8th July 2020
United Airlines warns 36,000 employees of potential job cuts as pandemic roils travel demand
By CNBC
United Airlines on Wednesday said it is warning about 36,000 front-line employees — more than a third of its staff — about potential furloughs as the coronavirus pandemic continues to roil travel demand.
The potential for the mass job cuts, the largest announced by a U.S. airline so far, comes as signs of a recovery in air travel fade with new coronavirus infections and travel restrictions.
Federal law requires employers to give staff notice about possible layoffs or temporary furloughs 60 days in advance. United and other airlines that took $25 billion in federal payroll support are prohibited from laying off, furloughing or cutting the pay rates of staff until Oct. 1.
In a memo sent to employees Wednesday, United said workers who receive a WARN notice may not get furloughed. The company said it will exhaust voluntary measures before cutting employees. Some of the workers may be called back to work but that will depend on a return to demand, which some industry executives say could take years.
“The reality is that United simply cannot continue at our current payroll level past October 1 in an environment where travel demand is so depressed,” the carrier said in its staff note. “And involuntary furloughs come as a last resort, after months of company-wide cost-cutting and capital-raising.”
United shares fell after the announcement, down 3.6%, while the S&P 500 was up 0.2%.
The furloughs would apply to unionized workers and warnings are going to some 15,000 flight attendants, more than half of the airline’s cabin crew, and more than 2,200 pilots. The airline also said more than 4,500 mechanics and technicians as well as more than 11,000 airport operations staff will receive Worker Adjustment and Retraining Notification Act, or WARN, notices.
“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, a flight attendant for the airline and president of the Association of Flight Attendants.
United, Delta and American and other airlines have been urging workers to take early retirements, buyouts and other voluntary measures as the carriers scramble to cut costs. But travel demand is a fraction of last year’s — just as the peak summer travel season hits. That presents a bleak outlook for the industry and voluntary measures may not be enough to reduce airlines’ costs to match weak demand.
American Airlines last week warned employees that it expects to be overstaffed by 20,000 people for its reduced fall schedule.
United executives have said that despite a resurgence in travelers over the past few weeks, new demand has started to slip as coronavirus cases rise and travel restrictions between states take effect. The airline told employees on Wednesday that “it’s increasingly likely that travel demand will not return to normal until there is a widely available treatment or vaccine.”
United had about 96,000 employees as of the end of last year.
The airline is negotiating with its pilots’ labor union about early retirements, a United executive said.
Labor unions, including the flight attendants’ AFA, last month asked Congress to extend aid to support airline workers’ jobs through the end of March.
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