Virus risk slams airline stocks
Delta Air Lines Inc. and American Airlines Group Inc. withdrew their 2020 financial forecasts and outlined plans to cut back on flying as they grapple with a rapid decline in travel demand because of the coronavirus outbreak.
Domestic capacity will be pared by as much as 15 per cent while international will tumble as much as 25 per cent, Delta said in a statement Tuesday. The company will also freeze hiring and suspend share buybacks. American will lower U.S. flying 7.5 per cent in April with a 10 per cent decline in foreign service.
The cuts deepen a dramatic reduction in flight schedules at carriers around the world as the virus’s spread upends economies and prompts travelers to stay at home. An airline trade group said last week that the industry will lose as much as US$113 billion in sales because of the coronavirus. United Airlines Holdings Inc. abandoned its 2020 forecasts last month.
“As the virus has spread, we have seen a decline in demand across all entities,” Delta Chief Executive Officer Ed Bastian said in the statement. “As a result, we have made the difficult but necessary decision to immediately reduce capacity and are implementing cost reductions and cash flow initiatives across the organization.”
Delta climbed 2.8 per cent to US$44.75 ahead of regular trading in New York, amid a broad market rally. American jumped 5.8 per cent to US$15.60. A Standard & Poor’s index of major U.S. carriers tumbled 32 per cent this year through Monday, dragged down by the virus outbreak.
At Southwest Airlines Co., Chief Executive Officer Gary Kelly said he would take a 10 per cent pay cut amid the drop in bookings, the Wall Street Journal reported.