United Airlines Holdings Inc. plans to trim flights, freeze hiring and halt merit pay raises as it grapples with a swift drop in travel demand because of the coronavirus outbreak.
The domestic schedule will be pared 10% in April and international flying will be chopped 20%, United said in a message to employees. Similar reductions will probably be necessary for May, Chief Executive Oscar Munoz and President Scott Kirby said Wednesday in the memo.
United has also imposed a hiring freeze through June 30 and deferred merit-based salary increases for management until July 1, in an effort to prepare the company financially for a steep downturn in business. The Chicago carrier will also offer employees voluntary unpaid leaves of absence.
The dramatic moves flashed a new warning sign as airlines across the world grapple with an abrupt decline in passengers while governments rush to contain the virus’ spread. United is joining carriers from Asia to Europe, which have slashed their schedules and grounded aircraft amid falling demand and the cancellation of large trade shows and other events.
“A lot has changed since this weekend,” Munoz and Kirby said. “We certainly hope that these latest measures are enough, but the dynamic nature of this outbreak requires us to be nimble and flexible moving forward.”
A Standard & Poor’s index of major U.S. airlines fell 23% in the seven trading sessions that ended Tuesday, as the economic fallout from the virus’ spread intensified. That was the biggest drop on the S&P 500 index.
Along with United, American Airlines Group Inc. and Delta Air Lines Inc. have temporarily halted flights to China, where the virus originated. But American and Delta haven’t adopted cost-control measures as significant as those unveiled by Munoz and Kirby.
United said transpacific flying makes up about half of the planned 20% in cuts for April, with service to Europe and Latin America also affected. The reductions will also prompt the airline to ground some of its larger international wide-body aircraft, which include Boeing 777 jets and 787 Dreamliners.
In the U.S., the cuts will come largely from frequency reductions on most routes, but United will also suspend some service to cities that it serves from multiple hubs. The airline is also changing aircraft sizes on certain routes to adjust for the schedule reductions.
Last month, United withdrew its 2020 profit forecast, citing the financial effect of the virus outbreak and the resulting uncertainty. The company also postponed its March 5 investor meetings because of the issue. Hawaiian Holdings Inc. also scrubbed an investor event set for March 9, citing the virus outbreak.