Could the coronavirus outbreak result in 9/11-like financial devastation of the airline industry? Well, the always forward-looking United Airlines is making “can-do” plans for a coronavirus worst-case scenario.
Incoming United CEO Scott Kirby is planning for a short but deep downturn for his airline. Kirby becomes the new United CEO in May. In a conference call hosted by J.P Morgan Kirby said,
“We’re planning for public concern (about the Coronavirus) to get worse before it gets better and for domestic bookings to get get worse in the weeks to come.”
Flight cuts first step towards United’s coronavirus worst-case scenario
United is cutting international flying by 20 percent in April and likely May. Domestic flying is being reduced by 10 percent.
Flights between Europe and the U.S.
However, the Trump administration’s fresh decision to discontinue flights between the Schengen countries of Europe and the U.S.A. (for a month to start) has created another challenge for United.
As a matter of fact, all airlines flying those routes will need to make some quick adjustments to their financial plans.
That decision also seriously challenged the very survival of financially weak international airlines, such as Norwegian Air.
United’s coronavirus worst-case scenario
United has created a plan of action based on revenue to drop as much as 70 percent during the months of April and May.
By the end of 2020, the rebound revenue scenario has been estimated to be 20 percent lower than normal for the year.
However, Kirby said that United is prepared to handle such a scenario.
Compared to 9/11 U.S. air travel revenue fell 40 percent during the two months following the September 11 terrorist attacks in 2001.
Kirby warned it could take up to 18 months for the air travel industry to fully recover from the Cornonavirus crisis.
Are United employee furloughs coming?
“It’s hard to downsize much more than where we’ll get to in May unless we get labor groups on board with that,”
“I’ve told people my priority is to take the steps required for United to survive, and my objective is to do so without furloughs. If layoffs are necessary, I’ll feel sick about it, but I won’t hesitate to do it. I’ll feel awful.” ”
United Airlines Unions
Outgoing CEO Oscar Munoz has built an excellent working relationship with the airline’s unions over the past few years. That could give the company more flexibility when it comes to coping with the coronavirus downturn.
Incoming CEO Kirby was optimistic in that regard.
“We haven’t asked them (the unionized employees) for anything. If it gets worse, I suspect they’d want to work with us.”
United started planning for the worst of the Coronavirus fallout when the virus spread to Europe.
“The turning point was when it spread in Italy two weeks ago. We started to prepare for a more severe decline in worldwide demand,”
What do you think about United’s proactive approach to planning how to handle the financial crisis the coronavirus can cause? Is United’s coronavirus worst-case scenario approach to problem-solving viable? You can contact the author here.
Featured Image: Unsplash.