• Gennette Cordova

U.S. airlines cut budgets, flights in wake of COVID-19

Lower fuel prices, which account for a major share of carriers’ operating costs, have brought airlines no relief as COVID-19 poses the biggest threat to U.S. flight demand in nearly 20 years.

Delta Airlines CEO Ed Bastian announced that it planned to cut its international flights by as much as 25% and domestic flights by up to 15%, during the J.P. Morgan Industrials Conference webcast, Tuesday morning, adding that the company had registered a 25% to 30% decline in net bookings and they expect it will worsen.

“We expect demand erosion to continue in the near term and have built a plan that prioritizes free cash flow generation and preserves liquidity,” said Bastian.

American Airlines, who declined to comment to Jet Fuel Innovation News, will reportedly reduce its international capacity by 10% during peak summer international flying, including 55% cut to its trans-Pacific flights.

These cuts resemble similar cuts to operating capacity at United and JetBlue, announced last week. Through April, United will suspend or reduce service on more than 170 routes due to sharp declines in bookings. Southwest Airlines CEO Gary Kelly told employees Tuesday that he will take a 10% pay cut.

Hawaiian Airlines, who recently announced that they plan to suspend some flights between Hawaii and Tokyo’s Haneda Airport at the end of this month, will stick to their regular fuel hedging strategy and continue to encourage their pilots to participate in fuel savings initiatives, in the wake of economic concerns in the industry.

“Our portfolio is made up entirely of call option instruments, which protect us against rising fuel prices but allow us to participate in downward markets. When we enter a new quarter, our target is to have 50 percent of that quarter’s consumption hedged,” said Marissa Villegas senior external communications specialist at Hawaiian Airlines, in an interview with Jet Fuel Innovation News.

“Regardless of COVID-19’s impact on the industry, we continue to identify opportunities both in the air and on the ground to operate even more efficiently,” said Villegas.

Currently, the effects of coronavirus have created the most severe downturn in U.S. travel demand since the terrorist attacks on Sept. 11, 2001.

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