JetBlue, United Airlines implementing spending cuts backed on reduced air travel demand

JetBlue Airways Corp and United Airlines Holdings Inc have cut down flights and have implemented cost controls measures in the wake of China’s coronavirus spreading in the United States depressing travel demand.

In a letter to employees, United Airlines announced a 10% reduction in U.S. and Canadian flights and a 20% reduction in international flying for April and May.

In a memo, JetBlue said it was cutting capacity by around 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 also taking 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 Airlines has also frozen new hiring except for critical roles and has delayed its 2019 merit salary increases for management and administrative employees. It has offered all its 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,” said United CEO Oscar Munoz and President Scott Kirby in the letter.

Concerns that domestic and international travel will help spread the virus have resulted in 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 moved quickly to dismiss.

On Wednesday, Trump also stated that airline executives have not asked for a bailout package.

Having emerged from bankruptcy in the last decade, U.S. airline majors have new business models that include charging fees for everything starting from baggage to boarding; as a result U.S. airline majors are in a better financial position to weather a crisis, opine analysts.

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

Categories: Creativity, Economy & Finance, HR & Organization, Strategy

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