United Airlines Likely to Cut Jobs
United Airlines said on Wednesday that it has cut its flight schedule by 90% in May. It expects similar cuts for June as a result of the coronavirus pandemic. Furthermore, it warned that travel demand that is now essentially at zero shows no sign of improvement.
The company disclosed its outlook in a memo to employees that it publicly released. It was from Chief Executive Oscar Munoz and President Scott Kirby.
Like other U.S. airlines, travel demand for Chicago-based United Airlines has cratered pulling down its stocks. This is due to most U.S. states ordering residents to stay at home to contain the spread of the coronavirus.
The airline said it flew less than 200,000 people in the first two weeks of April. That was a 97% drop from the more than 6 million people it flew during the same time last year.
Munoz and Kirby said they expect to fly fewer people during the entire month of May. Fewer than it did on a single day in May of last year.
The economic impact of this crisis means even when travel demand starts to inch back, it won’t bounce back quickly. United Airlines will be unlikely to regain its stock market position very soon.
Munoz and Kirby further said they believe that the health concerns about COVID-19 are likely to linger. This means even when social distancing measures are relaxed, and businesses and schools reopen, life won’t necessarily return to normal.
With That, Job Cuts for United Airlines Would Be Likely
After a $5 billion government payroll support under the CARES Act, the airline indicated that it expects to have to cut payroll after that. The company plans to offer new voluntary leave packages in the coming weeks and voluntary separation programs.
The United Airlines stock dropped 1% in extended stock trading. This was after it said it expects to receive the $5 billion from the Fed through the coronavirus aid bill.
It said that the government’s money does not cover its total payroll expenses. Payroll is only about 30% of total costs, including airport rent and supplies.
For the record, more than 20,000 of its employees have volunteered for unpaid leaves of absence. Its efforts to further cut payroll costs are similar to moves by peers Delta Air Lines and American Airlines.
United Airlines is among airlines eyeing a separate $25 billion federal loan package for U.S. passenger carriers.
It said last week it plans to start daily service on May 4 from Chicago to London. Then Newark to Amsterdam, Washington to Frankfurt, and starting May 5, three flights a week between Washington and Buenos Aires.
It has canceled planned seasonal summer flights from Newark to Prague; Stockholm; Palermo, Italy; and Reykjavik, Iceland. But it continues to operate flights between the United States and Frankfurt. Also Brazil, Sydney, Tel Aviv, and Tokyo, as well as cargo and repatriation flights.
