United Airlines, a major American airline, is reportedly planning to cut flying capacity by around 50% over the next two months.
In a letter from the company’s CEO Oscar Munoz & President Scott Kirby, employees were reportedly notified and alerted of the possible drop in demand for the airline due to the rising effect of COVID-19 across the globe as well as various travel restrictions imposed by the U.S. president Donald Trump. Its corporate officers are also likely to receive 50% pay cuts in the face of the flight capacity reduction.
The airline has reported a million fewer passenger in March 2020, which is usually a busy month for air travel, as compared to 2019, and is projected to record a year-on-year revenue loss of $1.5 billion. It expects decreasing demand from customers, with planes to be only 20-30% full at best, in the summer months ahead.
The airline is one of the first to announce a large-scale service reduction to several Asian destinations such as Japan, Taiwan, Singapore, and South Korea. The coronavirus outbreak has caused a sharp downturn in the number of customers and revenue amid increasing efforts to contain the spread of the virus. Various airlines are seeking cost savings by cancelling and merging flights due to low load factors, which is a vital cash essential to weathering the decline in demand.
The announcement of drastic flight suspension is also partly because of the crash history of United Airlines’ Boeing 737 Max aircraft, which caused the aircrafts to remain grounded. The airline has received consumer backlash over how it handled the downturn response due to the sharp decline in demand. The airline changed and imposed new policy on international schedule changes, which has raised difficulties in receiving refunds among affected customers due to the travel suspension.
Under the reformed policy, a change in international schedules of less than 6 hours will allow passengers to convert their funds into travel voucher, which will be refunded only if it remains unused after a year from purchasing the travel tickets.