Alaska Airlines has become the latest airline to announce significant schedule reductions and cost cutting measures, in light of the COVID-19 outbreak across the US and beyond.
Alaska cutting capacity by 70%
Alaska Airlines plans to cut capacity by 70% in April and May, in what the airline calls a “historic and unprecedented falloff in demand.” The airline has seen over an 80% reduction in demand in recent days.
The schedules for June and beyond will be based on demand, and it’s Alaska’s expectation that reductions will be substantial for at least the next several months.
As Alaska Airlines CEO Brad Tilden describes the current situation:
“Alaska’s goal, since the onset of this outbreak, has been to keep our employees and guests safe and healthy, and to ensure that our airline is here to support and serve them in the future. But we also know that given the lack of demand for air travel and profound impact on the financial management of our business, hard work and aggressive control of costs and cash are required, even with additional support.”
Alaska Airlines announces cost cutting measures
Like most airlines, Alaska Airlines has announced some measures to reduce spending and improve liquidity:
- Alaska is suspending cash dividends, after having previously announced suspension of their share repurchase program
- Alaska has drawn down $400 million on their line of credit and closed an additional secured loan of $425 million
- Alaska is soliciting employees who are interested in voluntary leave of absence, under which Alaska would continue to pay health and travel benefits
- Alaska has suspended annual pay increases, plans to reduce hours for management employees, and will release contractors and temporary workers
- Alaska is aggressively managing all spending, including for aircraft, buildings, equipment, leases, services, and other areas
- Alaska is working with all vendor partners to reduce spending in line with reduced flight schedules
On top of that, Alaska is reducing pay for executives through September 30, 2020. The pay reductions will be as follows:
- 100% for the CEO and President
- 50% for the President of Horizon Air
- 30% for EVPs and SVPs
- 20% for VPs and MDs
Like other airlines, Alaska Airlines is also hoping to get a chunk of the potential $50 billion worth of government aid that may be coming to the airline industry shortly.
Bottom line
All airlines are suffering right now, and now Alaska Airlines is getting around to cutting capacity by 70% and also focusing on other cost cutting measures.
Interestingly up until this point Alaska’s capacity cuts have been pretty minor — just under two weeks ago the airline announced capacity cuts of 15%, but obviously that wasn’t nearly enough to address the current situation.
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