March 13, 2020 / 4:31 PM / 5 months ago

Delta, American, United in White House talks to receive government support

WASHINGTON/CHICAGO (Reuters) - Delta Air Lines (DAL.N), American Air Lines (AAL.O) and United Airlines (UAL.O), the three largest U.S. airlines, are in talks with the U.S. government about potential assistance amid a dramatic drop-off in air travel demand due to the coronavirus outbreak, the carriers said on Friday.

Airlines are reeling from a plunge in bookings and traffic, as the fast-spreading coronavirus pandemic prompts travel restrictions and event cancellations around the world.

United CEO Oscar Munoz has spent two days in Washington this week meeting with lawmakers and senior officials in the Trump administration, while United President Scott Kirby has been in close touch with bank executives to assess the deepening impact of the crisis on the broader economy, the two told employees in a memo on Thursday.

“We will be helping the airline industry if we have to,” U.S. President Donald Trump said on Friday. “So far people haven’t been asking but if they should be asking we want to make sure our airlines are very strong.”

Delta CEO Ed Bastian also told employees on Friday that it was pursuing government aid.

“We are in discussions with the White House and Congress regarding the support they can provide to help us through this period,” Bastian said in a memo released by the airline, adding he was forgoing his salary this year. “The speed of the demand fall-off is unlike anything we’ve seen.”

American Airlines is also in discussions, a spokeswoman said.

Airlines and their trade association met with senior White House aides on Thursday to discuss the mounting crisis, three people briefed on the matter said.

The conversations are in the early stages and no specific proposals have been exchanged, people said. Airlines have been sounding the alarm in talks with government officials about potentially having to furlough tens of thousands of employees and warning that urgent action is needed.

Bastian said he was “optimistic” about receiving government support but said the “form and value is unpredictable” and the company could not put its “future at risk waiting on aid from our government.”

Delta announced a 40% capacity cut in the coming months, the largest in its history, including eliminating most flights to continental Europe starting on Monday.

To preserve cash, Delta will park up to 300 aircraft, defer new aircraft deliveries and delay other investment initiatives, in addition to implementing a hiring freeze.

Delta, United and American have all raised capital in recent weeks, with United tapping $2 billion. Their share prices have fallen by between 40%-56% over the past month.

Smaller Alaska Airlines (ALK.N) said on Friday it borrowed $388 million from existing credit facilities. It noted it has 133 aircraft that could be financed, if necessary, to generate another $2.5 billion.

Earlier, U.S. Treasury Secretary Steven Mnuchin urged Americans to shake off worries about the coronavirus and continue to fly on domestic airline routes, while saying the Trump administration was ready to provide needed liquidity to U.S. airlines.

“It is of strategic importance to us,” Mnuchin told reporters at the White House, adding that he was in close touch with the CEOs of U.S. airlines. The Trump administration viewed the ability of airlines to continue to fly as a top priority, he said.

“I think the airlines want to make sure that they can continue to provide domestic travel. They also want to make sure that they keep as many workers employed as they can,” he said.

“If I weren’t so busy working I would be going home to Los Angeles and I would be perfectly comfortable getting on a commercial plane this weekend. Despite the fact that we told people to shut down travel a little bit, people can travel in the domestic U.S.,” he said.

U.S. Treasury Secretary Steven Mnuchin speaks to reporters about coronavirus and its effect on the economy at the White House in Washington, U.S., March 13, 2020. REUTERS/Kevin Lamarque

The International Air Transport Association on Friday warned that air carriers could collapse if the coronavirus crisis lasted another two or three months.

IATA CEO Alexandre de Juniac told Reuters revenue losses internationally would be “probably above” the $113 billion figure the group had forecast a week ago, before the Trump administration’s announcement of U.S. travel curbs on much of continental Europe.

European carriers were also suffering from the measures, with Norwegian Air (NWC.OL) saying on Friday it needs access to cash within weeks as it seeks to overcome the coronavirus crisis and is optimistic that the government of Norway will help secure funding.

Reporting by David Shepardson, Alexandra Alper, David Lawder and Andrea Shalal and Tracy Rucinski; Editing by Rosalba O'Brien and Cynthia Osterman

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