed a large amount of cargo to the freighters at hub airports.
Airline stocks have lost half, or more, of their value so far this year, depending on the company.
