Airlines cut capacity to raise capital, as Coronavirus hits revenue further

Some airlines have announced their intention to downsize capacity in a bid to raise capital, amid continuous fears of the Coronavirus outbreak.

The aviation industry has been hard-hit by the killer disease since January 2020, as individuals continue to cancel tourism and business trips across the globe.

Reuters reported that American Airline and Delta Airlines had both announced the implementation of drastic measures to raise capital, amid the first-quarter loss to be posted.

“This clearly is not an economic event. This is a fear event, probably more akin to what we saw at 9/11 than necessarily what we saw in 2009,” Delta Airline Chief Executive Officer, Ed Bastian said at an industry conference.

He added that the Delta airline would cut down domestic capacity by 10% to 15% and international by 20% to 25%, and freezing hiring across the company. Voluntary leave options would be offered to some staff, with a possible retirement of older aircraft.

Similarly, American Airlines announced that it would cut domestic capacity by 7.5% in April and international by 10% for the upcoming summer season, in view of the slump in bookings.

The airline noted that the fall in oil prices was helping the airline save some costs, and subsequent falls were expected to drive about $3 billion in 2020 cost savings, equipping it further to manage through the Coronavirus crises.

United Airline noted that net bookings had fallen by up to 30%, thus necessitating a downsize in capacity since the situation was expected to worsen.

The CEO Oscar Munoz and President Scott Kirby are forgoing their base salaries through at least June 30, 2020, to help the airline recover.

Already, total liquidity has been shored up to $8 billion after the cuts, and 2020 capital expenditure has been slashed by more than a third to about $4.5 billion.

Southwest Airline CEO Gary Kelly, announced on Monday, that he was taking a 10% pay cut in response to a “severe recession” for the airline industry.

Spirit Airlines, also suspended its 2020 forecasts on Tuesday and said it was trimming its April capacity and eyeing more cuts in May.

Though the Airline has maintained balance so far, analysts say that no one can guess how long the outbreak will last.

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