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Alaska Airlines to Slash Capacity by 70%, Suspends Dividends

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Alaska Air Group’s (ALK - Free Report) subsidiary Alaska Airlines plans to reduce capacity by 70% for April and May due to “historic and unprecedented” decline in demand as coronavirus concerns evolve. The company is witnessing more than 80% drop in demand. Given the current crisis, the carrier expects to make such large number of flight cancelations in the next several months as well.

Apart from Alaska Airlines, United Airlines (UAL - Free Report) plans to reduce total scheduled capacity by 68% for April. Additionally, JetBlue Airways Corp. (JBLU - Free Report) will carry out massive flight cancelations this week and operate a schedule less than 50% its normal. The airline expects to cut flights even more in the coming month. Latin American carrier Copa Holdings (CPA - Free Report) suspended all passenger operations temporarily.

To cope with this deep crisis, Alaska Airlines has now suspended cash dividend. The company had already suspended share buybacks. Some other cost-cutting measures taken by the airline are slashing officer pays through Sep 30, laying off contractors and temporary workers, reducing work time for management employees, freezing annual pay hikes and asking employees to show interest in taking leave of absence voluntarily (the airline, however, will continue to ensure health and travel benefits).

The carrier also drew down $400 million on its line of credit and closed another secured loan for $425 million. It is also putting a check on all other spending, such as those on aircraft, buildings, equipment, leases etc.

Alaska Airlines along with other U.S. passenger airlines are seeking approval for an aid package, which if passed, might bring them $50 billion.

Shares of Alaska Air Group have plunged more than 53% since the beginning of February due to the coronavirus-related woes.


Zacks Rank

Alaska Air Group carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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