United Airlines Warns Of Layoffs Despite Government Aid

Filed Under: United

The government will be providing aid to the airline industry, but United Airlines is already saying that this won’t be enough.

The government is trying to maintain airline jobs

With the CARES Act, the government is supposed to provide $50 billion in aid to airlines. A couple of conditions of this include airlines adhering to the following through September 30, 2020:

Essentially the government will largely be taking over the payroll for airlines so that jobs aren’t lost in the airline industry. The expectation is that most airline employees will be working less than in the past, and will typically be paid for minimum hours, but at least no one will be involuntarily let go.

American Airlines’ CEO, Doug Parker, has painted this package in a positive light. As he explained:

  • “Are we going to be okay? I am happy to report the answer to that question is yes.”
  • “I am confident that those funds, along with our relatively high available cash position will allow us to ride through even the worst of potential future scenarios.”

United Airlines already says aid isn’t enough

United Airlines’ management has a different perspective.

In a letter signed by both United CEO Oscar Munoz and United President Scott Kirby, it’s made clear that they’re expecting this to last for a long time, and that layoffs will be needed in the fall:

And, based on how doctors expect the virus to spread and how economists expect the global economy to react, we expect demand to remain suppressed for months after that, possibly into next year. We will continue to plan for the worst and hope for a faster recovery but no matter what happens, taking care of each of our people will remain our number one priority. That means being honest, fair and upfront with you: if the recovery is as slow as we fear, it means our airline and our workforce will have to be smaller than it is today.

Bottom line

This isn’t exactly an optimistic outlook from United, and it kind of makes you wonder about this government aid.

Based on United’s perspective, this government relief package won’t actually help the airline recover, but rather will allow them to simply push off layoffs until October 2020…

Meanwhile according to Parker at American, the whole point of this package is so that people could remain employed, so that the industry could get moving again as soon as it’s safe.

Frankly United executives probably have a more realistic take on the situation, but…

What do you make of United’s stance on this?

(Tip of the hat to View from the Wing)

Comments
  1. As we know from their WiFi installation, Polaris seat & lounge rollout, United is really clueless when it comes to timelines.

  2. Doesn’t United still do all their own catering while Delta and American contract? I feel that catering will be bare bones for a while after this which would require United to furlough most of their catering staff. I don’t know, I feel like United is really unraveling and their incredibly ginormous dependence on Asian and international business exposes them to so many unknowns that they could really be in trouble. All the airlines are in trouble but United just seems to be painting such bleak future I wonder just how bad it really is behind the scenes.

  3. The bankruptcy courts are literally there to work through things like this. Have the government provide aid to United’s employees (don’t forget, United already put it’s pension plan obligations to the government during their previous bankruptcy), and tell the United executives and stockholders that they’re SOL. There’s truly no good reason to continue to prop up this company.

  4. If you own Denver Airport Revenue Bonds, now’s probably a pretty good time to sell–even at cents on the dollar.

    Oh yeah, don’t buy any Mileage Plus miles either.

  5. United is located in Chicago. One of the most progressive and liberal cities in the nation.

    Without a doubt, they have consulted scholars and experts and it is clear that airlines will feel the impact of COVID until the year end of 2020.

    I credit United for being transparent and yes, they may have to retire their 757’s early and some of their 767s.

  6. United’s take is almost certainly the more realistic one.

    Even if this whole thing is under control in the US/Europe by mid-summer, the lingering economic impacts with so much of the labor force out of work for months means that getting back to pre-COVID levels of airline traffic will probably take at least a year. Especially if waves of the virus continue to impact other countries.

    Major business travel routes will probably recover relatively quickly as big businesses get back to work. But leisure markets are going to take a long time to get back to pre-COVID levels.

  7. Just what I said….now they can have money and not have to hire anyone nor do they need to fly planes.

  8. Let’s just be realistic and face the ugly truth. Without passenger revenue…and lots of it from full planes… there isn’t enough money in the world to keep the airlines afloat through the end of summer. How far do you think a $1,500 check from the government will go if you are unemployed through the end of the year. And that could actually be the real timeline here. I worry less about whether I will be fed in the air and more about what happened to all those moving parts on my plane that lie dormant at PHL for 8 months. The maintenance costs will be astronomical just to get these birds flying safely again. Recertification, etc etc. The master switch was pulled quickly, but turning it back on will take LOTS of time. This will be disastrous for the industry in general. I hope I’m wrong.

  9. I personally think they deserve nothing. They purposely pissed away their cash and now run for a handout. This is not the first time he (their CEO) done this. To me any condition of cash to them should be with the firing of the C-Suite and board for letting the company get into this position.

    Otherwise, let them deal with it. If they are going to fire employees anyway then why delay the inevitable?

  10. They got the money today and are already complaining this is the US corporate culture stay quite till you get the money and then start complaining. Shame on them United does not realize most of this money is coming from the taxpayer who they treat like the garbage they need to show some kind of gratitude. At least Delta CEO said they are good till September that pretty much is sending the same message. United and American were the most aggressive in stock buybacks and now listen to them bellyaching. If I was the Federal Government, I would nationalize United and fire Oscar.

  11. @Shaorn: I am not sure I understand how “ United is located in Chicago. One of the most progressive and liberal cities in the nation.” ties into your comment.

    Am I not getting your point? The rest, I am guessing you are right.

  12. Scott Kirby signaling that he wants to layoff people regardless of anything. Ever since that man joined United everything has taken a sharp turn downhill. I don’t understand how he can be such a psychopathic cruel and heartless person, but he is.

  13. Many of you feel the airlines should be allowed to crash. I feel those people need to educate themselves on the airline industry more. Many very large foreign airlines are directly subsidized by their governments constantly just to survive. Airlines in the United States actually do the best job of operating on their own. Yes many of you will say that’s not accurate, but it is. Letting the airlines fail is a very large first domino to let fall. Many other industries and jobs will be affected and before you know it some people that might be talking tough now might be affected by the very thing they advocated. They just don’t realize that yet. The stock buybacks were not smart, but are not the reason they need a bailout. Nobody else is being asked to accept blame for failure during this time except the airlines who are operating at 50-60% capacity and still have 10-20% fill rates. Is it something they could have ever forecasted for? Without one single stock buybacks, you’re not surviving that. The profit margin in airlines is nowhere near high enough for that. Daily operating costs are enormous. That’s what it takes for you to be able to show up, drop your bags off, board and go fly 30,000 feet in the air. It’s takes an enormous amount of organization and people, and high dollar equipment to make that happen before you ever even factor the cost of the airplane you’re flying on. A 737 is over 100 million dollars. A new 787-10 is more than 360 million dollars. Costs are astronomical. I get the frustration but the response by some is mind boggling.

  14. Why can ‘t the airlines borrow money cheaply using their assets, substantial I am sure, as well as make up some of the lost flyers revenue by flying cargo?

  15. Absolutely the right thing to say. Much better than saying everything is rosy and then bam, laid off later. So, ya know, with this message employees maybe will save as much as they can, put off big expenses, etc. Actually this message is good: being honest, letting people prepare just in case, and treating employees like adults. The American msg seems actually potentially damaging and short sided.

  16. All you travel boogers love to beat up on United. Seems like I can’t go a week without some negative angle on them. Most of it is pure clickbait. It’s like the blogger that sat in the wrong seat and never asked to move to the seat printed on his ticket. He then blogged about how terrible the airline was…smfh

    I know from a personal friend that Delta laid off employees last week. At least United is being honest.

  17. Where is the $50 billion for the neighborhood restaurants shops services stores that are the backbone of our communities? The people who care for us and feed us and teach us and clothe us? Where is their bailout? No more bailouts for large corporations like UA unless and until taxpayers get an equity stake in return. Dilute the existing greed head owners and execs of UA et al down to zero. Let them sell their estates in Greenwich.

  18. @Ian: I get it isn’t an easy business but if at every downturn they continue to be bailed out, the consideration should be the government takes them over. You can’t continue to support them with multiple Billions every decade and still call them private business. The people that “guarantee” them should own them as they continue to fail. I think you are being generous by only calling the stock buyback with the last round of “subsidies” as not smart. Something needs to be done more than just another handout. But we all know this administration and the GOP would never put restrictions or any other form of control over them. In a year we will have the same arrogant pr*cks telling us how unfair it is having to compete with foreign carriers due to subsidies. This after multiple bailouts and bankruptcies. You either have poor management or businesses that can’t make it financially that are critical to our economy. So you need to either let government own them, allow more domestic routes controlled by foreign countries existing airlines, or let them stand alone and fail. You simply can’t continue as it has been by bailing them out continually. Nobody here thinks this will be the last time. It won’t be.

  19. That’s $50 billion which will result in nothing for the travelling public or the airline industry employees. Cut them off from aid. Whoever referenced bankruptcy courts ✔

  20. My wife is a new hire for UA. She’s worked at all sorts of different jobs and raised 3 children. She finally got the job she’s always wanted as a flight attendant and the only thing currently keeping her employed is the government assistance for the airlines. I understand people’s views about the airlines, but some of the comments I read on here are heartless. This affects customer service, rampers, pilots, fa’s not to mention the airport workers and ancillary staff that rely on functioning airlines for their income. I’m hoping the airlines make it through this in some sort of functional capacity for everyone’s sake.

  21. @DM

    Spot on, no more handouts to wall Street, money needs to start coming to the people who truly make the economy run. Airlines will always exist, it’s stupid to think otherwise. But restaurants and markets closing doors does untold damage to communities and our quality of life

  22. You all fail to realize that airline employees are people too. Wehave family and homes and things in life just as everyone else does. Our career is to provide for our families and Also to provide for everyone who has family all over the world . You speak as if we’re nothing but greed. The bottom line is we all have needs and responsibilities just like the rest of the working class. You’re talking like this industry shouldn’t exist. I’ve worked as customer service for over 20 years. I came to United to provide and care for my family passengers and coworkers. To get them to their destination and back safely. Almost every company has challenges and gone thru things that can and cannot be controlled. We work just as hard as doctors ,nurses ,police and firefighters. Frontline employees that deal with personalities and people from all over the world 24/7. Just as vulnerable of this life’s pandemic as you ALL are. I love my job and stand for us to stay employed and not be furloughed. In my journey there has been obvious obstacles that diverted the airlines direction but we’ve come back better and stronger still to provide a way to connect families and business and cargo to keep the worLd moving ONE MILE AT A TIME!
    Thank you
    MILELE

  23. Bailouts are not to help the average worker, they’re to make sure top management gets their million dollar bonuses.

  24. Dead on, Ian. And I will add, if United (or AA, Delta, GM or other big us firms) were to go into bankruptcy and reorganization, many people will lose their jobs. None of the creditors will be paid what they are owned (maybe, after years, 10 cents on the dollar), and many suppliers will go under, as well, and suppliers of those suppliers. The airline industry runs at just below a 3% profit margin. On $100 million in revenue, they make $3 million. United’s monthly operating cost is around $4 billion and then made $3 billion last year in profit. In other words, they have about 21 days of operating capital at any moment. Shut down flying on them, by law, and you will see them fall. If they go under, so does everyone who works with or for them. Not worth it. Government needs to help, as the unemployment, bankruptcies, house and brines foreclosures, is far more more expensive.

  25. Actually, Aaron, that’s false. Simple research shows the top executives of the airlines are forgoing their income this year or most of it. Bailout money keeps the companies from going under and eliminating jobs. Which would you rather have, a $1,200 check alone, or the same and your job? Stop hating management that provides the jobs. A pandemic isn’t the fault of the airlines, or any business.

  26. So much hate for the airlines when airfare has never been cheaper and a lot of people have access to travel and see the world. Airline employees are handsomely paid with unions extorting companies every contract for pay raises and excessive benefits yet flight attendants in the U.S. are rated the worst at performing service and doing their jobs. They get to keep everything they earned and walk away with government unemployment checks while shareholders who invested their capital are supposed to walk away with nothing. That’s ridiculous. Shareholders are not the same as excessively paid executives. Shareholders are individuals and institutional investors who own shares for mutual funds and thus pensions, retirement accounts and individual accounts.

    Airlines find themselves in this situation not because of how they ran their business but because of an unprecedented pandemic and government ordered shutdown of international travel and some domestic travel. Why should individuals who will likely go back to work get stimulus checks on top of unemployment checks. These they never have to pay back. If bailouts for airlines are in the form of loans or loan guarantees that they make good on why should airlines be forced to give up equity stakes yet individuals get to keep every penny of the bailout the government gives them.

    The reality is airlines don’t need bailouts. They have plenty of cash they can use to pay for aircraft loans and leases and maintain and store their aircraft. This can go on for a year. They need government assistance to pay their workers. If I was the airline management I would just fire everyone and let them earn unemployment. Then the airline can hire some back for competitive wages when there is travel demand for some routes. They probably are not doing this because of union contracts that handicap them but this is an extreme situation with massive government interference (for good reason) and a catastrophe that makes the contract null and void.

    You’re flight attendants you love so much are just as likely to treat you like garbage as they have done for 30 years, at least the big 3 airlines.

  27. Chris – I’ll take the opposite bet. Leisure travel will more swiftly rebound than business travel. Why?
    1) people cooped up in their house for weeks/months will want to get out
    2) stimulus checks and massive unemployment benefits will keep consumers afloat here quite well
    3) businesses on the other hand are having their balance sheets destroyed. T&M&E are always the first things cut by business in hard times. Companies will delever their balance sheet after this, not spend money traveling
    4) companies will be used to remote work and working with clients remotely now. Many will continue to do so
    5) companies will be reluctant to send employees on trips to risk them getting this or other viruses for a while

    Smith Travel Research’s hotel outlook that came out last night for 2020 and 2021 is absolutely brutal

  28. I just got home from Madrid Spain. If it wasn’t for United, I’d still be stuck there. I was able to secure a heavily discounted ticket after last second cancellations by Ryan Air and Norwegian Air. So i credit UA for that.
    BUT… as a lifetime million miler on United, their lousy service continues… I have had terrible responses from their Premier Exec desks to allow access to my account and they provide absolutely useless information in time of need. That’s exactly what I experienced with United for 30 years.
    Norwegian Air on the other hand is super customer oriented, but due to their small size they have limited resources.

  29. @johnsonwaterston : The US 3 are a full on oligopoly. The fact remains that the airlines especially in the USA spent all their money on stock buy backs to boost CxO level wealth.
    Also the Union members are the ones making sure the airline actually functions
    Stop making them out to be some innocent babes.

  30. To me the airlines should have to reissue the stock they bought back over the last 24 months. United has a market capitalization of $8 billion currently. Dilute the shareholders first before government aid is involved.

  31. It is my hope that the industry that emerges from this crisis is more fundamentally sound and equitable than the one that has been shuttered by COVID-19.

  32. It’s amusing to read a number of people either completely misunderstanding what most of us “airline haters” are saying or deliberately choosing to misunderstand. I don’t think anyone wants to see thousands of people made unemployed (I certainly don’t) but what we *do* want to see is the airlines taught a lesson – they can’t keep getting bailed out by the taxpayer every time there’s a crisis.

    I’m all for the airlines getting all the money they need to keep the regular workers in a job, but directors and executives should be fired (no golden parachutes) and the cash funneled into the airlines needs to be in exchange for stock (a controlling interest). Taxpayer money should not be used to bail out stockholders, that’s not how capitalism or the free market economy works.

  33. I’m of two minds here. Philosophically, I’m against government bailouts and handouts with my hard earned tax dollars. Realistically, the air travel industry is so large and important that we cannot allow it to simply crash. So, what to do?

    Let’s say we do bailout the airlines. There should be a few thingss on the table…
    – Improved consumer protections from things like overbookings.
    – No more stock buy backs! The airlines wouldn’t be in this mess (at least, not as precariously) if they’d saved their cash.
    – Airlines that don’t take bailout money (there might be one or two, like Ford didn’t take money when GM did a few years ago) should be rewarded somehow, perhaps with preferential gate access or additional slots here and there.

    There are others, sure, but that’s what springs to mind.

  34. So brave of United, to take the money, which required them to not lay employees off, and then laying employees off. I wonder if we’re ever going to learn from these bailouts? I run a small business and all my employees are veterans and I pretty much guarantee we get nothing while big companies like United get billions and lay their employees off anyway. They should all be allowed to fail or enter bankruptcy like the rest of us.

  35. Wow, I guess everyone being at home has given us time to comment about how much they dislike the non regulated airline industry! The “good old days” of the airline world ended 42 years ago. People don’t talk about how they couldn’t afford to fly back then versus today. Back then the government controlled which airline flew in which route and how much the fare would be. The fare you paid was dictated and very high for the average American. Today everyone feels entitled to 1960s first class service while only wanting to pay for the cheapest fare found on the internet.
    The part that is missing here is the rest of the letter. Yes the somber tone part was published for the article. The rest of the letter isn’t as bad. No one knows when governments are going to allow people to get out and about again, i.e. mandatory quarantines, lockdowns and off the street orders. No one knows the mass psychology of when people will feel comfortable to get out and travel again. So yes, being transparent that while the loan gets us through until October 1 is good, we’re not sure what’s beyond it and there may be some issues once we get there is good too. Smart folks should use the intervention time to prepare for the worst at the end of that time. Good management in being transparent doesn’t mean always making the picture seem rosie when it may not. The speed of this pandemic caught everyone unaware. The loan gives us some breathing room to prepare for what may come after.

  36. How about we do this. Rather than giving billions to the airlines, find a way to subsidize our travel. Make them earn it. Maybe they’ll start treating us a little better.

  37. So many of you people are clueless about supposed airline ” bailouts “. To start with United NEVER got bailed out by the federal government. Along with all the other U.S. air carriers, it did get some money from Congress to compensate for the government ordered shut down all U.S. airspace in the week after the September 11 attacks but United NEVER received loan guarantees that were handed out to certain other U.S. air carriers. It’s amazing how misinformed ( and nasty ) the readers and the authors of this blog are concerning the airline industry. Especially regarding United.

  38. Not. One. Dime.

    The thieving management has $50 billion in hand and here they are, holding their employees hostage for another freebie, courtesy of the US taxpayers.

    Let ‘em cool their heels in bankruptcy court. Not a dime for these thieving bastards. Not one thin dime.

  39. Wow, cannot believe all the airline haters…its too bad many of you feel that way and would like the airline industry to not survive. This was a PANDEMIC, nobody saw this coming and it has crippled everything. There are some people out there who are collecting regular paychecks without a reduction in their salary. Kudos for them, however other people will suffer , no fault of their own. So if you happen to want to go somewhere where air travel may be needed in order to get there , remember your words of letting the entire AIRLINE INDUSTRY….its happening in every country!

  40. I’ll say it again: not one thin dime of taxpayer money should be used to bail out airlines that used their cash to buy back stock and boost executives’ pay.

    I’m not at all convinced by these appeals to the plight of the soon-to-be-unemployed airline staff. No one wants them to lose their jobs. What we want is the best possible use of taxpayer money to jumpstart an economy devastated by a pandemic.

    Should that money be used to jump start small businesses, which collectively employee far more people? Or should we light that cash on fire by handing it to executives who have shown a propensity to walk away from pensions so that they can boost CEO pay and stock prices?

    The choice seems obvious. Here, United simply displays the same criminal intent we’ve seen time and time again.

  41. I work for United. I can tell you what has been offered to us employees:
    – 1, 2 and 6 month voluntary furlough (retain ALL benefits, but NO pay)
    – Early retirement for all age groups (retain certain benefits, but NO pay).

    Even though, United has cut back drastically on routes, we are still flying domestically and internationally, despite planes being close to empty. Granted, there is revenue created by flying cargo.
    And no, United does not operate it’s own kitchens. It is all outsourced to Skykitchens.

  42. How much do the various airlines make from non-passenger revenue, and what percentage of total revenue does that represent?

    I could have sworn I read somewhere that pre-COVID, some airlines were making more money off credit cards than passenger flights. If so, the reduction in flights and cost cutting shouldn’t be as big of an issue.

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