A United Airlines airplane takes off at Newark Liberty Airport.
Gary Hershorn | Getty Images
United Airlines on Tuesday reported a 70% drop in domestic demand in the last few days and said it will make more deep cuts to flights in the coming months as coronavirus keeps travelers at home.
United’s net bookings, which include new reservations minus cancellations, have collapsed in Asia and Europe, said Scott Kirby, the airline’s president who is scheduled to take over as CEO from Oscar Munoz in May. While domestic net bookings are down 70%, gross bookings are down 25%, which Kirby said are a better measure of current demand.
“While those numbers are encouraging compared to international, we’re planning for the public concern about the virus to get worse before it gets better,” he said at the JP Morgan Industrials conference, which was webcast due to the coronavirus.
Kirby’s assessment was one of the grimmest yet on the virus’ impact on carriers. The airline and its competitors are now racing to cut costs and preserve liquidity, warning trends could worsen.
Still, Kirby and other executives speaking at the conference said that U.S. airlines have stronger balance sheets and more revenue streams, such as those from co-branded credit cards, that would help them weather the impact. United shares were up 12% at $52.35 Tuesday afternoon.
United is expecting to cut May flights by 20% from its original plan, and it foresees cuts “each month after that to be at least as large or larger until we see concrete signs of returning demand,” Kirby said. The airline last week said it would cut domestic flights by 10% and international seat capacity by 20%.
The Chicago-based airline is preparing for a “dire” decline in revenue of 70% in April and May, and 60% in June. Kirby cautioned the carrier doesn’t expect that scenario to happen, but United wants to be prepared because “hope is not a strategy.”
The coronavirus has handed U.S. airlines their biggest crisis since the Sept. 11, 2001 terrorist attacks. Carriers like United, Delta Air Lines and American Airlines are freezing hiring and raises as well as asking some employees to take voluntary unpaid leave.
Airlines are getting hit by a steep decline in demand for flights as the virus spreads throughout the U.S. and Europe, prompting the cancellation of business trips and and leisure travel.
United is also reducing its capital expenditure planned for this year by more than a third to $4.5 billion.
Unlike during previous downturns, U.S. airlines have stronger balance sheets and more revenue streams, such as those from co-branded credit cards, executives have said. But carriers outside of the U.S. with weaker balance sheets may not be able to survive the coronavirus crisis, said Kirby.
While President Donald Trump has said his administration is working with the travel industry, including airlines and the especially hard-hit cruise lines, Kirby said United is “not going to count on any government intervention.”