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American and United Airlines Announce Massive Flight Plan Cuts

By Howard Smith - Mar 16, 2020 at 10:02AM

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As the COVID-19 epicenter shifts to Europe, more airlines have announced major service reductions.

Over the weekend, American Airlines Group (AAL 3.55%) and United Airlines Holdings (UAL 2.88%) both announced major new capacity cuts due to the continuing spread of the novel coronavirus, following a similar announcement last week by Delta Air Lines (DAL 1.90%) 

In a company release on Saturday, American Airlines said that due to lower customer demand from the COVID-19 crisis, it was reducing international flights out of the United States by 75% through May 6, 2020. United Airlines separately released a statement saying today it will announce approximately 50% capacity reductions for April and May. These cuts follow Delta's announcement last week that it would reduce capacity by 40%. 

Empty airline counters

Image source: Getty Images.

Extending into the summer

United also announced that, based on the current situation, it expects its deep cuts to last into the summer travel period. It added, "Even with those cuts, we're expecting load factors to drop into the 20-30% range -- and that's if things don't get worse."

American also went beyond just the international cuts, announcing that it anticipates domestic capacity to be reduced by about 20% in April and 30% in May, versus the same periods last year. 

On March 5, 2020, the airline trade association, International Air Transport Association (IATA), estimated that there could be up to $113 billion in lost revenue from passenger airlines alone, in one "extensive spread" scenario of the coronavirus. The group has not yet updated that estimate. 

In addition to capacity reductions, airlines have imposed other measures, including hiring freezes and executive salary cuts, in efforts to prepare to weather the crisis. The industry may get government assistance as well. Speaking to reporters Friday, U.S. Treasury Secretary Steven Mnuchin said the Trump administration was prepared to assist the domestic industry with needed liquidity.

 

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Stocks Mentioned

Delta Air Lines, Inc. Stock Quote
Delta Air Lines, Inc.
DAL
$29.52 (1.90%) $0.55
United Airlines Holdings, Inc. Stock Quote
United Airlines Holdings, Inc.
UAL
$36.44 (2.88%) $1.02
American Airlines Group Inc. Stock Quote
American Airlines Group Inc.
AAL
$13.13 (3.55%) $0.45

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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