Leaked Memo: What United Plans To Do To Reduce Costs As Coronavirus Dries Up Travel

The aviation world has been rocked by coronavirus, as demand for travel shrinks. Businesses are telling employees not to fly. Discretionary trips are being cancelled. And there’s tremendous uncertainty over the future.

While U.S. airlines have been healthy and better-positioned to handle what is so far a less extreme hit to their business as carriers in China, Hong Kong, and South Korea they’re certainly scrambling to figure out what’s next. United has been proactive communicating with employees, first with a note over the weekend and now with another message outlining drastic steps they’re taking to reduce costs given reductions in revenue.

  • United is reducing its international schedule by 20% for April (including cuts they’ve already made to China and Hong Kong flying).
  • They’re reducing domestic flying by 10% and expect this will continue for May as well.
  • They’re implementing a hiring freeze and offering employees voluntary unpaid leave.
  • And they’re postponing salary increases for non-union employees.

JonNYC who has recently branched out from sharing internal details of American Airlines to the plans for routes and schedules at Lufthansa’s airlines now shares the latest employee communication on coronavirus from United:

To our United family,

In my note to you over the weekend, I said that your role in taking care of our customers would be critical as we manage through this coronavirus (COVID-19) crisis, and you are delivering beyond my expectations – we had the best winter month operational performance in January and February that our airline has ever seen. We’re also seeing some of the strongest customer satisfaction ratings in recent memory. That is what success for our company looks like and just one of the reasons why Scott and I are so proud of this team.

Scott is joining me for today’s update, as a lot has changed since this weekend. Overseas, Cathay Pacific has canceled more than three-quarters of its weekly flights in March, and British Airways canceled a large number of flights between March 16 and March 28 because of a large decline in demand.

The experience of these and other foreign carriers is a further sign that the impact of COVID-19 on our industry – both internationally and here in the U.S. – continues to evolve rapidly. We have taken aggressive action to protect our employees, our customers and our company – and we’re back today to provide some additional details.

Due to decline in demand flowing from the impact of COVID-19, we’re taking additional steps to reduce our international and domestic schedules. All of our schedule reductions are, importantly, being implemented in a way that minimizes the impact on our employees and our operation. For example, we’re reducing the number of frequencies per week, finding routes with alternative travel options via other United hubs, and delaying start dates for seasonal travel to certain destinations – without closing any domestic stations.

§ International Network Changes: We will reduce our international schedule by 20% in April. We’ve already begun planning similar reductions in May. These schedule changes go public on March 7 and include previously announced capacity reductions to select destinations across Asia and suspension of service to Shanghai, Beijing, Chengdu and Hong Kong.

§ Domestic Network Changes: The decline in our international bookings, combined with lower demand among U.S. travelers, requires significant changes to our domestic schedule as well. Our schedules across the U.S. and Canada will be reduced by 10% in April. We’ve already begun planning similar reductions in May. These changes also go public on March 7.

§ Change Fees: Given the high level of uncertainly regarding travel, we are working to give customers more flexibility. We are waiving change fees for any booking – domestic or international – made between March 3 and March 31.

Due to our planned reduction in domestic and international departures – and the resulting impact on our operation – we have also made the difficult decision to implement the following measures, which will affect our employees:

§ Voluntary, Unpaid Leave of Absence: Starting today, active, non-probationary, U.S.-based employees have the option to apply for a voluntary, unpaid leave of absence or in some cases, a reduced schedule. Details and eligibility will vary by group and employees who are interested can learn more and submit their request through Help Hub.

§ Hiring Freeze: All new hiring has been suspended through at least June 30, except for roles that are critical to our operation. We also are evaluating the schedule for all new-hire training classes as we will need to postpone some of these classes given the domestic and international schedule changes mentioned above.

§ Postponed Salary Increases: 2019 merit salary increases for all Management and Administrative employees, including officers of the Company, will be postponed from April 1 until July 1, 2020. All employees covered by collective bargaining agreements will continue to receive their scheduled increases.

In the midst of all these changes, our core4 commitment to safety – your safety – has not wavered. We remain in close contact with the U.S. Centers for Disease Control and Prevention, the World Health Organization, federal officials, and other health organizations as we take a variety of steps to keep our customers and employees safe. We’ll continue to keep you in the loop as we implement additional safety measures moving forward.

In this uncertain environment, United, working closely with our labor leaders and the U.S. government, has never been better prepared to weather a crisis like this and that is a tribute to all of you and the jobs you do every day, taking care of our customers and one another.

We sincerely hope that these latest measures are enough, but the dynamic nature of this outbreak requires us to be nimble and flexible moving forward in how we respond. We are confident that if we continue to stick together as one United family, we will emerge from this challenge better positioned than ever to take United to new heights.

Thank you again for all you do.

Regards,

Oscar and Scott

These measures certainly make sense and I expect we’ll see more cost containment to come from United, and from other major U.S. carriers as well.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. @ Gary — The airlines should expect this to last much longer then through May. When you add in the recession that we have now undoubtedly entered, I’m guessing that travel demand will be reduced for about 18-24 months. The Fed cutting rates isn’t going to drive any travel demand, and the recession is being led by the travel sector, which is the world’s largest industry. In short, the airlines are screwed. Couldn’t happen to a nicer bunch of de-valuers and enhancers.

  2. Logical moves by UA. As for AA, I can sleep well at night knowing that AA will never, ever lose money again. LOL.

  3. With all the savings from these cost reduction measures they will be able to increase the bonus of their executives…

  4. I can see AA using the downtime to catch up on aircraft standardization (aka Oasis) and possible early retirements for the 757 domestic and 767’s. Since the MAX won’t be certified until fall than AA will be in good shape.

    DL is looking to retire MD series early and even some 757 and 767’s as well.

    I think UA will also defer some A320/319 leases if they can.

  5. When people ask what Unions do for people today…point to this announcement.

  6. Which airlines will be most challenged by the downturn? Who’s got the biggest debt?

  7. @ABC, AA has the most debt of the US carriers (and Southwest the least) which is why the stock price has fallen the most.

  8. AA recently offered me gold status and some 500 mile upgrades to fly with them again. Not a chance. Before trampling on their frequent flyer program, they should have considered the consequence. There is no such thing as a free lunch one of my professors used to say.

  9. I was on an AA flight yesterday (Wednesday 3/4) from CLT to JFK. Granted, it was a mid day flight but they have typically run at 80-100% capacity. This plane was half empty. It was so stark, that the FA even said it was unusual. I’m flying back Friday 3/6 from LGA to CLT. That flight should be packed on any normal Friday. Let’s see what happens.

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