With government leaders and public health officials urging people to stay home to slow the spread of COVID-19, it's no surprise that air travel demand has fallen off a cliff in recent weeks. On Wednesday, the TSA screened almost 90% fewer air travelers than it did on the comparable day in 2019. Just two weeks earlier, TSA passenger throughput was down a little less than 20% year over year.
Between this stunning plunge in air traffic and an equally sharp drop in booking activity, airlines have started burning cash at a rapid rate. Those with stronger balance sheets are better positioned to survive the current crisis without suffering permanent damage. But the need to dramatically reduce near-term capacity in response to virtually nonexistent demand is universal.
As a result, all major airlines are implementing unprecedented short-term capacity reductions. But so far, United Airlines (NASDAQ:UAL), Delta Air Lines (NYSE:DAL), Alaska Air (NYSE:ALK), and Hawaiian Holdings (NASDAQ:HA) have announced the biggest cuts.
Due to its large presence in China, United Airlines started to feel the impact of the COVID-19 pandemic before other U.S. airlines. Perhaps that's why it has been more proactive than most of its rivals in reducing capacity.
In February, United suspended its flights to China (including Hong Kong), in line with U.S. government directives. Near the end of the month, it also announced schedule reductions on other routes to Asia. And in early March, the airline said it planned to reduce its domestic schedule by 10% and its international schedule by 20%, beginning in April.
However, these changes were far too modest in light of plummeting demand. By March 17, United Airlines had announced a 42% reduction to its schedule in the U.S. and Canada and an 85% decrease for the rest of the world.
This past week, United rolled out yet another set of cuts, including suspending all flights to Canada on April 1. Combined with other recent adjustments, this means that United's capacity will be down 68% year over year in April, including a 52% reduction domestically and the elimination of roughly 90% of its international schedule. That makes United one of the most aggressive U.S. airlines in terms of cutting flights.
At first, Alaska Airlines moved very slowly to respond to the demand shock. As of March 10, it didn't plan any meaningful schedule adjustments for March or April and intended to trim capacity in May by just 3%.
However, in the subsequent days, demand deteriorated rapidly. In response, on March 16, Alaska stated that it would cut capacity by 10% in April and 15% in May relative to its original plans. Yet even these adjustments were more modest than the cuts announced by many of its peers around the same time.
Last Wednesday, management threw in the towel. With demand continuing to evaporate, Alaska Airlines announced that it would slash its April and May schedules by around 70%. That now ranks it among the most aggressive airlines with respect to cutting near-term capacity due to the COVID-19 pandemic.
Delta Air Lines
Like United, Delta Air Lines was one of the more proactive airlines with respect to schedule cuts. At an investor conference on March 10 -- when Alaska was still planning no changes for April and a 3% capacity cut for May -- Delta's management said that it would reduce planned capacity for the spring by at least 15%. It also said it was "prepared to do more" if needed.
Just three days later, Delta stated that it would cut capacity by 40% for the next few months and park 300 aircraft. (Its mainline fleet consists of about 900 planes.) Yet demand continued to crater, forcing Delta to make even deeper cuts. On March 18, CEO Ed Bastian said the airline would slash capacity by 70% (including a reduction of more than 80% on international routes) until demand starts to recover. As a result, Delta now plans to park 600 aircraft temporarily.
This announced 70% schedule cut would put Delta Air Lines in a tie with Alaska Airlines for the second-deepest capacity reductions in the industry. However, Delta has continued to cut flights over the past week or so in response to changing government travel restrictions. While the company hasn't officially updated the 70% figure, when all is said and done, its schedule reductions for the next couple of months will likely be even greater.
Unprecedented though these schedule cuts by United, Alaska, and Delta may be, they all pale in comparison to what Hawaiian Airlines has been forced to do over the past week. Early in the week, Hawaii Governor David Ige issued a "stay at home" order running through the end of April and ordered a mandatory 14-day quarantine for anyone arriving in Hawaii on March 26 or later.
The quarantine order eliminated virtually all demand for travel to and from Hawaii. And with nonessential travel forbidden, demand for interisland flights has plummeted as well.
In light of that, Hawaiian Airlines has canceled all of its long-haul flights except for daily service to Los Angeles and San Francisco (mainly to carry cargo) and once-weekly flights to American Samoa. Typically, it offers more than three dozen daily roundtrips on long-haul routes. In the interisland market, Hawaiian will offer 41 daily roundtrips, down by more than 50% from its usual schedule.
In terms of the absolute number of flights, Hawaiian's cuts are smaller than those made by some of its rivals. However, virtually all of the remaining routes will be short hops within Hawaii, so the capacity reduction (in terms of available seat miles) will exceed 90%. It's a dramatic number -- but with tourism on hold, Hawaiian Airlines has no choice but to put most of its operations on ice until authorities give the all-clear.