United Airlines warns it may furlough 36,000 staff as Covid-19 hits demand

The company said it was unable to estimate the cost of workforce reductions for the rest of the year

United Airlines is warning 36,000 employees nearly half its U.S. staff they could be furloughed in October, the clearest signal yet of how deeply the virus pandemic is hurting the airline industry.

The outlook for a recovery in the airline industry has dimmed in just the past two weeks, as infection rates rise in much of the U.S. and some states impose new quarantine requirements on travelers.

Airlines say they must shrink to match falling travel demand. American Airlines executives have said they could have 20,000 more employees than the airline will need this fall.

United told employees Wednesday that not everyone who gets a layoff notice will be furloughed. The company said job losses could be reduced if enough employees accept buyouts or early retirement by a deadline next week.

The buyouts come at a price too, however. United said it would take a USD 300 million charge in the second quarter to cover voluntary departures so far.

The company said it was unable to estimate the cost of workforce reductions for the rest of the year.

If every U.S. airline matched United's worst-case scenario of furloughs, it could be extrapolated to about 240,000 lost jobs nationwide, given United's share of the domestic market.

Helane Becker, an analyst for Cowen, predicted Wednesday that U.S. airlines will end 2020 with 150,000 to 200,000 fewer employees than they had at the end of 2019 much bigger losses than she expected back in April.

The notices that United sent out are meant to comply with a law requiring employers warn workers at least 60 days before mass job cuts.

The furloughs could include up to 15,000 flight attendants, 11,000 customer service and gate agents, 5,500 maintenance workers and 2,250 pilots.

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.

This crisis dwarfs all others in aviation history, and there's no end in sight. United executives said any furloughs will take effect on or shortly after October 1.

United can't lay off workers any sooner that's a condition of the USD 5 billion it got as its share of USD 25 billion in federal aid to help airlines cover payroll costs for six months.

The flight attendants' union and other airline labour groups are lobbying Congress for another USD 25 billion to protect jobs through next March.

But a senior United executive expressed doubt that Congress would approve the spending in an election year.

United has already cut capital spending by USD 2.5 billion and convinced thousands of employees to take unpaid leave. It has hoarded cash after raising billions in new borrowing including mortgaging its MileagePlus frequent-flyer program.

But with ticket sales sagging again, the Chicago-based airline is still losing about USD 40 million a day, executives said.

Layoffs are the last option left to protect the long-term interests of the company," said the senior United official, who spoke to reporters on condition of anonymity.

Executives said the notices covered 45 per cent of the airline's U.S. staff, most of whom are represented by unions. They would have reinstatement rights if United's fortunes improve.

Another 1,300 management and support staff will be laid off October 1, the company said. Including international employees, United has a work force of about 95,000.

Air travel in the U.S. plunged about 95% from March 1 until mid-April, then began a slow recovery. The number of U.S. air travelers around the July 4 weekend was the highest since mid-March, but was still down about 70 per cent from a year ago.

In recent weeks, the number of new reported cases of COVID-19 has roughly doubled to about 50,000 a day, with cases rising in Texas, Florida and California.

Last month, New York, New Jersey, Connecticut and Chicago announced requirements that people arriving from states with high infection rates go into quarantine for 14 days, throwing up a new roadblock to travel.

United's bookings for flights at its hub in Newark, New Jersey, have slumped badly since the region's governors announced the quarantine requirements, falling 84 per cent from a year earlier. That compares with a 73 per cent decline in bookings for United's other destinations.

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