United Airlines (UAL) has warned that it may have to enact huge layoffs if the federal government does not come through with a bailout by the end of this month to save the aviation industry.
United’s CEO, Oscar Munoz, its president Scott Kirby and four union leaders said on Friday that in the absence of federal aid, the airline might have to severely cut its workforce.
“While many in Washington, D.C. now realize the gravity of this situation, time is running out. The airline has made a number of drastic cuts over the last several weeks to reduce our costs: including slashing capital spending, freezing hiring, cutting payments to contractors and vendors, eliminating all discretionary spending and even cutting our corporate officers’ salary by 50% while reducing Oscar and Scott’s salary to zero,” the airline stated. “However, as travel demand continues to plummet, even more cost-cutting measures will be required soon to keep our company afloat. To be specific, if Congress doesn’t act on sufficient government support by the end of March, our company will begin to take the necessary steps to reduce our payroll in line with the 60% schedule reduction we announced for April. May’s schedule is likely to be cut even further.”
Given that United had 96,000 employees at the beginning of the year, the airline could theoretically fire 58,000 people.
But the airline assured it would rather cut salaries rather than lay off so many workers.
In a letter to congress, Airlines for America, the industry trade organization for U.S. airlines, urged lawmakers for a quick federal package deal to protect the jobs of some 750,000 direct employees. The letter was signed by airline CEOs.
“Unless worker payroll protection grants are passed immediately, many of us will be forced to take draconian measures such as furloughs,” stated the letter. “The breadth and immediacy of the need to act cannot be overstated. It is urgent and unprecedented.”
United, like other major airlines have grounded hundreds of aircraft and cancelled thousands of fights. However, no major carriers have yet announced job cuts, although they have asked workers to take unpaid leave or early retirement.
American Airlines (AAL) slashed its domestic flights by 30% in April and international flights by 75%, with more cuts expected for May. Delta Air Lines (DAL) plans to reduce up to 70% of its flights and ground at least 600 planes, more than one-half of its entire fleet. United cut flights by 60%.
Delta also said 13,000 of its employees have opted to take unpaid leave.
Delta’s CEO Ed Bastian said the airline’s revenue plunged 80% for the April-through-June quarter. He also said the company is burning through $50 million every day.
“The growing need to protect Delta’s future has led to difficult decisions across our business that are impacting all of our stakeholders,” said Bastian. “Maintaining ample liquidity during this crisis is critical to the essential service that Delta provides in America’s transportation infrastructure as well as the jobs of more than 90,000 Delta people across the country.”
The U.S. airline industry as a whole is asking the government for $29 billion in cash grants and an equal amount in zero-interest loans – nearly $60 billion in total. In response, the White House and Senate Republicans have offered up to $50 billion in loans but no cash grants.
Some Senate Republicans, like Richard Shelby of Alabama, vociferously oppose bailouts, but rather favor guaranteed loans.
Airlines, however, are in turn leery of any federal aid packages that include conditions, like job protections or limits on stock buybacks and executive bonuses. For example, Delta has repurchased more than $10 billion of its stock over the last five years. (Delta and United have both suspended share buybacks).
Stock repurchases benefit shareholders, not company employees.
“One of the reasons, let’s not forget, that many airlines are so short of cash right now is they spent billions on stock buybacks — money they had to send out when they should have been saving it for a rainy day, for their workers and customers,” Senate Minority Leader Chuck Schumer said. “That issue should be addressed.”
President Donald Trump also suggested he would not oppose prohibitions on stock buybacks as a condition of a federal rescue package.
However, Moody’s Investors Service contended that the larger airlines have enough cash on hand and borrowing ability to survive “a fairly significant short-term disruption” through June — and through September if the outbreak’s impact is moderates.
Indeed, Delta recently entered into a $2.6 billion secured credit facility, while also drawing on $3 billion under its existing revolving credit facilities.
“Without aid, it is essentially guaranteed that these airlines will have to send a number of employees home,” wrote Jay Singh in SimpleFlying. “Every airline will see a different level of impact. If airlines receive aid, executives have pledged to delay layoffs and furloughs until August at the soonest. Whether airlines will need to is a whole other question.”
Singh added that given the rapidly changing situation, it could be possible that some demand will rebound by August. “Or, perhaps, customers could remain wary of traveling. And, by August, airlines are not in a better position than they are now,” he warned.
For now airline employees are deeply worried.
“We don’t know how we are going to provide for our families,” said a flight attendant with United in Kentucky. “Working in the industry right now is very scary. There are a lot of unknowns. News about the coronavirus is changing so rapidly the information we are receiving is outdated by the time it is disseminated.”
A Delta flight attendant in Michigan said: “No one thought a month ago we would be facing an existential crisis. People are moving from disbelief, to grief, to anger, to hope, to denial, and to more anger. Trips are cancelled day to day, planes are empty, and passengers are nervous.”
An American Airlines flight attendant lamented: “I’m terrified about the possibility of losing my job. Today I worked a flight with literally 11 passengers on board, and it’s only going to get worse from here. Not only am I scared of getting furloughed, but also of bringing the virus home with me to my family.”
Sara Nelson, the international president of the Association of Flight Attendants, told The Guardian: “This truly is a national emergency. Where flight attendants are focusing now is recognizing not only are we still going to work and deal with issues on the frontlines and our own healthcare, we’ve got an even bigger issue because soon if there isn’t relief we aren’t going to have to the tools to take care of ourselves because the paychecks will stop.’
She added: “In just 30 days’ time we went from the biggest profits the [airlines] industry has ever made, with big plans to hire nearly 100,000 people this year across the industry. All that hiring has evaporated and now we’re talking about the exact opposite extreme of facing 70% to 80% furloughs and layoffs.”