United, JetBlue to Cut Flights on Demand Drop From Coronavirus

(Bloomberg) -- United Airlines Holdings Inc. and JetBlue Airways Corp. are trimming flights to grapple with a swift drop in travel demand because of the coronavirus outbreak.

The domestic schedule will be pared 10% in April and international flying will be chopped 20%, United told employees Wednesday. The company has imposed a hiring freeze through June 30, and deferred merit-based salary increases for management until July 1. In addition, United will offer voluntary unpaid leaves of absence.

JetBlue, which focuses primarily on the domestic market, will cut capacity 5% in the near term and watch booking trends to assess whether additional reductions are needed, Chief Operating Officer Joanna Geraghty said in a message to employees. The goal is “preserving cash and slowing down the amount of money we spend every day,” she said.

The cutbacks flashed a new warning sign as airlines across the world grapple with an abrupt decline in passengers while governments rush to contain the virus's spread. United and JetBlue are joining carriers from Asia to Europe, which have slashed their schedules and grounded aircraft amid falling demand and the cancellation of large trade shows and other events.

‘A Lot Has Changed'

“A lot has changed since this weekend,” United Chief Executive Officer Oscar Munoz and President Scott Kirby told employees in a memo. “We certainly hope that these latest measures are enough, but the dynamic nature of this outbreak requires us to be nimble and flexible moving forward.”

Indeed, similar reductions in flights will probably be necessary for May, they warned.

United climbed 2% to $59.47 at the close in New York amid a broad market rally. JetBlue advanced 3.5% to $15.54.

A Standard & Poor's index of major U.S. airlines has fallen 20% since Feb. 21, as the economic fallout from the virus's spread intensified. That was the third-worst industry drop on the S&P 500 Index.

Along with United, American Airlines Group Inc. and Delta Air Lines Inc. have temporarily halted flights to China, where the virus originated. But American and Delta haven't adopted cost-control measures as significant as those unveiled by Munoz and Kirby.

Grounded Wide-Bodies

United said trans-Pacific flying makes up about half of the planned 20% in cuts for April, with service to Europe and Latin America also affected.

The reductions will also prompt the Chicago-based airline to ground some of its larger international wide-body aircraft, which include Boeing Co. 777 jets and 787 Dreamliners.

Read more: Airbus Weighs A330 Output Cut After Largest Buyer Seeks Deferral

In the U.S., the cuts will come largely from frequency reductions on most routes but United will also suspend some service to cities that it serves from multiple hubs. The airline is also changing aircraft sizes on certain routes to adjust for the schedule reductions.

Last month, United withdrew its 2020 profit forecast, citing the financial impact of the virus outbreak and the resulting uncertainty. The company also postponed its March 5 investor meetings because of the issue.

Hawaiian Holdings Inc. also scrubbed an investor event set for March 9, citing the virus impact.

To contact the reporter on this story: Justin Bachman in Dallas at jbachman2@bloomberg.net

To contact the editor responsible for this story: Brendan Case at bcase4@bloomberg.net

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