United Airlines Holdings Inc plans to cut at least 3,400 management and administrative positions in October as the coronavirus pandemic crushes air travel demand, and has told pilots to brace for changes as well, according to two memos seen by Reuters.
Chicago-based United is among the US airlines that have accepted US government payroll aid that bans job or pay cuts before September 30. However, United and other carriers have warned that demand is unlikely to recover to pre-crisis levels by that date, forcing them to shrink in the fall.
The United memos are the first indication of just how much major airlines might downsize due to the health crisis.
“We have to acknowledge that there will be serious consequences to our company if we don’t continue to take strong and decisive action, which includes making decisions that none of us ever wanted or expected to make,” Kate Gebo, executive vice president of human resources and labour relations, said in the memo to some 11,500 management and administrative employees.
Affected employees will be notified in mid to late July for an October 1 effective date, she said, while encouraging employees to consider a voluntary separation before that date.
In a separate memo seen by Reuters, pilots were told to prepare for a “displacement” that will affect roughly 30 percent or about 3,675 pilots out of 12,250.
One pilot union official said the group was interpreting the message to mean a 30-percent reduction as soon as October 1.
United sent memos on Monday to a number of work groups about near-term changes and potential long-term implications, spokeswoman Leslie Scott said.
“Travel demand is essentially zero for the foreseeable future and, even with federal assistance that covers a portion of our payroll expense through September 30, we anticipate spending billions of dollars more than we take in for the next several months, while continuing to employ 100 percent of our workforce,” United spokesman Frank Benenati said in an email. “That’s not sustainable for any company.”
United and other airlines, which only months ago were mapping out growth plans, have parked jets and drastically cut flight schedules in an effort to reduce costs and shore up cash until demand recovers.
Optimism Down Under
Meanwhile, Australia’s Qantas Airways Ltd said on Tuesday it had secured enough funding to last it through the end of next year, boosting its shares, as it reviews its fleet with the expectation that most international travel could take years to rebound.
The carrier secured 550 million Australian dollars ($355m) against three of its Boeing Co 787-9 aircraft and said it could raise another 2.7 billion Australian dollars ($1.74bn) from other aircraft assets if needed. It also said it would reduce its cash burn rate to 40 million Australian dollars ($25.84m) a week by the end of June.
“This means we are very well placed to ride this out and to take part in the recovery when it arrives,” Qantas Chief Executive Alan Joyce told reporters. “Because Australia has flattened the curve there is some hope travel demand will come back faster than expected,” he said, referring to a plateau in the COVID-19 infection rate.
Joyce also said the airline saw no need to raise equity.
Qantas shares climbed as much as 5.6 percent during trading after the market update.
Australia has recorded about 6,800 infections and 96 deaths from COVID-19 and has maintained low single-digit daily rises in new cases for weeks, leading to a loosening of social distancing restrictions in some states and hopes for a domestic tourism revival this year.
Qantas has cancelled most domestic flights until the end of June and international flights until the end of July.
A full recovery in international travel, with the possible exception of New Zealand, could take years, Joyce said, sparking a review of the airline’s fleet.
He said Qantas has shelved plans to order up to 12 Airbus SE A350 planes capable of non-stop Sydney-London and Sydney-New York flights and could keep some of its 12 A380s grounded, depending on the pace of a recovery.
“We have to plan for a range of scenarios,” Joyce said.
More than 25,000 of the airline’s staff have been stood down until at least the end of June at a time when the carrier is flying 5 percent of its pre-crisis domestic passenger network and 1 percent of its pre-crisis international network.
Joyce said there was the ability to scale up quickly if demand returned and the airline was well-placed to pick up domestic and international market share during a recovery due to its strong financial position.
The company’s smaller rival Virgin Australia Holdings Ltd last month entered voluntary administration after being battered by the coronavirus crisis and a high debt load.
Virgin’s administrators have said more than 20 potential buyers have expressed interest in buying the country’s second-largest airline.