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Airlines slash capacity as coronavirus hits travel demand

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Via Financial Times

Global airlines underscored the damage wrought by the coronavirus as they cancelled flights and withdrew guidance on their business prospects this year in response to the travel slump caused by the outbreak.

American Airlines and Delta Air Lines on Tuesday pulled their 2020 financial forecasts and Delta said its capacity will be reduced by as much as 25 per cent internationally and as much as 15 per cent domestically.

Their announcements came after Australian carrier Qantas said it would cancel a planned share buyback and reduce its flying capacity by a quarter for the next six months.

It added that its chief executive Alan Joyce would “take no salary” for the remainder of 2020 and that manager bonuses would be slashed to zero while its executive directors’ pay would be reduced by 30 per cent.

Qantas also said it was “asking all Qantas and Jetstar employees to take paid or unpaid leave in light of reducing flying capacity”.

Travel demand has crumbled as coronavirus cases have surged outside of China. The International Air Transport Association estimates the virus could reduce 2020 global passenger revenue by $63bn to $113bn.

Delta said on Tuesday that it would defer $500m in capital expenditures, suspend share repurchases and delay $500m in pension funding. In addition it introduced a hiring freeze and offered voluntary leave options as part of an efforts to lower costs.

“As the virus has spread, we have seen a decline in demand across all entities, and we are taking decisive action to also protect Delta’s financial position,” said Ed Bastian, chief executive.

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American Airlines said its overseas capacity will be reduced by 10 per cent over the summer, including a 55 per cent reduction in trans-Pacific capacity. Domestically, capacity will be down 7.5 per cent.

Among the changes to its schedule, American said it is suspending service to mainland China and Hong Kong from Los Angeles through the summer. From Dallas-Fort Worth it is suspending service to mainland China through summer and Hong Kong through June. The carrier is also suspending flights to Rome and Milan from Philadelphia.

On the same day Italy’s prime minister Giuseppe Conte introduced a ban on all non-essential travel, European budget airline Ryanair suspended all flights to, from and within the country.

Meanwhile, Norwegian Air Shuttle said will slash 3,000 flights over the next three months, equating to about 15 per cent of its total capacity, as the embattled low-cost airline becomes the latest carrier to be hit by falling demand from coronavirus.

Europe’s third-largest low-cost airline on Tuesday said it was also introducing emergency measures, including temporary lay-offs of a significant share of its workforce. The 3,000 flight cancellations will take place over the period mid-March to mid-June.

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