American Airlines cutting international summer schedule by 60% as coronavirus drives down demand

KEY POINTS

• American Airlines plans to cut its international summer schedule by 60% to match a sharp drop in demand.
• The carrier is also delaying the start of several new routes.
• American says more cuts to its network are possible.

American Airlines passenger planes (L) parked due to flight reductions made to slow the spread of coronavirus disease (COVID-19), at Tulsa International Airport in Tulsa, Oklahoma, U.S. March 23, 2020. The planes on the right are 737 MAX, parked for reasons other than the coronavirus.

Nick Oxford | Reuters

American Airlines plans to cut its international summer flights by 60% due as the coronavirus and government travel restrictions aimed at stopping the disease from spreading drive down travel demand at an unprecedented rate.

The airline and its competitors are slashing capacity to match the sharp drop in bookings and parking hundreds of planes in a bid to reduce costs, instead of flying planes with few passengers aboard. The flight reductions have shrunk their networks to the smallest in decades.

"Nobody is booking travel," Vasu Raja, American's senior vice president of network strategy told CNBC. "If we can reduce our capacity this summer we can reduce our expenses."

Trans-Pacific flights will be the most impacted with an 80% decline compared with summer 2019, while trans-Atlantic flying will be down 65% and 48% between the U.S. and Latin America, respectively.

American is suspending 25 summer seasonal flights until 2021 and will postpone new routes it planned for this year, including the first-ever scheduled service from Seattle to Bangalore, India, and between Los Angeles and Christchurch, New Zealand, until early 2021. American is still evaluating its domestic network for this summer, Raja said.

Summer service will focus on flights into London's Heathrow and Madrid, where passengers can connect to flights on American's partners British Airways and Iberia, respectively.

U.S. airlines, including American, are expected to apply for government aid to soften the blow of the coronavirus on carriers. Congress last week approved up to $25 billion in grants for U.S. passenger airlines in exchange for not furloughing their workers or cutting their pay rates through Sept. 30. The relief bill also includes access for airlines to receive $25 billion in loans. American's CEO, Doug Parker, earlier this week said he expects American to receive about $12 billion in government relief.

Southwest Airlines CEO Gary Kelly on Thursday told employees that the airline plans to apply for the grants, whose application deadline is Friday afternoon.

"We still don't know the severity of the [coronavirus] situation. We don't know how long it will last," he said. "That helps us commit to job security for the next six months and as always, that is my No. 1 priority."