Alaska Airlines plans to reduce its flight schedule for April and May by approximately 70%, it said Wednesday, citing the “historic and unprecedented falloff in demand related to the COVID-19 outbreak across the U.S. and beyond.”
The Seattle-based airline, part of Alaska Air Group, said its schedules for June and beyond will be based on demand, “but it is our expectation that reductions will be substantial for at least the next several months.”
In an internal note to Alaska employees, CEO Brad Tilden said that passenger demand is currently about 85% below normal levels. As a result, he wrote, “our cash burn rate is currently $430 million per month, or over $14 million per day.”
“We must move swiftly and courageously to reduce it, and to give us the best chance possible of waiting out this storm and capitalizing on any opportunities we see on the other side,” Tilden said. “This is the case even with the possible government aid that may flow to us.”
“Alaska has been here for 88 years … It is imperative that we act now and act boldly to reduce our cash burn rate, extend our longevity, and ensure that we’re here to continue serving people in the future,” he wrote. “We are under severe financial pressure.”
These new schedule reductions are considerably sharper than the immediate cuts the company outlined to pilots earlier this week. An internal message on Sunday told pilots the company would be cutting 200 flights from its typical 1,300-flight schedule for the rest of March, and would park 30 of its roughly 230 jets until further notice.
Tilden told his employees that Alaska recently borrowed $825 million,, bringing the company’s total available cash to $2.1 billion. Additionally, he said he expects Alaska Air Group to get more than $2 billion from the federal assistance set aside for airlines, totaling $50 billion, in the bill being pushed through the Senate.
“Ordinarily, adding debt and securing government assistance would not be viewed as good news,” Tilden wrote. “But these sources of cash are critical right now to put us in the strongest possible position for getting through the crisis.”
Tilden went on to say that he wants to avoid employee furloughs and that “if the aid package goes through as planned, it will hopefully provide financial assistance to keep everyone who wants to work on the payroll and at your current hourly rates of pay through September 30th.”
As part of its effort to conserve cash, the company said its president and CEO will reduce their pay to zero, and other executives will see their pay cut by 20 to 50%. The company board will also take no pay.
Tilden said Alaska has worked actively with the White House, the Treasury Department and Congress on the $50 billion aid package for passenger airlines currently being pushed through the Senate.
“As we more fully understand the impact of these provisions, we will add to our plans to manage through this change,” he said.