Home Madrid Economy Airlines downsize to skeletal levels, focus on saving money

Airlines downsize to skeletal levels, focus on saving money


Faced with a sharp drop in traffic and income associated with new coronavirus travel restrictions imposed by many countries, including Canada and in the United States, airlines are drastically cutting flight schedules and taking other drastic measures that are having a serious impact on frontline workers for the first time.

Bookings and cancellations happen so quickly that in some cases airlines have cut operations two or three times over the past week. And carriers are starting to highlight how severely the coronavirus crisis is affecting their finances, with the specter of bankruptcy looming for less capitalized companies.

Airlines shares continued their fall on Monday, led by International Consolidated Airline Group and Air Canada, to 27% and 28.2%, respectively.

The situation could deteriorate further for the airline industry. White House and Homeland Security officials said they were considering domestic travel bans that could restrict flights to certain areas. During a White House briefing, President Donald Trump didn’t go so far as to say there would be a Federal Aviation Administration blanket flight ban.

On Sunday and Monday, several airlines announced they were cutting seat capacity by 75% or more and would park much of their fleets, while the Lufthansa Group said its airlines would cut long-haul capacity by 90%. % and the short-haul offer of 80%.

Meanwhile, Lufthansa subsidiary Austrian Airlines is temporarily suspending all flight operations between March 19 and 28, and SAS Ireland, the Irish subsidiary of Scandinavian Airlines, has said it will immobilize all planes for a month onwards. this Wednesday, with all the staff on unpaid leave. .

Last week’s decision by the European Commission to suspend rules forcing airlines to use or lose allocated take-off and landing slots at busy airports until June 30, has allowed airlines immediately consolidate schedules and planes on the ground.

The disruption is also making its way to Latin America.

On Monday evening, Brazilian airline Gol (NYSE: GOL) said it would reduce total flight capacity by 60-70% until mid-June, with a 50-60% reduction in the domestic market and 90-95% in available seats for international routes. The carrier said business was near normal in February, but in recent days there has been a sharp drop in demand for air travel to Brazil.

Removing passenger planes from service is also a problem for shippers as there is less space currently available to transport cargo on the lower deck, forcing companies to view all-cargo operators and ocean carriers as downsides. alternative modes of transport.

North American Airlines

United Airlines (NASDAQ: EU) said it was reducing capacity by 50% for April and during the busy summer travel period, but only expected load factors to be between 20% and 30% on the remaining flights. In the first two weeks of March, it carried more than one million fewer passengers than in the same period last year and expects revenue in March to be $ 1.5 billion lower than those of last March.

In a letter to employees, CEO Oscar Munoz and Chairman Scott Kirby said they have started discussions with union leaders on how to cut payroll expenses and cut company executives’ salaries in half.

Last week, Munoz said he would not accept his base salary and postponed a raise. Like many airlines, United previously imposed a hiring freeze and offered a voluntary leave program, while cutting capital and discretionary spending, but that was not enough to stop the bleeding.

“We are facing an unprecedented challenge. When medical experts say our health and safety depend on people staying home and practicing social distancing, it’s nearly impossible to run a business whose common goal is to “connect people.” Unite the world, ”the leaders wrote.

United stock fell 14.8% on Monday.

Air Canada is also eliminating 50% of its system-wide capacity, with available seats being reduced by approximately 75% in the trans-Pacific market in April.

The airline said it plans to make up 50-60% of the second-quarter revenue loss through savings from significantly lower jet fuel prices, capacity and workforce reductions, and other measures to reduce fuel costs. tightening of the belt. Combined with deferred capital spending, it targets at least C $ 500 million ($ 362 million) in savings to preserve cash flow.

Air Canada is also suspending its share buyback program and has borrowed C $ 600 million on its line of credit. The company, which has C $ 7.1 billion in liquid assets, said it is working to raise more liquidity in the coming weeks and withdraws its previous guidance for this year and next until ‘so that she can control the rapidly evolving situation.

Air Canada (To: THAT) also announced that it will explore with Boeing and Airbus the possibility of postponing deliveries of planes scheduled for this year, including 17 A220 regional jets and six Boeing 737 MAX jets.

“We are convinced that after a decade of transformation and record results, Air Canada today has the agility, the team and the route network to successfully navigate this crisis. More importantly for business continuity, it also has the necessary financial resources, including a strong balance sheet, record cash levels, higher debt ratings based on a low leverage ratio and a large pension plan surplus ” President Calin Rovinescu said in a statement. “These profound strengths allow us to fully focus our immediate attention on both the safety and well-being of our customers and employees, and on mitigating the financial impact of the virus.”

After announcing Friday, it is reducing by 40% of its capacity, suspending service to most of Europe for a month and park up to 300 planes, Delta Air Lines (NYSE: ADL) announced on Monday that it would cut a further 10% to 15% of national seats and suspend its New York-Mumbai service in India. Delta has reduced his schedule to Latin America also in recent days. Its stock fell 6.6%.

CNBC reported that Delta has entered into an agreement with the Air Line Pilots Association to allow it to offer partially paid time off. JetBlue also requires employees to take unpaid time off.

As stated previously, American Airlines announced on Sunday that it was reducing its international schedule in the coming weeks 75% and the parking of 135 wide-body aircraft. The Dallas-based company said earlier it was phasing out its regional E190 fleet by the end of this summer and its Boeing 757 fleet by mid-2021. Helane Becker, airline analyst at investment bank Cowen, has estimated that at least 2,000 pilots will be affected by decisions about the equipment.

American (NASDAQ: AAL) saw its price drop by more than 16% on Monday.

Bloomberg reported that Delta and American are in talks to line up billions in funding for working capital. Earlier Monday, Southwest Airlines said it had put in place a one-year term charge for $ 1 billion, while United revealed last week that it had received a similar loan of $ 2 billion.

UK. Aoverhead lines

Virgin Atlantic said it would cut its schedule by around 80% to focus on main routes and store around three-quarters of its planes by March 26, with a further 5% reduction in capacity in April . Employees are urged to take eight weeks of unpaid leave over the next three months, with the cost spread over six months of pay to cut costs without having to cut jobs.

The airline said the pilots and flight attendants union supported the measures.

Virgin also said it offered employees a one-time voluntary severance package and six to 12 month sabbatical. It postpones salary increases, reduces pension contributions for a year and reduces the amount of paid sick leave. CEO Shai Weiss extended his 20% pay cut until the end of 2020, with company executives getting a 15% pay cut.

IAG Group (LN: AGI), the parent company of British Airways, said it plans to cut passenger capacity by 75% for April and May and CEO Willie Walsh will postpone his retirement maintain management stability during the current threat. The company is also reducing many operational costs to save money, including non-essential and non-cybersecurity IT expenses, and reducing man-hours.

He said he has a strong cash position with 7.35 billion euros, with an additional 1.9 billion euros in planes that can be used as collateral for additional financing.

In addition to the temporary closure of SAS Ireland, charter airline TUI Airways is restraining all planes until further notice, and easyJet has announced that it will shut down the majority of its fleet.

Manchester Airport Holdings, which operates East Midlands, Manchester and London Stansted airports, said it plans to take a series of measures to protect the bottom line as passenger demand plummets, including hours of reduced work, temporary pay cuts and temporary layoffs.

European airlines

The low-cost company Norwegian Air is shutting down most of its flights and temporarily laying off 7,300 employees, or 90% of its workforce, including pilots. This is a rapid change of events for the company, which had undergone a major restructuring and indicated in February that it expected positive results in 2020. The airline said the turmoil in the capital markets has made it extremely difficult to obtain loans and credits to finance operations. .

Deutsche Lufthansa AG (D.IX: LHA) said that it operated more than 17 special flights over the weekend with jumbo jets to repatriate more than 4,000 cruise passengers and tourists stranded in Germany and that the airlines of the group, including Swiss International Airlines, Brussels Airlines and Eurowings , would continue to evacuate. flights to Germany, Austria, Belgium and Switzerland.

The company also announced that it is suspending its dividend for fiscal 2019 in order to preserve its cash flow and has raised around 600 million euros ($ 666.5 million) in credit. It currently has around 4.3 billion euros in cash. The Lufthansa group, which owns 86% of its fleet, is seeking to raise additional funds guaranteed by its planes. He said the book value of the fleet is around 10 billion euros.

Lufthansa shares lost 7.71%.

Unlike passenger airlines, Lufthansa Cargo has so far been able to perform all of its scheduled cargo flights, with the exception of cutbacks to mainland China.


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