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United Airlines executives warned of further capacity and staffing cuts to come Wednesday, just a day after the company accepted payroll assistance from the U.S. government’s $2 trillion coronavirus bailout package.
The Chicago-based carrier will dramatically cut capacity with plans to shrink its network by roughly 90% in May, United CEO Oscar Munoz and president Scott Kirby told staff in a letter Wednesday night. But the flying reductions are only the supply-half of the picture.
“Travel demand is essentially zero and shows no sign of improving in the near-term,” they said. “We expect to fly fewer people during the entire month of May than we did on a single day in May 2019.”
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Traffic on U.S. carriers was down 97% year-over-year during the seven-days ending April 12, according to Airlines for America (A4A). The industry group draws data directly from member airlines, including United and other majors American Airlines, Delta Air Lines and Southwest Airlines.
International Air Transport Association (IATA) director general Alexandre de Juniac has called the impact of COVID-19 on the industry the “biggest crisis we have ever had in front of us.”
The U.S. government set aside $50 billion in aid to get airlines through the crisis in the bailout package known as the CARES Act. At least 10 carriers have received payroll assistance funds, including $5 billion for United. As a condition of the aid, airlines cannot involuntarily furlough or layoff staff through Sept. 30.
Once those protections lift, Oct. 1 stands to be a dark day for many airline employees across America.
“The challenging economic outlook means we have some tough decisions ahead as we plan for our airline, and our overall workforce, to be smaller than it is today, starting as early as October 1,” Munoz and Kirby said Wednesday.
More than 20,000 employees at United have already taken voluntary unpaid leave, they added.
Ed Bastian, CEO of Delta, has similarly warned of the likely need to right-size the carrier’s staff along with its operations later this year.
“I think this industry is going to be smaller for some period of time here as we build back, and I don’t know what that pace of recovery will be,” Bastian told employees on April 8. “It will really be dictated based on when customers feel safe to travel again in large numbers.”
As many as 125,000 airline staff could be furloughed or laid off if the industry contracts by roughly 30%, Cowen analyst Helane Becker estimated in an April 13 report. That could mean up to 27,000 people lose their jobs at United, and another 25,000 at Delta.
“If we want to emerge stronger, if we want to emerge the world’s leading airline on the other side of this, we have to have flexibility,” Kirby told employees during a virtual town hall on April 2. But that flexibility will likely mean economic pain in the form of unpaid leave or fewer hours for many in the short term.
Featured image courtesy of United Airlines.
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