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.
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.