Huge waves were created this week when United revealed that travel bookings have been falling off. But that’s something I told you about last week (and explained why overoptimism was misplaced).
With American Airlines thinks in a best case summer 2021 could see 80%-90% as much flying as 2019, United’s CEO has been consistently the most pessimistic (some would say realistic) throughout the crisis. United, of course, relies on international travel more than competitors so is in some ways at the greatest disadvantage.
Airlines have been unable to lay off workers once they took CARES Act bailout money. That restriction lifts October 1. They’ve limited hours to save money, encouraged voluntary leaves and buy outs, and given non-union workers a choice to leave now or wait until October 1 getting next to nothing out the door. And yet it’s still highly likely that even as airlines work to minimize involuntary departures come October 1 that there will be big layoffs coming for the industry because airlines need fewer workers when customers are buying fewer tickets.
According to United, revenue is lagging passengers and airlines are ramping their schedules up faster than customers are turning.
Credit: United Airlines
So the airline has issued WARN Act notices to 36,000 employees or 39% of their current workforce. That sounds like a big number. It’s being played up by some as “half its employees.” (It’s also framed as 45% of their ‘front line’ or customer-facing workforce.)
The truth is that United is not going to lay off half or even 40% of its employees.
- Under the law United has to provide advance notice of large layoffs (or ‘furloughs’). If they didn’t send out the notices broadly they’d be over-constraining themselves. The notices are a cap on how many people they might lay off, not the actual number that’s expected.
- If they didn’t send notices broadly, and needed to lay off more than they had notified, they’d have to send another set of notices and wait. That would mean paying more people in the interim, and a sense of death by 1000 cuts. Better to get it done all at once, what’s the difference to morale in laying off 15,000 or 20,000 people? Laying off 15,000 and then another 5,000 is worse.
- Even if United sees itself as 40% smaller, it doesn’t make sense to lay off 40% of employees because some of their flying is going to return. As American’s CEO Doug Parker explained, they need to furlough fewer pilots than near-term flying requires because of training requirements and the time to bring those pilots back on board, “It makes zero sense to furlough a pilot in October if you’re going to need that pilot again in July.”
- Big numbers create big headlines, and airlines still think they might have a shot at more government money especially now that letters of intent for CARES Act loans have been signed. I’ve argued a second bailout won’t be forthcoming because the idea is so absurd as to be implausible but airline unions have been asking for one and the Secretary of Transportation wants to keep her options open. Remember that mass layoffs can happen effective October 1, a month before the Presidential election.
Make no mistake, United Airlines will be a smaller airline in the coming months than they’ve been in the past, and as a result they need fewer employees. Payroll support grants that have kept workers attached to the airline do not change that fact, they just delay the transition for employees from United to their next job (delaying the economy’s eventual recovery). It makes more sense to support affected workers directly than to keep them in roles where they’re no longer needed.
United Airlines will lay off or furlough workers effective October 1, unless the government pays them not to again. However it’s not going to be 39% of their workforce, today’s headlines notwithstanding.
This continues to show Kirby has been the AA and UA problem. I personally think he is trying to get the unions to renegotiate their contracts in order to avoid layoffs. This is just tanking morel at UA, while Parker is actually raising it at AA.
The big issue here is international strategy. UA uses the domestic network to feed hubs and the international flights (as does DL) but AA has a strong domestic only / South American networks and it relying on partners (as are the partners relying on them) to feed the international service. Since DL and UA have the old Pan Am routes and AA had to grow organically (except for LHR which they bought from TWA and evetually all of TWA) makes me wonder who has the better strategy. Right now, I lean toward AA. We will just have to see how it ends up a year or two from now.
Great analysis
15,000 FA’s is way too high of a number when you factor in the Thanksgiving and Christmas are the busiest days of the year. They likely would have increase some routes in winter just for that.
Also, UA flight attendants will be taking some form of retirement/leave. Plus the closing of the foreign bases. These numbers don’t add up to me.
Gary-
The problem isn’t this tough. UA, and AA (and others) based their core assumption on packing as many people on a plane as they could. With that, all they had to sell were cheap fares, which they did.
Now it’s time to reset with new goals and tools, and these guys don’t have a clue what those words mean.
This is business, United isn’t picking on a group. It’s what they need to provide the most cost effective product to the customer. It might also be a bit of a publicity stunt to get public sentiment for additional bailout funds. With FA’s in particular, more FA’s need to be laid off because there are more of them. There will be less flights and less flight attendants required per flight. Required FA’s are based on the number of passengers, so it’s a compounding problem. Fortunately for pilots, two are required regardless of whether there is one passenger or one hundred passengers.
§ 91.533 Flight attendant requirements.
(a) No person may operate an airplane unless at least the following number of flight attendants are on board the airplane:
(1) For airplanes having more than 19 but less than 51 passengers on board, one flight attendant.
(2) For airplanes having more than 50 but less than 101 passengers on board, two flight attendants.
(3) For airplanes having more than 100 passengers on board, two flight attendants plus one additional flight attendant for each unit (or part of a unit) of 50 passengers above 100.
While I feel for anyone losing their job, why does the airline industry need to be subsidized to support extra manpower any more than any other industry. United could be trying the “shock and awe” strategy to gather public support for additional bailout funds and provide leeway in sizing United employee numbers without the need for a second notification.
They have already started laying off 30% or more of their staff, internationally. I know my wife is one of them. They are seriously diminishing their staff. And WARN letters have been and are being issued.
All of a sudden US airline flight attendants are beginning to see how redundant they are. It certainly doesn’t help their customer service is the worst in the world
C19sucks has some interesting information but it isn’t quite up to the mark. For larger air craft it is minimum one FA for each door.
I believe the CARES ACT will be extended because Oct 1 is a month away from an election. It is highly improbable that massive layoffs will be happening under that circumstance..
Thanks Ann Seymour. I should have pulled the Part 121 FARs, which happen to mimic the Part 91 FARs with an exception around emergency evacuation demonstration. This is developed by the certificate holder, so it could potentially be a flight attendant for each door. The interesting thing is it seems they are always asking the people in the middle of the plane to accept responsibility opening the over wing exits. : ) If the ratio goes from 4:2 (737) to 10:2 (747), you could expect anywhere from 2x to 5x higher impact on FA ranks. Then take into flying currency and time to online a pilot they may keep a couple of extra pilots around for when things improve.
§ 121.391 Flight attendants.
(a) Except as specified in § 121.393 and § 121.394, each certificate holder must provide at least the following flight attendants on board each passenger-carrying airplane when passengers are on board:
(1) For airplanes having a maximum payload capacity of more than 7,500 pounds and having a seating capacity of more than 9 but less than 51 passengers – one flight attendant.
(2) For airplanes having a maximum payload capacity of 7,500 pounds or less and having a seating capacity of more than 19 but less than 51 passengers – one flight attendant.
(3) For airplanes having a seating capacity of more than 50 but less than 101 passengers – two flight attendants.
(4) For airplanes having a seating capacity of more than 100 passengers – two flight attendants plus one additional flight attendant for each unit (or part of a unit) of 50 passenger seats above a seating capacity of 100 passengers.
(b) If, in conducting the emergency evacuation demonstration required under § 121.291 (a) or (b), the certificate holder used more flight attendants than is required under paragraph (a) of this section for the maximum seating capacity of the airplane used in the demonstration, he may not, thereafter, take off that airplane –
(1) In its maximum seating capacity configuration with fewer flight attendants than the number used during the emergency evacuation demonstration; or
(2) In any reduced seating capacity configuration with fewer flight attendants than the number required by paragraph (a) of this section for that seating capacity plus the number of flight attendants used during the emergency evacuation demonstration that were in excess of those required under paragraph (a) of this section.
(c) The number of flight attendants approved under paragraphs (a) and (b) of this section are set forth in the certificate holder’s operations specifications.
(d) During takeoff and landing, flight attendants required by this section shall be located as near as practicable to required floor level exists and shall be uniformly distributed throughout the airplane in order to provide the most effective egress of passengers in event of an emergency evacuation. During taxi, flight attendants required by this section must remain at their duty stations with safety belts and shoulder harnesses fastened except to perform duties related to the safety of the airplane and its occupants.
I wish United would use this opportunity to get rid of their CRJ200’s.
@C19sucks the number of Flight Attendants are for each aircraft and the number of seats on that aircraft not the number of total passengers. A flight could have 20 people on board but all exits must be covered in the event other usable exits are not available.