Alaska Air Group is cutting its capacity by 10% next month and at least 15% in May as part of a package of crisis measures that includes deferring payments to Boeing for pending jet deliveries and asking employees to take voluntary leaves of absence. CEO Brad Tilden also joined other airline bosses in cutting his base salary to zero.

In a filing for investors, Tilden said the crisis appears worse than the post-9/11 downturn in airline business.

Alaska will initially cut flights on high-frequency routes, for which passengers can be accommodated on other flights.

In announcing the moves to both employees and investors, Alaska Air Group CEO Brad Tilden on Monday said the cuts were needed as flight cancellations outpace new bookings.

“We processed 362,000 cancellations for March in the past two days and have taken only 93,000 new bookings, so on a net basis we are down 269,000 bookings,” he wrote.

Alaska disclosed that as of March 16, seats on flights this month are 56% booked, 25 percentage points lower than normal.


“Our expected load factor for the month of March has shrunk steadily for the last several days and we now expect March revenue to be down by more than 40% (over $300 million) versus last year,” he wrote.

“Additional cuts are likely as we learn more about demand,” Tilden added.

Alaska’s moves follow more drastic capacity cuts at American, Delta and United, which have all reduced their international schedules dramatically and have grounded most of their widebody fleets.

American Airlines will cut 75% of its international flights through May 6, cut domestic flights by 30% by May and park 135 widebody aircraft. Delta Air Lines will cut capacity by 40 percent in the next few months and park up to 300 aircraft. United will cut capacity about 50% for April and May.

The CEOs of both Delta and United have also zeroed their base salaries. Doug Parker, CEO of American, has forgone a salary for some years, asking the board instead to compensate him with stock awards only.

In a financial filing Monday, Southwest Airlines said it will reduce its published flight schedules so as to cut capacity by at least 20 percent between April 14 and June 5. These flight schedule reductions are in addition to Southwest’s existing capacity impact due to the Boeing 737 MAX groundings, and the low-cost carrier said it continues to evaluate further reductions.


Tilden said comparisons to the hit airlines took from 9/11 may even underestimate the current crisis. “Based on what we are seeing, it is that and worse,” he wrote.

“Like 9/11, it is possible that Alaska and other airlines receive federal financial assistance. We cannot predict whether this will happen but we are actively engaged in the process,” he said.

Southwest CEO Gary Kelly, who has taken a 10% salary cut, in a video message to employees Monday went further in describing the economic impact of the coronavirus crisis: “It is certain this will be far worse that 9/11 was,” Kelly told employees.

Southwest took out a new $1 billion credit line Monday and said it will fully draw down a previous $1 billion credit line.

Tilden announced the following measures to conserve cash at Alaska:

  • Alaska has drawn nearly $400 million on its line of credit, bringing its total cash available to $1.9 billion, and it aims to borrow more.
  • It has suspended at least $300 million in capital spending, largely through the deferral of pre-delivery aircraft payments and certain non-aircraft capital projects.
  • It has suspended share repurchases.
  • It’s deferring executive merit pay increases for 2020, and both Tilden and Alaska President Ben Minicucci have reduced their base salaries to zero.
  • It’s offering voluntary leaves of absence for 30, 60 and 90 days across all workgroups.
  • It has implemented a hiring freeze.

Tilden said it’s a priority of the company’s leadership “to do everything possible to avoid furloughs” of employees.

Tilden also tried to tamp down a widespread rumor that the government may shut down air travel completely, either nationally or in certain regions.


“We have been in regular contact with the White House, the DOT and others, and we are told that domestic travel restrictions are unlikely for the time being,” he wrote. “We are in touch regularly with government leaders and are working to keep the national transportation system intact.”

Still, he ended by noting that the airline will likely have to take additional action in the days and weeks ahead.

“Things are evolving and we will of course keep you posted,” Tilden told employees.

On a day when the S&P 500 dropped 12%, Alaska shares fell just over 14% percent, closing down $5.42 at $32.53.