COVID19’s Industry impact
 

Airlines slash routes, outlook and executive pay on coronavirus fallout

Delta and American scale back U.S. and international flights, while executives at Southwest and United cut their salaries.

https://www.washingtonpost.com/wp-ap...NEUE.jpg&w=767Delta Air Lines announced it was cutting back its international routes by as much as 25 percent and its domestic flying by 10 to 15 percent. (Ted S. Warren/AP)By
Rachel Siegel
March 10, 2020 at 11:09 a.m. EDTSeveral major airlines, feeling the coronavirus’s tightening economic squeeze, moved Tuesday to slash routes, redraw their financial outlooks for the year and even slash executive pay.

Delta Air Lines said it is cutting international flights by as much as 25 percent and domestic routes by 10 to 15 percent. The carrier is also withdrawing its 2020 financial outlook, instituting a hiring freeze and suspending its stock repurchase program.
Speaking at the J.P. Morgan Industrials Conference, Delta executives said that the global outbreak has cut net bookings by at least 25 percent, a drop-off they expect will worsen. Executives said most of the uncertainty surrounded domestic travel, with CEO Ed Bastian adding that the fear that’s now keeping travelers home was “more akin to what we saw at 9/11,” as opposed to some broader economic force.

ADAmerican Airlines also is pulling back, announcing plans to scale back peak summer international flying by 10 percent. Those cuts include a 55 percent reduction in trans-Pacific routes as the outbreak continues to exact a toll on China, South Korea and Japan. American will also reduce domestic flying in April by 7.5 percent.

Trump says he will seek payroll tax cut, relief for hourly workers as part of coronavirus economic package

Meanwhile, United Airlines said Tuesday that its CEO and president will forgo their base salaries through at least the end of June. United and JetBlue were the first U.S. carriers to cut domestic service last week.

Southwest Airlines CEO Gary Kelly is also taking a 10 percent pay cut as the carrier contends with steep declines in bookings. The decision was first reported by the Wall Street Journal and later confirmed by The Post.

ADLast week, Southwest said it expects to lose $200 to $300 million in March alone because of the outbreak. Kelly compared the jarring drop in sales to the aftermath of the Sept. 11, 2001, terrorist attacks, saying the blow to the travel industry “was more fear, quite frankly, and I think that that’s really what’s manifested this time.”

The coronavirus outbreak has thrown much of the tourism industry into free fall. In a matter of weeks, hotels, airlines and convention centers have seen their bookings plummet as leisure travelers stay home and businesses discourage or cancel employee travel. The State Department warned against going on cruises during the coronavirus scare and U.S. health officials prevented some ships from sailing. Share prices for major carriers and hotel chains have plunged.

On Monday, Trump said he would ask Congress to cut payroll taxes and provide relief to hourly workers suffering from coronavirus’s economic fallout. He also said he was looking to help the airline, hotel and cruise industries. But it wasn’t clear whether he would ask Congress to help these industries or if he thought he could do it alone.

ADSome U.S. airlines are offering flexible policies as coronavirus spreads. Here’s what travelers need to know.

On Tuesday morning, Delta’s Bastian said there was “no question” the airline industry would see some form of government intervention.

“Hopefully we’ll start to see some light at the end of the tunnel before massive structural changes,” Bastian said.

Foreign carriers were hardly immune.Norwegian Air Shuttle ASA said Tuesday that it will cancel 3,000 flights through mid-June. It is also temporarily laying off workers to ride out the crisis.

Loizos Heracleous, an aviation industry expert at Britain’s Warwick Business School, said there are estimates that coronavirus could cost the aviation industry up to one-fifth of its revenue, or nearly $219 billion. Much depends on when the virus is contained and how quickly the world economy bounces back.

“The aviation industry has already been consolidating over the last few years, especially in Europe where the market is very competitive,” Heracleous said. “With the added pressure created by coronavirus, it would be no surprise to see weaker airlines go out of business or acquired by rival companies.”

9 Commentshttps://www.washingtonpost.com/wp-ap....png&w=90&h=90
Rachel Siegel
Rachel Siegel is a national business reporter. She previously contributed to the Post's Metro desk, The Marshall Project and The Dallas Morning News.Follow

I have yet to see any firm numbers out of either UPS or FedEx similar to what the pax haulers CEOs are giving. Has guidance been given or are we playing it close to the best?

Maybe the fact that people will sit in their homes and order more crap online instead of venturing to the store with the crowds, will not hurt UPS as much. I do think that any downturn will be short lived and the fundamentals of the economy are still good. Let's hope for the best.

https://www.bizjournals.com/atlanta/news/2020/03/10/sources-david-abney-may-retire-as-ups-ceo.html?ana=yahoo&yptr=yahoo

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..."It's a very unexpected retirement," Haber said. "My understanding is he planned to be there for a couple years... [Barber] left two months ago; it doesn't add up for Abney to retire so soon after that. That doesn't make any sense to me."...
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Chief Financial Officer Carol Tomé could take over the role. Tomé has served as a director of United Parcel Service Inc. since 2003 and chairs UPS's audit committee. Tomé retired from Home Depot last August. UPS' annual shareholder's meeting is set for May 14...
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Very interesting..

Was Tomé a successful Home Depot CEO? IF transition rumors are true, hopefully he won’t turn out to be the next Scott Davis.. :-|

I saw the article about Abney resigning. Not good for us if true. He seemed to get the math of how much payback the company as a whole got for investing in more lift. Hopefully, whoever replaces him would be equally supportive of Ops and not a bean counter.

Abney was a Davis acolyte. What made him invest unlike his predecessor? The market turned around and UPS was starving when he took over as CEO. The lean Davis years left UPS in a great place for a declining market but not for a growing market demand he found himself in as new CEO. Abney realized the only way forward (out of the burning building he previously supported under Davis as a senior executive was to go out the "invest in the business" door to survive. Unfortunately, UPS doesn't value its lower to mid level managers vital to the business success as it did when UPS was privately held. Maybe that is why UPS cannot hold onto all real management talent. If UPS cannot bring forward a strong senior executive, then leadership has failed at UPS. Outside is good like Scott Price. The suggestion that next CEO will be an outside UPS executive, and no one is able to take over from the stable of senior executives internally, then says much about the poor development of leadership at UPS. Not good long term. Hope UPS can attract and find a former CEO like Oz Nelson who truly was a global marketing innovator and good for UPSers and customers.

I would think Carol is a she.

My bad. Saw a Carol Tome linked to Verizon, not Home Depot so I figured it was someone else.

Cargo....
 

Definitely has the potential to be a nice short term boost. How this plays out over the rest of the year is anyone’s guess.