March 4, 2020 / 7:59 PM / 3 months ago

United Airlines, JetBlue cut flights, spending as coronavirus hits demand

CHICAGO (Reuters) - United Airlines Holdings Inc (UAL.O) and JetBlue Airways Corp (JBLU.O) are cutting flights and implementing cost controls in the most drastic actions by U.S. airlines to get ahead of depressed travel demand due to the spreading coronavirus.

FILE PHOTO: A United Airlines passenger jet takes off with New York City as a backdrop, at Newark Liberty International Airport, New Jersey, U.S. December 6, 2019. REUTERS/Chris Helgren

The United measures, announced by executives in a letter to employees on Wednesday, include a 10% reduction in U.S. and Canadian flights and a 20% reduction in international flying in the month of April, with similar cuts planned in May.

JetBlue said in a memo Wednesday seen by Reuters that it was cutting capacity by approximately 5% “in the near term to address the fall in demand” as a result of the coronavirus and said it assessing if more cuts are needed.

JetBlue is taking other steps “aimed at preserving cash” including “delaying or canceling upcoming events and meetings” and “reducing hiring for frontline and support center positions.” It is also considering voluntary time-off programs and is “limiting non-essential spending.”

United is freezing new hiring except for critical roles, delaying 2019 merit salary increases for management and administrative employees and offering all U.S.-based workers the option of a voluntary unpaid leave of absence.

“We sincerely hope that these latest measures are enough, but the dynamic nature of this outbreak requires us to be nimble and flexible moving forward in how we respond,” United CEO Oscar Munoz and President Scott Kirby said in the letter.

The coronavirus emerged in the central Chinese city of Wuhan late last year and has spread globally with more than 94,000 cases and 3,220 deaths, according to a Reuters tally.

Conferences and gatherings around the world have been canceled, and companies have changed work and travel plans. Plane maker Boeing Co itself on Wednesday said it was taking precautions including restricting travel to essential trips.

Chicago-based United’s announcement followed a meeting of U.S. President Donald Trump and the heads of major U.S. airlines at the White House where they discussed the effect of the virus on the industry and demand.

Concerns over the effect of reduced travel demand on airlines have hit airline shares and stoked fears of a financial bailout for the sector, an idea that the head of the U.S. Chamber of Commerce on Wednesday moved quickly to dismiss.

Trump also said on Wednesday that the airline executives had not asked for a bailout. After emerging from bankruptcy in the last decade and with new business models that include fees for everything from baggage to boarding, the U.S. airline majors are in a better financial position to weather a crisis, analysts have said.

UNCHARTED TERRITORY

The rapid, global spread of the virus has forced airlines to abandon their usual strategies for crisis management, which in the past have included lowering fares and redirecting flights to trouble-free areas.

Until now, United and other U.S. carriers had only reduced flying to the areas most hit by coronavirus cases, though international rivals Cathay Pacific Airways Ltd (0293.HK) and British Airways recently announced broader reductions.

Leaders of the unions representing United’s pilots and flight attendants called the move a “responsible approach” to addressing the impact of COVID-19 on air travel.

In one effort to win over hesitant travelers, U.S. airlines have suspended rebooking fees for new ticket reservations.

Reporting by Tracy Rucinski in Chicago; additional reporting by David Shepardson in Washington and Peter Henderson in San Francisco; Editing by Matthew Lewis and Cynthia Osterman

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