United Airlines is sending layoff warnings to 36,000 US employees

Andrew Cummings
July 9, 2020

The outlook for a recovery in air travel has dimmed in just the past two weeks, as infection rates rise in much of the US and some states imposed new quarantine requirements. United "does not expect the recovery from COVID-19 to follow a linear path, as illustrated by recent booking and demand trends, and that consolidated capacity through the end of 2020 is expected to be generally consistent with August 2020", it said.

The big picture: The company told employees it was able to stave off the furloughs by cutting costs and raising capital, but leadership had believed for months its workforce was too large to match demand.

The planned furloughs include about 15,000 flight attendants, 11,000 customer service staff and 5,500 maintenance employees.

"We are living through the most disruptive financial crisis in the history of commercial aviation", the company said in a letter to employees.

If United carries through on the notices, furloughs would take effect on or shortly after October 1.

The shares fell 2.6 per cent to $31.71 at 12:20pm in NY on Wednesday amid broad declines at USA airlines.

Other major US airlines are expected to lay off employees in October when they are no longer tied to the conditions set forth by Congress to receive federal aid.

United shares lost 3.3% in midday trading. Those who are cut will be given the option to return to their jobs whenever travel demand returns and additional labour is needed.

"The United Airlines projected furlough numbers are a gut punch, but they are also the most honest assessment we've seen on the state of the industry", said Sara Nelson, president of the Association of Flight Attendants. "Demand was just barely climbing back to 20 per cent of previous year and even those minimal gains evaporated over the last week due to surging Covid-19 cases across the country".

The number of furloughs could be less depending on the number of employees who take advantage of early retirement, voluntary separation or other programs. executives said. Among pilots, 2,250 could be impacted.

United's rivals are also studying major job cuts.

Last week, the department said it had agreed on the terms for government loans under the CARES Act with five other airlines including American Airlines. Delta Air Lines said last month it would inform nearly 2,600 pilots about a possible furlough and encouraged a total of 7,900 eligible aviators to accept early retirement.

USA airlines have already received $25 billion in payroll aid under the CARES Act to protect jobs through September and have until Sept. 30 to decide whether to take the loan, which would include the issue of warrants and restrictions on executive compensation and share buybacks.

The industry's major job cuts are expected to commence on October 1, roughly a month before the U.S. presidential election.

Most airline unions are strong, relative to other industries, and contracts tend to require airlines to offer furloughs, rather than layoffs.

'None of the decisions we've made so far have been more hard than the decision we are announcing today, ' a United official said during a press call.

"None of the decisions so far have been more hard as the decisions that we are announcing today", A United executive said, referring to the involuntary furloughs as the company's "last resort".

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